You Might Also Like: (UN)Conventional Wealth
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Here's the big question.

Are you ready to reach new limits? It's time to change your family tree and redefine industry. Enough with all the cliche cookie cutter recommendations about finance, business, and life. You found the podcast to give you the tips you need to create the unconventional lifestyle and outcomes you've always wanted. It's time to build your own systems and play your own game. You're tapped in with the one, the only Dan Nicholson, and this is the Unconventional Wealth Podcast.

Jeff, thanks so much for coming on the show. Looking forward to chat today. No, thanks for having me today, Dan. Well, excited to jump in. I know one of your passions is around helping young people get better informed around financial literacy. And I share that passion. I think it's easier to help people when they're young and get them on the right path. What interested you in that? And then we can kind of dive into how you're helping younger folks.

Sure. You know, and a lot of things in life really come from your background and your previous experiences. We'll say your personal experiences. You know, financial literacy is a pretty important topic or probably one of the most important topics to me because of how I kind of figured out and stumbled throughout my young adult life.

I was the first one to go to college in my family and didn't really understand, you know, really fully understand the student loans and, you know, what the responsibility is after college and the amount that, you know, taking out the loans creates. You know, I've often said if you could fast forward and see the amount that, you know, I think a lot of people, the amount that they would need to pay or have

or they're going to have to pay, they probably would make some changes and maybe look in different directions throughout the education system. And so, you know, I was about two or three months away from graduating and I received a letter from Sally May. I thought it was a magazine subscription service, you know, it's a loan servicer. And, you know, I'd said something like I owed a thousand dollars a month for the next 10 years. And, you know, I,

At the point I was at, I didn't know what I wanted to do. And I didn't really have any skills coming out of college. You know, the Army had a program that if you went in and served your time, they would pay your loans off. So I went ahead and did that and probably learned a whole lot more, probably twice as much as I did in the Army and the military than I did in college. First off, thanks for your service. And how long did you end up serving?

For five years. So it was, you know, again, it was a good, you know, as part of,

Part of life, you know, I look back and there are a lot of sacrifices over the time where I had friends that were getting married, starting families. Not to say you can't do that in the military, but it's it's not the easiest thing. You know, and I have respect for anyone that, you know, stays in, goes in, especially given, you know, post 90, given all the challenges and, you know, that that life holds now.

How would you say your time in the military has impacted the way that you serve clients in the financial world now? Yeah, I think, you know, the benefit of the military is it's almost, I would call it like a melting pot. You know, you have people from all varying degrees of socioeconomic points. You know, it allows you, I believe, you know, really communicate and learn how to communicate with people from all kinds of different backgrounds. You know, at the same time, you know, you,

the skills and some of the structure that you learn in the military can turn over and really help managing clients and working with them on a daily basis. It,

Really trying to treat them. I try to treat them really as family and try to work through things and never let anything. You know, if there's an issue, you know, you always want to address it. That's one of the biggest things I've learned in the military. The longer that you let something go without fixing it, you know, just it just metastases and creates a whole lot of other problems along the way. Yeah.

Yeah, avoidance is one of those big things that really impacts. There's a lot of people who avoid the realities of the state of their financial affairs and just hope it's going to magically solve itself later. I imagine you see the avoidance quite a bit.

Exactly. And, you know, I do. And, you know, I think a lot of times people are more geared towards social media. I've said, you know, I sometimes I think I go to a restaurant or I go somewhere and I see the kids communicating, you know, they're communicating on their phones and they're probably communicating with each other and they're sitting next to one another. They can't even talk to one another.

And I think, you know, if you I think whether it's meeting someone in person or just speaking with them over the phone, you know, it can go a lot longer if there's an issue than just simply sending an email and hoping it goes away, whatever the issue might be.

And so much is left for interpretation when you just send a text or an email. There's no tone. Can't tell if they're being empathetic. No. Can't read their body language. So much of it. So much of communication is not the words.

No, that's exactly right. And, you know, it's even if financial services dealing with clients on pretty emotional topics. I mean, most people would argue money, whether it's a relationship, a husband, wife, whether it's family members. You know, there's money tends to create more friction than anything else imaginable.

