I was recently sat down with my partner, Matt Reiner, to talk about his new book, Ready To Be Rich.
Wes: What inspired you to write “Ready to be Rich: Smart Financial Advice for People on the Way Up?”
Matt: For me it was a desire to change the conversation around budgeting, saving and investing. I think that the younger generations get a bad rap for not saving enough and not understanding money. Too often the advice that is told to younger generations just isn’t yet relatable, and that leads everyone else to look at them and say, “They just don’t get it.” But the thing is that these generations do want to be good with money. They do want to save and retire one day, it’s just that the conversation hasn’t changed in centuries. The advice is always going to be the same, but we should look to try to better relate to these generations. We should help them get what they want today: experiences, homes, etc., but also help build the habits that are integral to a solid financial future. I believe that the balance of the two can happen when we update and improve the conversation around finances, and that’s why I wrote Ready to be Rich.
Wes: I think that makes perfect sense. So it sounds like this is written for younger folks. Is that who you think would benefit the most from reading this book?
Matt: It’s really for anyone that feels that the advice blogs and Googling hasn’t helped them yet with understanding budgeting and managing their personal finances. It’s for the person who hasn’t really connected with today’s standards of advice which push to sacrifice, save, invest, and then hope it’s enough.
Wes: Interesting, but you’re also a financial advisor. Do these two worlds overlap? How did your background as a financial advisor affect your messaging in the book?
Matt: When I manage a client’s investments, I have to constantly work to relate back the philosophies and methodologies of investment management and financial planning to the individual or couples understanding. And this is slightly different from person to person. What I quickly realized in this business, is that finding ways to relate finance to things people enjoy (sports, traveling, family, etc.) tends to be most effective. That actually helped my clients more quickly understand how I was managing money. They were more likely to take the recommended actions and were more engaged with their financial situation. Knowing that this method worked so well with my older clients, it made sense that this younger audience would also be more receptive to learning about finances with this methodology.
Wes: I’ve actually seen the same response from people when I’m discussing complex financial ideas and theories. I think breaking down this topic into relatable and even sometimes just into a generally understandable format can be difficult. But when you’re able to find a way to relate it to something that people already care about, it tends to just really help everyone understand the concept much more clearly.
Now, I know that you based your book on a survey you sent out, much like what I did with You Can Retire Sooner Than You Think. What would you say were some of the key findings from your survey that you based the book on?
Matt: We wanted to look at how people felt about their money situation, and whether or not they enjoyed experiences or things more. This survey actually allowed us to validate our thesis that people enjoy experiences more than things. This validation of our thesis actually led us to present the oftentimes boring chore of budgeting in a way that focused on how people could achieve their goals for the experiences that they crave now while also building the habits necessary to solidify their financial future.
One interesting finding was the clear way people kick the can down the road regarding financial situations. We split up two questions and asked people early in the study what, regarding their financial situation, kept them up at night. They had the option to say nothing, but over 60% of people said they worried about something (from debt to retirement to kids college, etc.) Later in the survey, we asked them how worried they were about their financial situation and only 18% of them were very or extremely worried. In fact, the majority said they were fine even though they had just noted these financial issues weighing on them. Based on this survey, people tend to not let their big picture financial fears impact their view of their financial situation today, and instead, they assume it will all work out sometime in the future.
It’s human nature that we don’t worry about a problem until it’s right on top of us, and with finances that typically doesn’t happen (especially for younger generations) for many years (heck decades) down the road.
Wes: I think we can all relate to that. I’ve certainly found myself “kicking the can” down the road before on personal obligations. What would you say these millennials and young families are prioritizing today over their bigger picture financial goals and worries? What’s causing them to “kick the can” down the road? Is it different from the previous generations?
Matt: This younger generation is prioritizing experiences. For example, rather than saving diligently for retirement for 40ish years and then traveling the world once they leave the workplace, they’re instead trying to juggle a career and traveling while they are young and with their family. Also, this might be a surprise, but this generation does want to own a home.
