Investing Unscripted Podcast 86: When Should You Stop Investing?

Priorities, reaching goals, and dealing with life's surprises

Investing Unscripted Podcast 86: When Should You Stop Investing?

Note: Apologies for the late delivery of this week’s transcript. Going forward, expect it to arrive in your inbox at 6AM ET on Wednesdays, when new weekly episodes are released. Transcripts are edited for clarity.

Jason Hall: [00:00:00] Hey everybody. Welcome back to investing unscripted, where we ask the hard questions about investing. I'm Jason Hall joined as usual by Jeff Santoro. Mr. Hot tea guy. Hey, Jeff. Happy new year, buddy. 

Jeff Santoro: Hey. Happy new year. How are you? 

Jason Hall: I'm good. I'm good. So we're recording this on January 3rd. So when you're listening to it, this is the first thing that Jeff and I have done together since, oh, goodness gracious, nearly mid December.

So it's been a couple of weeks since we recorded anything together. It's good to, it's good to be back on tape with you, buddy. 

Jeff Santoro: Yeah. We sort of, we were joking when we did the planning for this that we hadn't really even texted each other much over the holidays. So we got a much needed break from one another.

But I am, I'm glad to be back. I'm glad to be back into the routine recording another show. And speaking of the routine, you, if you are a listener on the day that the podcast drops, you have noticed that this dropped on a Wednesday, not a Saturday. And that is because we are making a small tweak to our production schedule here in [00:01:00] 2024.

Our new regular weekly episodes are going to drop on Wednesdays. 

And other things we do throughout the month, , whether it's a first Friday recording or whether it's a Rough Cut, we'll drop on other days. We'll try to do some of those on Saturdays, because we did hear feedback from our listeners that having a weekend show is something that they enjoyed. But, the regular weekly episode will be coming on our Wednesdays moving forward. 

And that was for a very practical reason, which is we suddenly realized there was no reason we had to rush and record and put the show out within a two or three day span, which is what we've been doing for about a year and a half now.

Jason Hall: It's just the way that we started and we continued to do it that way. And I do think, Jeff, there might be times where there's like some of the Rough Cuts, maybe there's something that's like really big news that's going on or really timely that you might see us want to really try to be quick to market, so to speak with it.

But yeah, by and large, it's just been really [00:02:00] hard on us to be honest. So we're both looking forward to being more creative and more productive with a schedule, a publication schedule that's a little better for us. I mean, we still love you guys, but we love us more. Yeah. I guess it's really- 

Jeff Santoro: No, I love me. And you love you. And then after that we love our audience. 

Jason Hall: Right. 

Jeff Santoro: Here's the rest of the rundown of what the cadence of the week will be.

You'll still get the transcript the day the show drops, so that will also come out on Wednesdays along with the podcast. It'll still be 6am, like it always has been. The regular Sunday newsletter is gonna remain on Sundays. So you'll still get our Random Words newsletter every Sunday morning. The show will just come out on Wednesdays, unless it's, like I said, a Rough Cut or a First Fridays or something fun. And yeah, those will be a little more nimble. We can get those out quickly for things that are more timely.

But we're hoping that our regular episodes are pretty evergreen and not so time sensitive that they can't wait a week to come out to you. That's the update.

While I'm wasting time here, let me do our quick [00:03:00] housekeeping. Several of you have been nice enough to add more ratings and reviews to the podcast apps over the last couple of weeks. We really appreciate it.

We have a wonderful one from my wife's cousin this past week, who said Jeff's literally standing to me right now and told me to write this. Five stars.

So thank you, Shannon. We appreciate that review.

Jason Hall: Best review ever. 

Jeff Santoro: Best review ever. 

But if you would, if you've been enjoying the show and can take a few minutes to write us a review or take a few seconds and give us a star review on the podcast apps we would really appreciate that. And if you know someone who you think would like the show, please send them a link to it, let them know they should check it out and let's help more people find the show.

All right, Jason. So here we are with our first regular episode of the new year. What are we going to talk about? 

Jason Hall: So this is the time of year where there's tons of podcasts that are talking about new year's resolutions and doing things, and I think last year we talked a little bit about not like resolutions per se, but [00:04:00] thinking about planning as an investor and like building all of the things to move forward.

And our good friend of the show, Colin, it's been a little while ago he sent it to us, but I just, I thought it really jumped out at me because this is like almost like the anti new year's resolution show that we're going to do.

And the title is "when should you stop investing?" 

Jeff Santoro: When you die. 

No, that was my, when Jason asked me about this first, that was what I thought the question was asking. But then he gave me some more context.

So that is not what we're talking about. What we're talking about is, we spend so much time encouraging people to start investing and start early. And the best day to start is today. And the second best day to start is tomorrow.

But we never really talk about when should you, or are there times when you should put a pause on or stop your investing. So that's what this episode's going to be about. 

So Jason, why don't we, why don't we start. By maybe you want to read the exact question that he sent over to us. 

Jason Hall: [00:05:00] And I think just in thinking about this, Jeff, I think I want to title this episode, "when should you not invest?" because maybe that's a different way to reframe it too. And like you said, pause is another way to reframe it. 