And if you can try to be a resource where you can help try to take away some of the friction and some of the stress, you know, that's what I would say would be optimal as an advisor. Yeah, that resonates with me. One of my beliefs that I tell our business clients is every business decision is a financial decision. You can't divorce the two. And often people do. They're like, I'm the visionary dreamer. Somebody else handles all these other things. No, there's a they're interconnected. So curious, curious your reaction to that.

They are, you know, and really looking at it, I mean, I always say, you know, from a decision process, it used to be that you would really have to kind of go, you would have to go to the library as an example, or you would have to consult two or three advisors to come up and even get the information before the internet. And before, you know, now how readily everything is available. And now I would say it's almost 180 degrees different now.

Where if you go on Google and you Google financial topic, a lot of times you'll get 100, 200 million hits. And then it's a matter of, well, you have all this information, but what do you do with it?

And how do you approach it from the standpoint of it being your individualized and your family or business situation? And I think one of the challenges I've seen over the past several years with people in particular is the, you know, where they'll have a family member, a friend, co-worker, and they'll just go along blindly with the advice that the person gives them.

as opposed to looking at what effect that has on their individual family circumstances. And I think it's important, whatever decision, whether it's Social Security, whether it's Medicare, decisions that in a lot of cases, when you start taking it, it's not as easy to reverse yourself. You really need to understand what the repercussions and the consequences are for doing certain things. Yeah, you used the word individualized, and that resonates with me.

especially what I do on the tax and kind of CFO side is a lot of the questions that I'm asked sound like a fact-based question, but it's a preference. It's like, well, I don't know. What are you trying to accomplish with your life? Because if your number one goal is to save time, you're asking me if you should hire a couple of employees, you might actually in the short term, you're getting away from having more time. So yeah,

Most of the questions people ask are individualized. It depends on what they want. And so using Google and even ChatGPT or some of these other things aren't going to give you that individual level of recommendation, which I imagine you face every call that you're on.

Exactly. I mean, it's a matter of really understanding what each individual, you know, individual and their family members pain points are really. And that varies widely from person to person. You know, if you can understand what their pain points are, what they're looking to try to accomplish, then.

And when you have tough times, whether it's in the market or whether they, you know, they have an issue with a family member from a health standpoint, or even if they're forced to retire in a lot of cases because of health care issues, you know, you can go back to the original points.

of how the relationship started, whether the person's worried about running out of money, whether they're trying to figure out how much money to save, you know, the more that you can kind of not necessarily get in the weeds, but give yourself a better idea of where you really stand on a practical basis.

You'll be in a much better position when the time comes to actually having to start drawing income, making decisions about the sale of your business. That's one of the biggest things over the next, I would say, 10 to 20 years, whether it's in accounting, financial services, whatever the business is, there's going to be a tremendous amount of businesses that need to sell. In a lot of cases, not necessarily because the owner wants to, but because they have to for health purposes.

And, you know, doing the necessary things that aren't fun, you know, business valuations and things that you have to do to understand what your business is worth. And, you know, having people in place, the key people keeping them, you know, it's certainly better to do that as a planning basis, as opposed to do that, you know, your family doing it as a after trying to pick up the pieces after something happens, potentially from a health standpoint. Yeah.

You're exactly right. I mean, we're in this period where so many businesses are going to have to be sold because of just the age of the business owners. And certainly in your industry, financial services, there's a huge...

aging out that's happening in my business. 75% of CPAs have hit retirement age. That happened three years ago. We don't have enough new people coming into the profession. And you mentioned business valuations. I'm curious what you see. I know the data says 85% of small business owners don't know the value of, or 85% of the net worth of a small business owner is tied up in their business. Only about 5% of them, 6% know the value of the company.

