Smart Women Finish Rich
Let's talk about Smart Women Finish Rich. The ladies are like yes! What started everything for me was teaching classes for women in money and how that happened, I talked about my grandma Bach in the beginning of the class and how she made a decision at that she didn't want to be poor anymore. And that decision led her to learn how to go out and invest and as a result she became a self-made millionaire. For many of you watching at home, her best investments by the way, came in her 60s. So remember I say it's never too late. Some of her best investments came in her 60s. My grandmother helped me buy my first stock at the age of seven. So one thing I want to talk about to the moms here today, and the dads, is that you can teach your kids about money. My grandmother, at seven years old, at McDonald's one day said to me, "You can make a lot of money here." I was seven years old and I said, "Grandma, I'm too young to work here." And she said, "I have a bigger plan for you. "I want you to go ...
up to the manager "and ask the manager if this company is publicly traded." I'm eating my french fries, I'm like, "Seriously grandma?" She's like, "I'll give you a dollar." I'm like, "What do you want me to go ask?" (audience laughter) So I go running up to this manager and the guy thought he was on a show called Candid Camera. Anybody remember that show? He's like, what? The manager came over, came back with me to the table. He looked at my grandmother. He said, "Yes, we are publicly traded." In fact, he knew the symbol, the stock, which was amazing. I don't know if that would happen today. But he was like, "The symbol is MCD. "It trades on the New York Stock Exchange. "In fact, the stock's done very well." She's like, "Thank you very much." She's like, "I actually knew that but I wanted my grandson "to learn how to ask." So he left and I'm eating my french fries and my Big Mac and she says, "So here's the deal. "There's three types of people in the world. "Those like you who come here and spend money "and eat at McDonald's, "those who work here, "all those people at the counter, "they're all working here. "They have a job, they're earning minimum wage. "It's a tough way to make a living." Then she said, "Then there's people who own this place. "I want to teach you how to own this place." She's like, "You can buy stock in McDonald's. "You can take your allowance "and I'll help you buy your first stock in McDonald's. "You will own a piece of McDonald's. "And when McDonald's makes money from "all your friends eating there, "you'll make money." I'm seven years old. I'm like that sounds cool. So we run home, she opened up the newspaper. She circled MCD in the Wall Street Journal. Then she said, "Now I'm going to teach you how to find this on television." So we go and she turns on the financial news, and the ticker going across the bottom, she's like, "As soon as you see MCD, "watch for MCD and tell me what the price is." I'm literally like this in front of the TV. "MCD, MCD, there it is. "MCD and here's the price." All of a sudden, by the way, that got me. I'm like this is a whole new world opened up at seven years old. So I bought my McDonald's stock. I used to look forward to the annual report. Literally at nine years old I'm at Disney Land. I'm running up to Mickey Mouse, "Hey, are you guys public?" (audience laughter) So it changed my whole perspective as a young kid. Now, the interesting thing is I told you there were three ways to make money on a business, right. I said you can go and you can eat, which is what she said. She said you can work here and you can own the stock. Turns out there's whole lot more ways to make money in a business. People own the real estate the McDonald's in. Those things are sold all the time. They're called triple net investments. Investors buy that real estate. There is bonds. You can buy a bond from that company. There's preferred stock from that company. So there are lots of ways to make money on businesses. The key thing is if you're going to use a business on a regular basis you should be looking at investing in that business, because everybody else is probably using it too. What does this have to with women and money? I wanted to start out with my grandmother's story, because she transformed our lives. My grandmother was unique because she took charge of her finances before a lot of women were doing this. Today this is becoming way more mainstream. But when I taught my first class for women and money back in 1994 in Lafayette, California nobody was doing this and people thought I was crazy. People told me it wouldn't work, that nobody would come. And guys couldn't teach a class on women and money. That's what happened. And then we had 225 of our clients wanted to come to the first seminar. We could only fit a 165 in the actual hotel room. I ended up teaching that class three times, and from there it just grew and grew and grew, and I wrote the book "Smart Women Finish Rich." I set out teach a million women to be smarter with their money and that's how my whole career went from Morgan Stanley to doing what I do today. So with women and money I would always start by talking about the good news. Ladies, here's the good news about women and money, and guys you can listen to this too. The good news is this. Today you are the entrepreneurs of America. You own 9.1 million businesses, and you start them at a rate 3:1 versus men. It's pretty remarkable. There's a lot of good news. You actually employ right now 7.9 million people. You make up 45% of the household with assets of $600,000 or more. You control those assets. I'm always a little confused by this statistic, because I'm married and my experience is that usually you guys have control over all the money. (audience laughter) They say that you impact 87% of all purchasing decisions. And I think that that's really true. I can tell you that our last car, I was pretty positive that we should get an SUV, and my wife wanted a station wagon. What do you think we have?