But what Colin, the message he sent said, when should you stop investing? And then he gave us some examples, building an emergency fund, loss of a job, had an emergency, paying off a house early, baby on the way and so on.

Again, just some good examples of times that maybe there are other financial priorities to putting money in an investing account. 

Jeff Santoro: So I think we're going to be talking about a lot of different scenarios in this episode. It's going to feel a little unwieldy, I think.

And I just want to say off the bat, this is a very much a, it depends episode, meaning who you are, where you are on your stage in life, both in age and in terms of married, single, kids, no kids, renting, homeowning, all those different types of things. There really is no one answer to this. And we wouldn't be able to give [00:06:00] advice on an answer, even if we knew everyone's exact situation. So we're going to talk in a lot of generalities and around it and pick each other's brains.

So it, this isn't going to be a one size fits all kind of an answer. But we, as we were talking through the question, we kind of found a bunch of interesting places to explore. So I think this will be a fun conversation.

So I think to start off, I'll say this. I think there are times when you could consider putting a pause on your investing, but that's how I want to think about it. That was the first thing that jumped out to me. I get that. The question is when should you stop investing? 

Stop to me implies, and maybe not ever continue. And I think the better mindset, if one needs to stop contributing to investing, investment accounts is a pause, not a hard stop. Because I think ideally, you'd want to get back to doing it when the circumstances dictate that you can. Would you agree with that? 

Jason Hall: I think by and large, yeah. And again, kind of interpreting what Colin said, to me, I read it as[00:07:00] when should you stop contributing money to your investing accounts. When should you stop putting money in your Roth, your 401k, your taxable brokerage, whatever version of those happens where you live if you're not based in the U S. I think that's kind of what he was getting at is that aspect of it. 

And, but I think there's another part of it we can talk about a little bit too, is when should you take money that you have invested and do something else with it? So that's another question. Collin wasn't directly asking, but I think it's part of this same thought exercise that you should do. 

And Jeff, one of the things I really love about this particular question is I think it really works with what we try to do with frameworks and help figure out how to think about these hard questions and come up with the right answer for yourself versus a series of rules necessarily to follow.

But with that said, in the preplanning, Jeff, one of the things you and I talked about was one of the kind of cool things that's come out of social media, Fintwit, and starting, maybe starting to grow on other platforms is that there are people that [00:08:00] have done a lot of good free work and put together like checklists that people can go through.

And it's a good way to start maybe setting those financial priorities. So you can think about where do you need to allocate your resources? What's most important. 

Jeff Santoro: Yeah. And I think the other piece of it too, is the question we can ask is, when is a decision like this binary versus on a spectrum?

So if you're at a point when you literally cannot pay the electric bill or feed your family or you're going to be evicted because you can't pay your rent or mortgage, to me that's a binary reason to take all the money that you were contributing to a retirement account and funnel it to something a little bit more immediate to get through whatever this circumstances that's causing you to change your plan. 

But then there's the spectrum of maybe you have X dollars a month that you can do whatever with invest, save, spend-

Jason Hall: Discretionary income. 

Jeff Santoro: Correct. Whether you are on a spectrum of, okay, this pile of money [00:09:00] was a hundred percent retirement accounts, and now it needs to be 20 percent retirement accounts, 80 percent paying off this high interest debt or something like that, right?

So there's the on off switch kind of version of this. And then there's also the how do you turn the dial one way or another? 

So I think a place I like to start the conversation is stage of life matters greatly here. But I think it makes sense to start from a positive standpoint of what are some things you can do when you're younger, just starting out, you know. Get your first job, you just graduate from college or whatever, mid twenties, late twenties, whenever you kind of figure things out.

What are some things you can do to set yourself up for success so that something like some of the things Colin mentioned in his list, like losing a job, having an emergency, having a baby coming on the way, like some of the things that, you know, might just change the plan that you can weather them a little bit more successfully.

So what are some things people can do foundationally to maybe prevent some issues down the road? 

Jason Hall: I'm going to answer this in [00:10:00] two ways. One is just like the general basic personal finance approach that most everybody should take. But then I also want to give like a way to think about it that I think is really useful.

And starting with the basics, obviously, you have short term money, long term money, right? And your long term money is it's what you're investing to create this, to generate wealth, right? To turn money into assets and assets that create value, generate cashflow, become more valuable, all that stuff.

That's the reason we buy stocks, right? It's why we invest in real estate, all that kind of stuff. That's a long term.

The problem is because of the short term threats to those assets is volatility, they're terrible as a safety net because, well, just based on the odds, you're probably more likely to lose a job or maybe get your hours cut when the economy is not great, right?

When the economy is not great, there's a good chance that your portfolio is down, right? So you're having to take cash out some of those resources at the worst time if you lose your job [00:11:00] or you get injured or something like that, right? So those probabilities align in really bad correlations.

So that's why you don't, for short term, you just suck it up and you have something predictable like cash, right? So building out that emergency fund. And if you're 25 and you're still working your first job out of college and you're making good money, but you don't own a house, you're not married, you don't have kids, the emergency fund probably doesn't need to be that big because realistically, you can probably couch surf for a few weeks, move back in with your folks.