It's like not knowing the value. Exactly. And I mean, that's,

No, it's, you know, and that is for most of them, it's probably 95% of their assets really at the end of the day, you know, in a lot of instances. And waiting a year, six months before you're ready to sell to make these decisions is just not the right time. You know, you really want to give yourself really about a five-year window, even in some cases, you know, I would say five to seven years. And what you want to do is have a real good understanding what the valuation is.

of your business is look at various peers, understand, you know, what is, you know, how are they selling their businesses? Who are they selling them to? You know, where are the opportunities? You know, how the other thing would be, you know, if you look at how can you get a higher, you know, how can you get a higher return on the revenue? You know, what,

How can you get a better return on your money from the standpoint of the sale? You know, what are other people doing in the same business to, you know, increase the value? And a lot of times, if you have a little time, you can make just minor changes that would greatly increase the overall value of the business. What you just share for those people who actually take that in and digest it is pretty significant to the trajectory of both your retirement and your legacy.

five to seven years. What I know from the data, again, most business owners don't know the value of their company, even though it's most of their net worth.

And their saleability score is really low, meaning they're so essential to the business day to day that they can't sell it without giving a huge discount because someone else is coming in and they're like, I don't know if the clients are going to stay. I don't know if the vendors and employees are going to stick around. So five to seven years, you're exactly on point. And the data I've seen is,

Some of the things we do for clients, if you're paying attention to the value and the salability, on average, you're going to see your business value grow year over year by about 29%. That's what we've seen. You're crushing the market. So that's just what you're saying is very resonant with me. And people need to listen to that and work with users to get that advice. So you're leaving millions of dollars on the table.

Millions of dollars. And, you know, I think unfortunately we're going to see more and more of more business owners that are going to learn from their friends who are business owners that have health issues. And a lot of times people delay because they may think a child, an adult, you know, a family member is going to come in and take the business over. And, you know, what I see more and more is a situation where, you know, the other the family members that they expected to come in, they just have other interests.

or they may not want to take the responsibility of running a company. And it's important to have someone, you know, if that's not going to work, have a couple of key people there that you can, I would say, lock down really quickly

and be there if something happens to you so they can help transition the business. Because if you don't have the key, you know, something happens to you and you're running everything, there's no succession plan. You know, you have key people. They're not going to stick around and try to figure out what happens if they have other opportunities. Absolutely. Yeah. Especially if they're truly key to your business, that means somebody else probably would like to hire them like your competitor. You're essential to this.

So locking them down. Is that something you guys consult on at all about how to think about structuring inside buyers or keep them around long term?

Yes. So, you know, I typically will use various other professionals to help with that. And, you know, initially what I'll do is talk about the various considerations and various options that they have and then kind of work through that. And it really it comes down to the relationship they have with the key people. But, you know, oftentimes, you know,

business owners, the more people they have, the more they're more of an operational, you know, they're running all the day-to-day pieces. They're not always directly with the clients and the people that are actually buying the services. And the people that are managing the relationships of those services are the people that you want to lock down and keep because if they leave, you know, a lot of times, you know, you'll have a lot of, we'll say leakage in terms of the clients leaving. Right.

You mentioned this is a conversation that you're having with your clients and bringing in the right experts to help facilitate that. That's not necessarily a normal thing that financial advisors do. From my experience, there's kind of a large brokerage firm model, and maybe they're stuck within the architecture and constraints of that firm. And then you can go out on your own. And that's what you've done, right? You worked at a large brokerage firm.

Yes. You founded your own firm. What inspired you to do that? And how would you say you guys kind of differentiate between what you were doing in the past?

No, I mean, there are, you know, there's advantages and disadvantages, you know, and it's really based upon what your comfort level is. There are certain people that would just prefer to just manage the relationship specifically with the clients and not really do deal with the day to day operations and have administration and some of the things. But maybe for them, a larger firm, you know, where everything is integrated and everything's basically handled for you.

can work. I look at it being independent, not being product, being agnostic to whatever the product is and having an open architecture. I believe it goes a long way to sitting on the right side and the same side of the table as a client

and really putting their needs and interests first. And there's captive agents, captive advisors. And I just think really, you always wanna be in a position where you have multiple two or three options and you help point the person through the door. You just don't push them through one door. And I think that's the benefit of being independent and having the experience to go along with it, learning from the past.