I think the difference between the millennial generation and the boomer generation is that millennials saw our parents as more affluent than our boomer generation parents saw their parents when they were kids. Adding to this, technology has allowed us to have more access to opportunities than past generations. These combined factors have perhaps made millennials desire more instant gratification than previous generations. They’re not interested in waiting until retirement to travel. They want the instant gratification of traveling today and retiring someday in the future.
A last note that’s not really a difference between the generations but really just based on timing, is that millennials are still far away from understanding what they will need financially for retirement. Often as a financial advisor, I hear people say they wished they had started saving earlier. Every generation probably says that and this millennial generation will likely be no different. The main reason all generations struggle with saving for retirement is typically the inability to truly grasp what they’ll need during a period of time so far away.
Wes: Well, that last piece leads to something else I found interesting in your book. You talk about the difference between renting and owning your finances in your book. Could you quickly break that down for us?
Matt: We took the idea of owning versus renting your house and brought it back to individuals financial situation. Because so many people already understand the differences between owning versus renting when it comes to houses, this was our opportunity to relate back to something we all know very well. Owning your finances means that you have control over your spending, you have transparency in your spending, you are effectively managing debt and you are growing your overall equity. Whereas when you are renting, you lack control over your finances, always feeling that things are coming in one door and out the other and you are constantly paying others as opposed to building your own equity.
Wes: That seems to tie nicely with your thoughts on budgeting. The book says a budget should be a “financial GPS.” Can you explain this concept?
Matt: When you use a GPS system like Waze or Google Maps you put in your destination and it gives you an estimated time of arrival. If you happen to make a wrong turn or take a detour, the GPS system doesn’t just say, “Welp, you are on your own, good luck!” Instead, it helps you get back on track. The same should be true for your budget. Many budgets today leave people stranded if they have a major life expense or if they overspend once. The budgets blow up and individuals are left trying to figure things out on their own. That’s what we wanted to help alleviate with the daily spend limit. We say, “Yeah, your spending blew up, but let’s still give you the path to get where you want to go in regards to your financial goals.”
Wes: I love that concept. In fact, it reminds me of my investing concept of “head west.” Sometimes you have to focus on generally getting it right, not necessarily getting every piece perfect.
So how did all of this talk about owning your finances and your daily spend limit lead you to create Benjamin? Can you explain the concept of Benjamin?
Matt: Benjamin is an artificially intelligent bot. Which, in the simplest form, is the idea of making a computer intelligent. You create artificial intelligence by training the computer to do some of the tasks that are typically dependent on the intelligence of a human. An example of this you probably use on a daily basis is your spam filter in your email. Your email program has learned the task of weeding out emails that likely won’t provide you with value or which may even be harmful.
Then a bot is a tool that allows people to ask questions that once had to be done over the phone or email, but now can be done on the computer or via texting. Recipients are able to ask their questions and get immediate answers without a person having to sit behind a screen somewhere.
We wanted to create a solution that allowed our clients and users to have a more connected and personalized experience with their financial situation. Benjamin helps individuals gain insights and engage with their financial situation in their own time and via the same mediums they are using daily… mobile phones.
Wes: I like that you’re offering immediate answers to folks trying to improve their financial health. We already talked about how millennials (and most people for that matter) like instant gratification these days. On that note, what behavioral and psychological theories went into the research for the book and the concepts behind Benjamin?
Behavioral economics is one of the most interesting things to me. I was inspired after reading the book Thinking Fast and Slow by Daniel Kahneman. I was able to really understand the concepts he was talking about because I saw it first hand managing clients monies.
As humans, we aren’t rational and our financial and money decisions can’t be plotted on a normal bell curve. And so understanding some of the human tendencies with regards to money and gains and losses and ownership all help us to better understand why people don’t save and/or why people sell at the market bottoms and buy at the market tops.
All of these concepts helped to drive the way we thought of presenting Benjamin, the daily spend limit and some of the other concepts in the book.
Wes: Well, I’m excited for folks to read your book and try out Benjamin! Thanks for talking with me today, Matt. For our readers, remember that you can find Matt’s book, Ready To Be Rich: Smart Financial Advice for People on the Way Up, at MattReiner.com and Amazon.