I mean, you your access to ways to bridge that gap are far better, and your opportunity to create long term wealth maybe more important, where you really want to probably leverage more of your resources towards building that the foundation of your investment portfolio when you're younger. I really think that more people should probably do that versus saving cash when they're young. 

There's a, there's like a mental side of it too I want to mention. People fall in love with cash, right? You start saving that [00:12:00] cash and you see that cash number and then taking that cash and investing it in something It's, it can be hard to do because you fall in love with the size of your savings account balance. 

Jeff Santoro: This is where the internet can really help. If you just google something like, how much of an emergency fund do I need? You will see all sorts of opinions. So I've seen the opinion out there that you just expressed where, actually, when you're the younger you are, the more you should prioritize getting your investment going and maybe simultaneously or slightly thereafter start to build the emergency fund . 

I have also seen people who have the exact opposite view that the number one thing you should do is build an emergency fund. I think a lot of it depends on in what industry you work as well. And also what is your situation? 

I never built my finances on this, but I knew in the back of my mind when I was 22, if I ever really got into huge financial, lost my job for a really long amount of time and whatever, I could move back in with my parents and they'd help me [00:13:00] out. Like I, that was a situation I knew- I didn't want to. I didn't, and I thankfully I didn't have to. 

Not everybody has that luxury. You know, some people view getting out of college and getting their first job is like the way out of being with their parents and family. 

Jason Hall: I will never go there again kind of thing.

Jeff Santoro: Right. And like I said, I think industry matters. I grew up working in education and not that you can't, it's not like you can't lose your job in education, but there's always other jobs in education. So I knew I could lose my job and be out of work. I felt fairly certain that within, you know, by no later than the following school year, I'd be able to find employment again.

Not everyone is a teacher, right? So I think that matters as well. And I guess the last thing I would say about emergency funding that I think we can maybe move on from it is I, you have to think of it in my opinion as income replacement to pay your bills.

So it's not just looking at your spending in terms of how much to have. It's what in your spending can you not cut out? 

So if you have cheap rent and you need to feed yourself maybe all you need is three [00:14:00] to six months of that dollar amount covered. But that's every situation is different.

 I'm of the opinion, I think I'm a little bit opposite of you. I'm of the opinion that, as early as possible, you should just pile all of your discretionary money into doing that fast.

Let yourself go out a little bit. Have some fun. But, at least in some people's situations, I think in some ways you can be the most wealthy you'll ever be when you have your first job because your expenses are also proportionately lower. And you can maybe pile up some cash a little bit quicker. 

Jason Hall: And the jump from being a poor college kid to actually making money is such like a massive change in lifestyle. 

Jeff Santoro: Yeah. 

Jason Hall: That everything else is just a little bit of creep, right, from that day forward. 

Jeff Santoro: I mean, I remember, look, I was a teacher right out of school, so I didn't make a ton of money, comparatively. My first paycheck tripled my net worth. Not kidding.

I had about 500 bucks to my name in September of the school, my first year teaching and my first paycheck, triple that. Now that was, it was a little bit higher than normal cause I hadn't started [00:15:00] taking the pension stuff out.

But but I still had the mindset of I can get by on 50 a month. So I probably should have spent more of that or taken more of that cash and saved it. I didn't. I bought things because I could. 

Jason Hall: I want to give I want to give a number here. And this is, directionally, it's pretty much online. It's gonna be different from market conditions and periods of time and that sort of thing.

But every 10 years you defer saving for investing for some long term goal, whether it's saving for retirement or something else you're investing in, right? Every 10 years you wait, it takes about five times more dollars to generate the same end result

. It is a massive amount of money for every 10 years you put it off. So that's why I think it's so important. The investing piece is so important. And time, the time value of money and compounding, starting early, why I think it's so important.

But if you don't have that safety net. Cash safety net. You can wipe out years and years of investing[00:16:00] in months, right? Depending on the timing. So that's the downside. 

Jeff Santoro: The other thing I would say, I already said it'd be the last thing, but this really will be the last thing on the emergency fund thing, is aspect of the emergency fund that was new to me recently is the idea of, and I know this kind of goes against that balance between how much cash do you really wanna have, but the idea of having some level of self-insurance.

And I don't mean like you don't need health insurance. I'm not saying you don't need health insurance or life insurance. But self-insurance on little things like for example, I always bought the AppleCare on my iPhone, right? Because I was like, oh man, if I dropped this thing in a lake, I don't want to drop another thousand bucks on a phone. I probably bought- I've never actually dropped my phone in a lake. So all that money has gone to waste. But if you have enough cash saved up that you- 

Jason Hall: Apple shareholders say it has not gone to waste.

Jeff Santoro: Right. And I am one, but if you have you know, if you have enough money saved up, where like okay, I dropped my phone in the lake. I don't want to spend 1, 000 on a new phone, but that's why I have this emergency fund. Right? So it's that kind of stuff too. 

All right. So let's, so we've established that having a [00:17:00] safety net as early as possible, whether that's right away or kind of right away, I think is probably the best way to prevent having to make a really tough decision down the road.