We have a station wagon, exactly. Happy wife, happy life. 48% of millionaires are women in this country. So I told you how the number of millionaires has skyrocketed and 48% are women. This number within 10 to 15 years will be at least 60%. Women are going to control the bulk of the wealth in America. You're also earning $12 trillion a year. Huge earning. You control $14 trillion in assets. It's been expected that somewhere between about $20 trillion will transfer to women in the next 10 to 20 years. Some of those numbers have gone from 10 to 20. But it's huge. Those numbers are huge and too bad, because the husband's are going to pass away first. But wait. There's more! Here's the other thing. Women are the primary wage earner in 40% of families. So most families today are at least two-income households. In many of those families women are the primary wage earner. You control 83% of purchasing decisions. I think I said 87% before. So maybe that was from a previous day in age, but 83% of all purchasing decisions is pretty darn high. You graduate at a rate now that is actually higher than men, both undergraduate and graduate. You consistently outperform men investors. Why would you guess that women consistently outperform men investors?
They're more attentive.
More attention to detail. What is that?
Panic less. What do you guys think at home? Why do you think women make better investors than men? Typically. Less risky? What's that?
More conservative. By the way, a lot of these things are true. First of all, women do typically more research than men before they invest. So they will actually do all their research, do all their homework, completely understand everything, get all their questions answered, then they'll invest. Which is a good thing, by the way, because once you're clear you're committed. And the key to investing, decades, not days. The key to good investing is commitment and not panicking when the markets go up and the markets go down. Women consistently outperform men investors, but here's the number one reason. You trade less. When you look at people who trade actively, it's typically men, and almost across the board they're losing money. So guys, you can learn from this. Don't trade actively. Get all your questions answered. Don't act all cool like you know what's going on. If you don't know what's going on, ask questions. Leave it alone. Don't panic. Ignore the tip on the golf course and in the locker room. Women never come up to me with stock tips. Ever. I mean almost ever. Don't invest on a hunch. Do your research. What's the not-so-good news? Women live seven years longer than men. It all depends on how you look at this, but like I said earlier today, many women, you ladies will not die. You're gonna live forever. My grandmother was drinking green juice at the age of 86. She was walking five miles a day. She lived leisurely in California. She'd outlived my grandfather by well over a decade. She unfortunately had a stroke pretty suddenly, and then she passed away. When she passed away we found out that she had been dating three men, three nights a week, and those three men, they did not know about each other. (audience laughter) So we were like oh! We were doing like the whole day of the funeral. Go grandma! You're gonna live a long time, and you will probably outlive the man in your life. I said the average age of a widow is 56, 57. The most recent statistic I don't understand this, but it's at 55. Whether it's 55, 56, or 57 too many people are left as widows at too young of an age without the family being prepared, which is why I hammered on life insurance and wills in previous lessons today. You come here first. Go back and watch the sessions on wills and protection plans. What else is not so good? 40 to 50% of marriages end in divorce. So the most important thing you can do when it comes to money is know where all the money is. Everything I taught earlier in previous lessons, like using mint.com, having the finishers file folder system, knowing your net worth. What do you think the first thing is that people fight about when they get divorced? It's money. They literally fight about money before they fight about the kids. So what happens in divorce, unfortunately if you go through a divorce, is that they divide the money up. If you don't know how much is there you don't get half. Now guys, I know this little section here is for women, but I will say this to you too. A lot of men today, because the wife is the primary bread earner you need to know what's going on with the money, because now the roles have been reversed. The other thing I will say is we have a lot of same sex relationships and marriages today. It's all the same. It's all the same. You need a protection plan. You need to know where all the money is. And guess what? People in committed same sex relationships are now going through divorce. So all the same rules apply. With that, ladies you rock. Go crush it and deal with all this stuff, alright. Own your financial power. Can we do that? We have a deal?
We have a question from one of the guys.
It's a bit of a throw back, but you mentioned the importance of life insurance. One thing I realized that I wanted to ask that I forgot during that section is the difference between term, and then life insurance as an investment vehicle.
Sure, let me cover that. Term insurance, when you buy term insurance, all you're getting is protection plan in case you die. When you die. You buy a 20-year term policy, you die within those 20 years, that insurance policy is taken care of. Whoever you designate as the beneficiary. 21 years, year 21 that insurance policy, there's nothing there. So you paid for it for 20 years. It's gone. It's just a protection plan. There's a whole lot of insurance policies out there. Whole life, universal life, variable life insurance. I mean I could literally do all day on insurance. Those insurance policies, you're paying for a death benefit, and then you're putting excess money into an investment account and that investment account could be cash, money markets, mutual funds, depends on the insurance. You want that money then to grow inside that investment account. That's the investment part of it. That part grows tax free, because it's inside insurance, and you can borrow that money out by taking loans tax free. So it's looked at as an investment. It can be, but for most investors, it's a very expensive way to invest. I think you should be maxing out your 401k plan first, your dream account. Once you've got a lot of savings and you have a high income, then you start to look at insurance, this is my opinion, as an investment vehicle. Also, the commissions are totally different. It's like 60, 70, 80, 90% of your first year's premium in a cash-value insurance policy is all commission. You have to be very clear in why your buying the insurance policy. All things being equal.
Term plus some of the alternative investment vehicles that you've discussed is a better rudimentary strategy?