Because the markets aren't always just, it's not like an elevator where they go straight up. There's volatility as the years go by. And it's important to have some sort of, just have the ability to kind of take a step back and try as best you can to keep the client's interest first and foremost. And from what I understand, a big part of your offer is around financial literacy. Yes.

In fact, you wrote a book about it, right? Yes. Yes. So I did. Yes. Yeah. And what motivated you to write the book and how does that kind of fit into financial literacy? How does that fit into your offer or how you're helping the community on a day to day basis?

Sure. So going back to my own history and just understanding, you know, just basic financial topics, most people coming out of high school, really only 22 states currently have financial literacy programs in school. And, you know, even if

even a lot of those programs, there's options or electives, some ways to get around that. And if I look at it, the consumer finance is the most important thing I believe that could be taught in school.

You know, just simply understanding the difference between a checking savings account, even how to write a check. You know, a lot of the kids these days are just completely they just don't understand how to even do basic financial tasks. So if you don't understand the basics, how are you going to come up and look through understanding student loans or understanding what type of a car should you get a buy a car? Should you lease a car? Should you when you buy a car, should it be new or used? And so.

As I was looking at writing a book, I was looking at potentially doing one for retirees. And then what I ended up doing was pivoting and really focusing on young adults. And the research bears it out. I mean, Pricewaterhouse did a study recently of millennials, and they found that only about 24% of the millennials understand basic financial topics. Right.

And so, you know, when you have millennials starting families and they don't understand the topics, how are the children, their children going to understand? So it's I look at it as almost a crisis in terms of the lack of understanding education. And it's not like things are getting more simple.

And as you further go down the road, whether you just keep accumulating debt or you don't save the right amount, the longer you wait to save and the more debt you accumulate, the harder it is to get where most people want to be in retirement. Really important points you're making. I mean, if we look at just the U.S. in general and the rate in which consumer debt is increasing nationally,

Yeah, it is pushing for the economy, but there's ramifications long term about just the average per person consumer debt stacked on top of the overall financial U.S. government deficit and the way in which that has rapidly accelerated over the last decade, but really multiple decades of time. It is a crisis. It transcends. Yeah, it's definitely of concern. You know, they don't.

It does. You know, the media a lot of times called calls it a consumer led economy, consumer driven economy. Well, you know, a lot of that a lot of that is unfortunately driven by debt and running up credit cards, auto loans, going out of your, you know, if you have equity, taking equity from your home, you know, all these things to spend more.

And a lot of it is, I would say, wasteful in terms of what's being spent. And you mentioned the deficit as a country. I think that's the biggest risk, you know, one of the biggest risk over the next next few years, just in how to get that under control, because it's the government's bringing in more in most people's looking at the research. The government's bringing in more revenue than they ever have, but they're spending it as much more.

as they ever have as well, more. And when you have a $2 trillion a year deficit or more, and you're adding to $35 trillion, something's going to have to give down the road. And that's really unfortunate as it relates to people, the children, grandchildren, people down the road, because unfortunately, I think everyone is going to have to pay more for the decisions of the past few years.

100 percent. Yeah. And I try and stay away from the politics on this show. But my observation is that neither side wants to deal with that at this point.

And we don't need to dig much deeper than that. And that's the problem. That's the problem. No, no, we don't. We don't have to. That's I mean, that's my take really on it. It's about how can we give, forgive, give when really other people are going to have somebody else is going to have to pay for it where we're all going to pay for it, which is probably the reality. Absolutely. Yeah. Hopefully, hopefully there's an answer at some point.

Part of it is driven by just our own emotional states and the way that our biases impact our decision-making, things like loss aversion, ownership bias. How does psychology, just mindset, play into the way that you work with your clients?

Yeah, I would say, you know, because of everything being, I would say, almost instantaneous, whether it's the value account values, whether it's something that happens geopolitically or whether it is just simply a

a change, it's very easy for people to get confused and for them to get upset. And behavioral finance, I think getting alongside consumer finance, really putting the two together, that's more of, I would say, I look at it more as like a quarterback or someone that the person can go to or the family when they're not sure about something and they're worried. Really what you want to do is keep everyone as best you can at ease.