But let's go through, let's go through Colin's list of events here, just as a conversation, framer, and talk about what we each think in terms of stopping and starting investing as each one comes up.

So his first one was actually building an emergency fund. And I think we talked through that one already.

So let's go to the next one, losing a job. So to me, that is probably either a binary, okay, I'm going to stop this. 

Jason Hall: You don't have a job. You don't have any income. Okay. There you go. 

Jeff Santoro: Yeah. 

Jason Hall: Now, but I think a more probable, scenario for most people now is most families are dual income families, right?

So this is a situation where maybe one of- maybe your spouse loses a job or you lose your job and your spouse doesn't. Then you start thinking about really where you can cut back and be thoughtful. And a lot of this is going to be income based, right? Because [00:18:00] one of the things that happens when you stop investing is you stop getting free money in some cases.

For instance, let's say, Jeff, you, I don't know, use a lot of profanity on the podcast and there's a major outroar and then you curse out your boss and tell him it's none of his business and they fire you because you cursed out your boss. And now your wife is working and she works in the private sector and she works for a company that matches her 401k, right?

I don't know these things to be exactly true, but directionally, that's a situation a lot of people are in. Maybe she's putting 10 percent into her 401k and her employer matches the first 3%. Maybe the best thing to do is, again, you run the math first, right? You triage this.

This is, you're in the, you're in the financial ER at this point. They're looking at you and saying, okay, you know what? Yes, that artery is cut. There is blood squirting at the ceiling, but it looks like he's got a little scratch on his toe. Let's put a bandaid on his toe. No, you don't bandage the toe [00:19:00] first, right? You deal with the major emergency first. 

So this may be a situation where you're going through it and you can say, you know what? We can still get by for the next six months if she's still putting that three percent in, to at least get that free money. Because yeah, in the short term we have this to deal with, but we can bridge the gap for this long and then if we get to that point and we're still not there, then we have to reevaluate.

I think that's the way you think through these things. 

Jeff Santoro: I totally agree with that. And I think one of the benefits of making yourself a habitually early investor, and I'm talking, hopefully from the time you get your first job in high school and you can open a Roth IRA, like I'm trying to do that with my son. I'm trying to get him to understand this is your first paycheck of your whole life. Just get into the habit of putting 10 percent of it into some sort of savings. And just so that you never, it just becomes a habit, it's just a thing you do, it's normal to you. 

Because then, the reason I think that's so important is, I can see a scenario where someone loses their job. And the math is, oh, we got this [00:20:00] emergency fund. Let's burn through that and still go out to dinner three times a week and have four streaming services. 

And, okay, that's one choice. I know even where I'm at with my wife and my job. If one of us lost our job and we had an, let's just say we had an enormous emergency fund, like we had a year's worth of our income saved, I would still cut back on a lot of discretionary spending and tighten the belt before I would stop investing.

No I, to your point, I think that would be like the very last thing I would pull out would be like the company match on my wife's 401k. Absolutely. It's literally free money. 

Jason Hall: Yeah. Well, and a couple reasons, right? Because at the end of the day, too, with a 401k, at least you could do a hardship loan, right?

There's a way to actually to tap that a little bit. You can't call Netflix or Disney up in six months and say, Hey, can I have that past six months, Netflix might actually give it back to you, they're pretty amazing with customer service, but Disney, I mean, they're going to send Mickey Mouse and his goons to your house to get their money, right?

They're, you it's, that money's gone, right? It's absolutely gone. So I think that's really important when [00:21:00] you're thinking through this. 

Jeff Santoro: I want to-

Jason Hall: Go ahead. 

Jeff Santoro: I was just saying, I also want to say , I've heard other people, I've heard people ask the question or I've heard, overheard people say, oh, my emergency fund is my brokerage account. And it could be.

But to your point, if it was the end of 2022 and you lost your job, you're selling your stocks at mostly a loss probably, unless you've been investing a really long time. Like I view my brokerage account as the very very last thing I would go tap if I ran out of cash and you know, if I have to sell a stock. 

Jason Hall: If that's where you keep your cash because you can get the best yield in the money market.

Jeff Santoro: Not talking about that. I'm talking about invested stocks and things like that. 

Jason Hall: It's the assets. That's the key, right? The assets that's the key. So I agree with you there. I really do. 

Jeff Santoro: I mean, if you're lucky and you have, $50, 000 in Apple shares that you've had since you were a kid that your parents gifted to you and you can sell that to cover your, but not everyone has that, so. 

Jason Hall: I think there's a part of this too, that I think is really important that people need to consider. And we've talked a little bit about it, we did [00:22:00] our show that we talked about goals and incentives. And one of the things that creeps in when people go through these situations, maybe one spouse loses a job, something happens, you're in a lifestyle.

And the way that we're perceived by our peers can creep in and affect the decisions we make and can lead to bad financial decisions. And like the shame of losing your job and then you can find a job that replaces 75 percent of your income.

And guess what? You really need that other 25 percent because you have an $800 payment on the SUV that you just bought six months ago. And you don't want to cut off Disney+ because you don't want your kids to know that you're financially struck. Like all of those things, and I think it's so critically important to make those uncomfortable decisions very early. Because exactly what you were talking about. 