I think so. Just so we're clear, because then the insurance people would all be upset with me, for high net worth, high income people, insurance can be a great vehicle. There are a lot of sophisticated strategies with insurance. But for most people with less than a million dollars, it's not where I would start. I'd buy the term policy so I'm protected, low cost. It's also an easier decision for you to buy term insurance, which means you won't put off buying it. What happens when you go look at a cash value insurance policy is that that half a million dollar insurance instead of being 50 bucks a month, it might be a thousand dollars a month, or it might be $500 a month. So you're like I don't know if I should do it. Then you don't do it. Whereas at least you can go get the term policy set up, and then later you can always go into a cash value insurance policy if you want.
I have a quick question back from the owning a home real estate part. You talk about when you have a $300,000 mortgage you can do a 15-year versus a 30-year. But how would that work for places like here where the average home cost is more than a million?
Basically the question is how do I pay a million dollar home off in 15 years? Or how do I even buy a million dollar home?
Or how different would the approach be?
It all depends, right. Because if somebody can afford a million dollar home, somebody can afford an $800,000 mortgage. The extra cost on that $800,000 mortgage, you pay it off 15 years early. There's a possibility that they can afford the extra payments. If you really stretch and you can barely get into the 30-year mortgage, then that's okay. You do a 30-year mortgage. You just do the bi-weekly mortgage payment plan. That'll take a 30-year mortgage down to 25 years. That's a great start. Then as you make more money you can chunk it down. Are homes here now actually averaging a million dollars? (audience chatter)
We had some similar questions online. People in New York and L.A. and San Francisco saying, "What do you say about people like us "who live in those places?"
I'm in New York. I think the average price of an apartment now in New York is a million six. Nobody would have believed this 20 years ago, right?
I was just there. I just got back from New York. They're small compared to ...
Yeah, it's a deal if you can find an apartment for less than 2,000 a square foot it's a deal. Can you believe that?
I have another question. There's a lot of speculation of what's going to happen in the next four, potentially eight, years. Anything you would say about things you expect that might change or what to look out for? Anything like that?
I have this crystal ball. (audience laughter) So I look into it and ... Remember that slide where I showed you 1926 to now, to the end of last year? What I didn't go through, there were dots all over that slide, and they were all things that have gone wrong in history. Every year there's something that will go wrong. I'm the ultimate optimist. I'm very hopeful for our country. I fundamentally believe in America. Politics have been very ugly these last 12 months, so you have some really happy people, and you have some really unhappy people. For the most part it's usually just a giant sideshow. No one who runs for office, whether republican or democrat, is going to go into your house and fix your finances. I just hate to tell it to you. Let's just tell it like it is. Your opportunity to fix your economy is to fix your own economy. Really, what goes on in the economy is not nearly as important as what you do in each and every economy. If you were to ask me do I think we're headed into a four-year bull market or eight-year bull market, I think today as I sit here, one thing, this is a timeless video or show, but I happen to be sitting here at the all-time high in the stock market and the real estate market. All-time high in both after 7 1/2 years of perfection. So from 2009 to where I am today, the markets are up over 300%. If you bought homes in the last recession, you're up 50% on average. "Well God, that's too late. "I missed this." No, don't worry. We'll have another market correction. Guaranteed in the next 10 years things will go wrong again. They always do. We through economic cycles and everything turns upside down, and everything gets bad, and people run in panic. Other people make money. Recessions make millionaires. Booming economies like this, this is where people candidly can get lazy, because when things get this good, if you've been investing your wealth is at an all-time high. Your 401k plan's at an all-time high, your real estate's at an all-time high. Maybe you got lucky, you invested in a couple of start-up companies and they worked out. This is whenever everybody goes now it's easy. As soon as it starts to feel easy, it usually stops being easy. But there's never a warning sign. So I'm not sitting here trying to time any market, because I know it's a timeless market. I think the most important thing you can do honestly is own your own economy. Own your own job skills. Own your own finances. Have a plan for good markets and bad markets. And don't worry about what's coming politically. I hope what's coming politically, personally, because it's just completely self-serving, is that the taxes laws will get changed. Because if they change the tax laws in theory they're gonna simplify them, and they're gonna lower them, which is going to put more money in my pocket. Is it gonna happen? I don't know. I think that we are about to experience politically a level of change that we've never seen in this country, certainly in the last 10, 20 years. Ultimately, I'm hopeful that four years, and eight years, and 12 years, and 15 years, and 20 years as good as things are now, they're gonna be better. I know this. I come back here in 20 years, if the value of an average home in the Bay Area today is a million dollars, in 20 years it's more than a million dollars. The stock market's at, what are we at now? We're almost at 20,000. In 20 years I will be shocked if the market's not over 30,000. It's probably going to be more like 40,000. That just means the market doubled in 20 years. That would be extremely low returns actually. Markets double every 10 years on average. They double every 10 years, we won't be at 40,000. We could be at 60,000 or 80,000. So I hope to live another 50 years, and if I do I'm gonna bet on the fact that investments long-term when they're quality, go up.