And, you know, if they need to worry about something, they need to worry about it. But a lot of times people worry about things that are unnecessary and where they should be worrying about things that, you know, pointing out other things that they should be worrying about. And so, you know, really what you want to do is really mesh the two together.

And you really want to look and help. Hopefully that will enhance their decision making, whether it's to stay in the market when things aren't good or whether it's to, as an example, maybe delay Social Security. But understand what the consequences are and not just do what someone else, your friend, family member or co-worker is doing, but do it in the interest of yourself and for your family. Yeah.

I've played this little game for the last 15 years when we have a new client come on where I'll ask them, what are your money rules? What are your rules around money? And almost always I get deer in the headlights or have as much of it as possible. And they laugh like it's a dad joke. It's like, well, that's, I get it, but that's not a rule. That's an outcome. And what it shines a light on is that most of us don't have principles framework for how we're making decisions. And it's sort of,

Steered by, again, all these emotions and biases. And I'll give one example of that and I'll let you respond to it because I know this is one of the areas of your expertise. Is how to handle what I call the difference between a windfall versus day-to-day income. So, for example, back in 2020,

Small business owners experienced a number of windfall moments where they got PPP funds, they got EIDL, they got ERTC. And these were just, especially with the PPP and EIDL, it was hundreds of thousands of millions of dollars that showed up in their bank account the next day. People rapidly increased their spending like it was a new recurring revenue stream as opposed to a windfall.

One time thing, it may never happen again. Hopefully it doesn't ever happen again because we just talked about the deficit and we just talked about some of these other. So just being able to characterize that.

How do I behave with the windfall? So like a bonus, maybe a more practical example for the average consumer. You get a bonus. That's a one-time thing. You don't go out and get a new car payment that's recurring because you got a bonus, a one-time thing, unless the bonus pays for the car in total. So these sort of fundamental ways to characterize money is missing, right?

And I'll let you, I guess, react to that or add anything that comes to mind from your perspective and what you see. Yeah, I mean, I would say one of the things that I've noticed and, you know, it's one of the things we haven't talked about, but it's a further it's a real stressor for a lot of people is really inflation, especially on groceries. And I would say essential items, fixed expenses, etc.

And one of the challenges I see with retirees, especially as they approach, you know, whether they're just getting into retirement, is the fact that a lot of them really haven't operated with any sort of a budget because of the way their income was. They would have income come in. Typically, they would save through their employer and then they may save a little bit after that.

But, you know, what I see is I see people that aren't necessarily retiring. They're not really prepared to put together a budget or even understand it. You know, they don't have the income coming in that's more discretionary anymore. Right.

They're living off their savings and their assets. And so you factor inflation on top of that. And it makes for a very, very much of a challenge, I believe, for a lot of people. And so that's why I really look at budgeting. You know, and I always some people will say, well, you have to do this type of budgeting. You know, my belief is you try two or three different types of budgeting.

You find one that you're comfortable with that you can stay with and you create a habit and you develop that over time and you make adjustments that make you, you know, that fit your comfort level. But so that you can understand what is coming in and what is coming out. And that if I use the example of a spouse, you know, spouses now, I'll meet with clients.

And one of the exercises is, do you both have a Netflix account or do you both have an Amazon account? And I would say probably about 50 to 60% of the time they have two separate accounts that they're both paying for it. And so, you know, if you can go through these discretionary accounts that set up where they're just billing you every month, cut down those costs, you're going to be able to get a better deal.

You know, use that towards savings. Look at I even use the example of insurance. You know, a lot of husband and spouse spouses, they just don't connect their and consolidate their insurance coverage. And that's a big mistake because you can save a lot of money by bundling.

Absolutely correct. I have a cheesy principle. I'll share it with you. I call it the two Oreo principle that speaks to this. There's an anecdote, if you don't mind, I'll share it with you. So about six years ago, my wife and I moved to a new place. And in our previous house, she had some snacks in a snack cabinet. I was like, I don't want to know where the snacks are because...