You, the longer you- it's like having cancer. Okay. And for anybody that has cancer, maybe I'm triggering anybody that's [00:23:00] dealt with the trauma of cancer. I'm not trying to, but it's like having cancer and knowing something's wrong and not going to see a doctor, right? Not taking steps if it's treatable cancer. 

It's, you're not, you're ignoring the problem. Hoping that things just miraculously get better. And what happens? It gets worse. 

And that's the same way with these financial decisions, you have to make those uncomfortable decisions quickly. And I think about it, I've used this framework, I've used before. It's like decisions. It's is it a one way door? Is it a two way door? 

Those two way doors, canceling those extraneous streaming services, stuff like that that you can turn on and off really quickly. Do that quick, save that money. Maybe it's an overreaction. You're like, Oh, okay, we can still afford $8 a month for this one thing. Okay. We'll get that one thing and everything's fine.

, now the one way doors, immediately calling the, your lender for the car and saying, hey, come get the car. We're just giving it back to you. Maybe that's an overreaction, right? You want to be thoughtful [00:24:00] about those.

Jason Hall: But making those uncomfortable decisions. To hell with your neighbors, whatever the perception others may have about how your family appears, your life, you got to put that stuff in your back pocket and you got to make the hard decisions and run at them and not run away from them and put them off. Because if you put them off, the decisions get harder and worse. 

Jeff Santoro: Yeah, and I, we don't need to spend time on it, but I, what you said just made me think.

It's probably not a bad idea to either think through these scenarios if you're a single person on your own. Okay, what would I do if. And have these conversations with your significant other if you have shared, if you're married or have a significant other and you have shared finances and that kind of stuff. Because I think it's I would imagine, I'm lucky I've not had a big financial emergency yet in my life, but I would imagine it's easier to handle those things if you've already had the conversation of, okay, if this happens here are the things we can cut, here are the things we value, that kind of a thing.

So the next thing on- 

Jason Hall: The value, Jeff, is not in the plan, but it's in the planning. You've gone through it before. You thought about it. You've already worked out those [00:25:00] muscles. And you're gonna be able to act a lot more effectively when you're actually in that situation. 

Jeff Santoro: Yep agreed.

So the next thing on Collins list was, had an emergency. 

So that's obviously a vague, that could be any kind of an emergency. I was thinking of it in two main ways. Like one would be like health emergency, which has all sorts of implications because that could mean loss of work or missed work and that kind of a thing.

But then there's the other kinds of emergencies. Like, I need a new furnace. My roof is leaking. Someone drove their car into my house. You know, there's all sorts of weird stuff that happens. And to me, those are the ones that feel, not the health ones, but the things like I need a new washer and dryer, my furnace broke, can be very costly, but also theoretically temporary.

So like one thing I've thought about with those scenarios for myself is, let's say I needed a new furnace. And it's $9, 000 and I don't have that in cash so I need to figure something out. 

Like I would probably do the math on some combination of cutting back and maybe a little less contributions to a retirement account just [00:26:00] until that's paid off and then turn it right back on.

But to me, that's one of those spectrum decisions versus like on off. And again, just for the habit type of thing, you know, if your employer lets you just log onto a website and change the percentage of your salary that goes towards your retirement account, figure out, let's say it's 9 percent right now. Well, what is it if you go down to 6%? How much comes back into your paycheck with that extra 3%? It's this amount. Okay, I can pay this thing off in six months of doing that and then I'll go right back to 9%.

I think those kind of things make sense. Again, you'd hope that you'd have the emergency fund built up to cover a big expense like that. But that's one type of emergency that I was thinking about. 

Jason Hall: Yeah. Well, and I think that's by and large what he's talking about. You know, in the area that I live in, , we don't have municipal water. Everybody has wells and some of the people's wells are thousands of feet deep. And my neighbor actually, they had to have their well fracked to be able to get water and it was like $10 grand. I mean, these mind boggling expenses can come out of nowhere and things that you didn't even consider.

So I think that's important, [00:27:00] but it, kind of in that same vein, like sometimes these expenses, I think you always you do the math, right? And you think about it.

 Okay, so I have to take out a loan to replace my furnace, right? The loan, the interest rate is going to be 10%, whatever it's going to be. Let's say it's 10%. Well, what am I getting as a return from the crappy investments in my company's 401k? They just have these mutual funds that are really expensive. That's not very good.

But you know what? Now it's taxable income and before it was untaxed. So like you have to do the math on those things to really think what is the best economic return.

But Jeff, and this is going to come up with the next topic that Colin put on here, but there's also like the emotional return to that. You have to factor in as well. Sometimes, even though the math maybe isn't perfectly favorable to pay off that loan for the new furnace, maybe just the peace of mind of knowing that's not another monthly bill that's going to show up is worth it to pay it off in two years instead of five years or whatever.

Jeff Santoro: Yeah. So let's use that to pivot right into that next one on his list, which [00:28:00] was paying off a house early. 

And this is interesting because you and I have both had this conversation, both privately and I think even on the podcast in terms of, buying stocks that we think could outpace our mortgage interest rate.

So we've talked about this a little bit- 

Jason Hall: Changed a lot in the past year and a half. 

Jeff Santoro: Yes, it has. This'll be fun to talk through.

But, I do think that a lot of that is a personal choice. So I've heard bestselling author Morgan Housel, I've heard him say on several podcasts and interviews that, even though he absolutely knows it's the wrong financial decision, he and his wife paid their house off years ago.

So instead of putting more money into, retirement accounts or stocks or whatever index funds, they decided as a couple that they were, their priority was to pay off their mortgage. And it probably, I'm just assuming, didn't have a super high interest rate. Just based on we haven't had super high interest rates in a long time. And he has, I heard him say, even though we know logically, this is not the best financial decision, it was such a no brainer for us because we just loved the peace of mind of [00:29:00] knowing that we have no debt. We are not tied down to anything. If we want to up and move tomorrow, we just go. There's no consideration.

 That's someone who knows obviously a lot about personal finance and money, and that was a decision he made. But I do think the paying off the house early question can bring in a lot of different things as it pertains to all types of debt. How long is the term of the debt? What is the interest rate? All that kind of stuff. 

So how do you think about that balance of investing versus paying off debt? 

Jason Hall: Yeah, I'm lucky. And this is one too, that especially is so family oriented, right? Most people that own a house probably have a spouse and they have a joint mortgage and their finances are going to be pretty intertwined. And it's not just what you think and how you feel, right, there's another person that's heavily involved in this decision. And you have to kind of factor that in across the spectrum of how all the parties that are involved, how they think and feel.

And I'm pretty fortunate with my wife that we're very aligned. And we spent a lot of time talking about finances and money and long term goals and [00:30:00] assets versus cash versus investments. And a house is an asset and a liability and like all that. 

Talked through all this stuff, and where we've both come down is that as much as it would nice to have that multiple thousands of dollars a month of the mortgage payment not be there. Because I mean, it would be cool too, because guess what? That's all of a sudden, multiple thousands of dollars a month in disposable income that you could start saving as cash, hyper focus on investing, right? You could do lots of things with that cash, by paying off a mortgage early. 

I think for most people, what you'd be talking about doing is not just paying the mortgage off. You'd be, instead of putting money in your retirement account, instead of putting money in college savings for your kids, you'd just be paying more on the mortgage to pay it down, right? To pay it off more quickly. 

And this, there's two parts of this that I think are really important for people to consider. Number one is just the basic math. You and I've talked about this a lot. We, I bought a house in 2021, you refinanced. My mortgage is less than 3 percent. [00:31:00] Less than 3%. 

I literally am getting paid to keep cash and not pay my mortgage down. You know, the rates I'm earning on saving that cash are so much higher than I would get by paying off that mortgage.

But if I bought that same house a year ago or six months ago the calculus is a little different. If it's a six or 7 percent interest rate versus the five I can get on a money market or the four I'm getting in a high yield savings account. Yeah, there's a better return on that money. 

But guess what? I no longer have money. I have home equity. So you have to consider making sure you're protecting your short term needs and not having, and not becoming house poor, as they say. 

Jeff Santoro: And not all debt is the same. 

So, I know this is not a rock solid rule, but a lot of times, or most times, or for the past 15, 20 years that you and I have been homeowners, houses have been appreciating assets. So even a high amount of debt on your house can sometimes be fruitful. A little less scary [00:32:00] because hopefully your house will continue to gain in value over time. 

Jason Hall: Yeah, I think Peter Lynch described it, because it's one of the things he talked about in One Up on Wall Street is that most people before they focus on investing should focus on owning a home. Because it's an enforced long term savings vehicle.

Jeff Santoro: But to be fair, like, that's been less the case just over the past year, you know. So, it's not houses don't always go up. And in fact, I know this too because I owned a home in, I bought a house in 2005 and tried to move in 2011 and that was not, that was the opposite.

 I bought my house at the top of the housing bubble and I tried to sell it after the crash and it had not recovered. So it doesn't always go up.

But I, but there are things that you know will always go down. So here's one from my own personal life that I think is one where I would very much think about paying this off versus investing and that's car loans. Because that is a, unless you own like some exotic sports car or an antique or something, that is a depreciating asset from the moment you hit the start button and drive off the lot. [00:33:00] 

So one thing that we did, there was a point several years ago where we both, by bad luck, needed cars within the same few years of each other and didn't have enough cash to pay for both of them. So we had moderate car loans on both. And as soon as I paid off one, I took that dollar amount and just applied it to the second car. And we paid the second car off like twice as fast. Like it was a five year, the typical five year car loan. We paid it off in two, two and a half years because I wanted that, it wasn't crazy. 

It was like, you know, 2. 99%, you know the one the rate you see on the commercials all the time. But I, but that's where I was like. I just don't, I don't want to have car payments anymore. I want to be done with that. So our decision was, rather than invest that money, let's just get the car paid off. Cause that's just going to keep losing value over time anyway.

And then if it gets into an accident, it's a whole, that's a whole different thing. So yeah, I think the paying off a house early could be applied to paying off a car early, paying off your student debt early, all the different things that, that people carry around. 