She could do like one Oreo at a time. I'm eating all the Oreos. So let's keep those separate. When we moved, I knew where the snacks were. And I just have, I don't know, impulse control problem. So at the end of the year, I'm stepping on the scale and I'm like, how did I gain?

10 pounds over the last 12 months. You know, I diet, I think I'm eating roughly the same. And then I started looking at it. It's like, Oh, I've been eating an average of about two Oreos per day.

more. And I did the math and it's about 12 pounds of extra calories. The seemingly small little thing that adds up, it's basically an anecdote about compound interest. All these little tiny software as a service things that you mentioned are these little Oreos. They don't seem like they're going to impact your life. It seems like it's a waste of time.

When you add it up, I do this for business owners all the time. It's hundreds. I've had as much as $60,000 a month for clients, for small business owners in these recurring little charges that add up that I don't have the time for that are the difference between living comfortably and feeling really, really stressed. Now, inflation on top of that just is a crushing thing.

I got retired parents, so I totally understand it. But you win some of that back by doing kind of resource recovery that you were talking about.

Yeah. And, you know, it's I completely agree. And that's a good analogy just looking at it, because every little piece adds up. And, you know, if you the more pieces you can sit to the side as it is for savings and the earlier you start, you mentioned compound interest. You'll compound interest can take care of you if you do the right things, especially at an early age. Yeah. And back to the overall financial literacy issue.

inflation shocked a lot of people, but for someone like you or for someone like me, it wasn't a huge surprise because you see, you see the factors, right? You see a bunch of money getting printed and pushed into the market. You see supply chain being disrupted. You see all the run on toilet paper and all of that. It was predictable again, not getting into the politics of what could have been done better, but unfortunately for most folks, uh,

They didn't see it coming. So they weren't prepared at all for adjusting their lifestyle. I'm not blaming them for that. It's just we don't prepare our citizens to be able to kind of read some of the basic indicators and go like, okay, this is coming around the corner. It's going to be a real problem. So I'll let you reflect on that. And you look at it.

Yeah, I mean, I would just say it's, you know, and I always bring up groceries because it's certainly a pain point, but I can also bring up insurance costs. You know, if you have a lot of retirees that live in Florida, that live at beaches, it's going to be very difficult for them over the next few years, you know, because they're going to have to make a decision whether, unfortunately, unless things change, whether or not to, at some point, it's going to be too expensive to insure where they live. And how do you choose that between, you know, getting a house,

Giving up the day to day necessities as well. So, I mean, I think if you look at whether it's utilities, groceries, you know, it's important. A lot of it's important to stress test things. And that's why I always look at as well, just because the inflation rate is average two and a half percent.

doesn't mean that what happens if it's five or 6%. What does that look like for your savings in retirement? And does it still work? And you want to, whether it's Monte Carlo, what do you, you want to run different stress tests when you're coming up to retirement to really give yourself, I would say almost a comfort level to understand if the inflation rate's high, you can handle it. You know, it's not like you're going to have to give up your day-to-day, you know, whether it's

It's just simple things. You just want to make sure you cover all your bases. Getting back, I would say, a five to 10-year rule, coming up within about 10 years to retirement, you want to start looking at all these things because most people within 10 years to retirement, their kids are graduated. They don't have that expense. And they're really able to scale up on savings.

look to pay down debt, make some decisions that will hopefully help them get to the finish line so they can have an enjoyable retirement and just not be stressed about the day-to-day expenses of life.

I'm glad you mentioned insurance because those are things that sneak up on us. They're on auto charge. They're part of our mortgage payment. Right. And so, you know, you don't, it's not as in your face, like going to the grocery store and go, Oh, this is $20 more than I'm used to. It's like, it's hitting your bank account. So you're right. Inflation insurance. Last I looked at the data is,

has been the most inflationary. Some other things have stabilized a bit, but insurance, there are no easy answers there. So I'm glad you called that out. Jeff, I really appreciate you coming on the show today. People can find you at jeffreypanik.com. That's P-A-N-I-K, right? The last name. Or they can go to balancewealth.com to learn more about you. Thanks so much for coming on the show and really appreciate what you had to share today.

No, thank you for having me, Dan. Have a great day. You too.