Jason Hall: You do the math and then how do you feel about it, right? Both of those things come into [00:34:00] play and they're really important. 

Jeff Santoro: All right, last one on Colin's list here. Baby on the way, which is something that many people do come across. 

Jason Hall: It happens. People have babies. 

Jeff Santoro: They do. They do. I, I don't know. This was an interesting one for me because I don't remember really thinking differently about money when I knew we were expecting other than knowing I would need to put away money for college. Yeah, maybe I was just lucky. By that point in our lives it's not like we were scraping by or anything. So I didn't worry about can I feed this baby or anything like that.

But I don't know. Like I, it's an interesting one to think about in terms of would I turn the investing spigot on or off based on expecting a kid. What are your thoughts? 

Jason Hall: So a couple of things, and we'll talk about the like saving for your kids college. Cause that's one of the things you and I talked about a lot and our conversation around when we first saw that, got this message from Colin.

But I think it is like, it may be an opportunity for a lot of people that like, haven't started to build up that safety net. You've got, guess what? You've got a human person that is entirely now [00:35:00] reliant on you. And if you screw up, they are helpless, right? They're helpless if you screw up. 

Jeff Santoro: No pressure though, expecting parents. No pressure. It's fine. 

Jason Hall: I mean, but seriously, if you screw up and you have a spouse, well, they probably have resources, right? Ability to earn income, things that they can do. But when you have a kid and you, if you haven't- I think if this is the time, if you haven't started to build up a safety net, it's time to do it, right? It's absolutely time to do it. 

And if that means, you know what? You got to pull back on the money you're putting in your brokerage and your Roth and your 401k and all that stuff to make sure you get to that multiple months of covering your basic expenses. Yeah, I a hundred percent agree with that.

But if you're going to stop investing to fund your kid's college savings. I absolutely wholeheartedly disagree with that 100 percent, Jeff. 

Jeff Santoro: Yeah. And anyone who's interested in how the kid piece of this interacts with the question we're talking about today, go back five [00:36:00] or six episodes and listen to the two part series we did with Robert Brokamp, where we talked about investing for your kids, investing with your kids.

I've heard him say this, I've heard other people say it that you can borrow for your kids college. You can't borrow for retirement. So given the choice between investing for your kid, in your kid's 529 or putting money towards your retirement account. Probably should do the retirement account first. The other thing that I was thinking of- 

Jason Hall: This episode sponsored by Joe's Reverse Mortgage Company. 

Jeff Santoro: We're not going to talk about reverse mortgages.

Jason Hall: Not touching it. 

Jeff Santoro: So yeah, I do think I agree with you totally, like, where I do think it's something to consider in terms of a kid coming on the way is if you've not yet gotten your financial house in order and that's the thing that pushes you in that direction, yes. Pause, take care of that. Come back to the investing piece as soon as you can. 

Jason Hall: Well, there's those three little words, Jeff. Those three little words. Pay yourself first. 

Jeff Santoro: Pay yourself first. That's right. I love that phrase. It's a, one to live by. So here's a question-

Jason Hall: And the thing too, if you're paying yourself first, if you're saving yourself first,[00:37:00] guess what? Those assets will be there when your kids go to college too. 

Jeff Santoro: All right. So let's, I'm going to Charlie Munger this on you. And we did not plan this. So hopefully you can see how quickly you think on your feet.

Jason Hall: I was inverted. 

Jeff Santoro: Here we go. We were inverted. Thanks, Top Gun joke for everyone.

When should you not stop investing? So what things should not cause you to pause or change your investing plan? I have one in mind. 

Jason Hall: You go. You go first. You go first. So I love this, by the way. 

Jeff Santoro: So I have been guilty in my life when I was younger of justifying large purchases by doing the math on where I could come up with that money. So yeah, I can get a new car because I just have to not buy coffee 47 times a month, and doing that kind of stuff. 

And I do know people who have made big purchases that probably were not 100 percent necessary, and said, oh, I'm just going to stop contributing to my retirement account, because I want to [00:38:00] buy.

Jason Hall: And a lot of times, Jeff, here's how they justify it. Here's how people do this. I've actually never done this because I was too dumb to think like that third level to do it. 

Jeff Santoro: But you would have done it if you had.

Jason Hall: I would've if I was smart enough. But the way people do it, and a lot of times it's with dumb, like depreciating assets or like the dream vacation. 

And you know what, we talked about that. Let's, spoil yourself too. Spend lavishly on experiences with the people that you love and care about. I am a huge proponent of that. 

But don't be dumb, right? And don't do it on depreciating assets, like a car, like sure, it's your dream car. Great. Okay, buy it when you can afford it, buy a used one, right? Think.

 And that's the problem. And here's what I was going to say, and this is the way people justify it a lot of times. They say, you know what, I'll just, I'm going to get a raise next year. And when I get that raise, I'm gonna... and then, and you know what, then the lifestyle creep comes in. And you get the raise. And well, you know what, the next model of that car comes out, and you're like, I really want it, you know.

It's amazing how that lifestyle creep [00:39:00] thing comes in.

Jeff Santoro: We all should have learned this lesson from watching National Lampoon's Christmas Vacation. You don't put the deposit down on the new pool 'til you get your Christmas bonus. 

Jason Hall: I don't have enough in the account to cover the deposit check. Yeah. Yeah. 

Jeff Santoro: And I, look, I've been guilty of this. So I'm not sitting here and judging. Like, I get why people do it. I get, I understand all that. And I think the time in my life when I was most likely to do that stuff was when I was younger. Which means retirement was so far away. It seemed like I didn't even need to think about it. And also before I had kids.

You know, and the risks were lower. Ah, it's just me, I'll get a cheaper apartment and I'll eat ramen noodles, you know. Like it's a whole different calculus. . I'd be in a much better spot now if I didn't do those dumb things, cause I would have contributed more to my retirement earlier on.

Jason Hall: But I think it's also an example a little bit of, it's some of those lessons that you have to learn from experience, I guess. You know, it's really hard to learn them from other people. Sure. 

You have the two 40 something guys with a podcast telling you to do it. And you're like, Oh, you guys. I'm not worried about that, right?[00:40:00] You're not going to learn from us, and having experience making those decisions.

But man, if there's somebody in your life that you can help understand the value of their dollars today, for a goal 20, 30, 40 years from now. And how much more valuable that $1 is today versus the dozens of dollars or hundreds of dollars to replace it will cost in 10, 20, 30 years then it can be really powerful.

I have one more. Go ahead. And then I have one that's not the when shouldn't you, but it is another when maybe you should, or when you could. 

Jeff Santoro: Yeah. The only other thing I was going to say was to piggyback on what you just said is if there's one lesson I wish I knew when I was not even in my twenties. If there's one lesson I knew when I got my first job, when I was like, whatever, 15 or 16, it's, I really wish I understood compounding.

Jason Hall: Yeah. Yeah.

Jeff Santoro: The idea that just, put away 20 bucks a month. That's doable at a 15 year old summer job salary, right? Just build that habit, start early, increase it as you get older, because 20 bucks a month when you're 15,[00:41:00] there's a long time before that's gonna, you know, if you put that in the retirement account. 

I just didn't know, I guess, I basically conceptually understood compounding, but not really. Not to the point where, because I went a really long time in my life putting a pitifully small amount of money towards my retirement accounts. Not full, not realizing like it's the dollars now that become more dollars later piece of it.

Jason Hall: Yeah, I mean, that just makes you most people, right? That's just, that's the reality.

There was something you hit on that I want to say first before I circle back around to a good time to maybe stop investing or cut back on that putting new money to work.

And you were talking about building that habit. I think there's two parts of it, right? I think there's the stories that I've read and people that I've talked to that spent so many years focused on growing that account, saving enough for wealth, maximizing their retirement accounts, putting money in a Roth as long as they could, like all of those things, putting whatever was leftover in the taxable brokers, like doing all of the things as much as they could.

And then [00:42:00] they retire with, I'm going to be honest, this is like a massive first world problem here. But then they retire with all this wealth and they feel so bad spending any of it. And I think it's so important to find like financial balance with your habits. And not just focusing on the saving, and the investing, but also focused on having balance in the way you think about money. And the way you spend it so that it is a pleasurable experience. And you enjoy benefiting from the fruits of all of your labors and not focus so much on just the goal of making the wealth that you can't actually benefit. You can't actually enjoy having it. 

Jeff Santoro: Yeah. I mean, I agree with that. I mean, we don't want to get, we don't have to turn this totally into a personal finance episode, but the other piece of that is some people who just save for like later. It's a sad thing, but some people don't make it to later, right?

So you hear all these stories about, person X retires, they were going to travel the world. Two weeks after they retire, one of the people drops dead, you know. So you do have to, you have to have that balance. You have to you know. I think that the challenge [00:43:00] is to identify the things that bring you joy and happiness and spend the money on that, and not necessarily the stuff that you're just trying to impress your neighbors with. 

Jason Hall: Things you don't want to impress the people you don't like.

Jeff Santoro: Right. So what was your final reason maybe to stop and then we'll take a break. 

Jason Hall: When you've figured out what you're enough is and you're actually on track.

This is, I'm going to, this is a little bit of a crow here. I'm going to beat my chest a little bit. But you know, we've talked about my financial journey going back to before the Financial Crisis to being basically insolvent, in a messy situation, being fortunate enough to be in the right place at the right time from an income perspective, realizing how much work I needed to do to catch up. 

And then the past 14, 15 years at this point, of working really hard plus benefiting from this incredible bull market that we've invested through since, 2009 to get to a point now where, looking at the wealth that we've created and thinking about the next 20 years, 15 to 20 years approaching [00:44:00] retirement age and thinking, okay, what kind of income do I need, do I think we need to have? What kind of returns do I need to generate between now and then on what I have? And what am I going to need to contribute to what we have on top of that to get there?

And we're in a situation now where we could earn a very far below- average return for the next 10 or 20 years, Jeff. The market's generated eight to 10 percent average returns over the longterm. And if we got less than that, my family, we would actually arrive at retirement on track for our financial goals without putting another dollar in. And that is incredible. And that's so fortunate to be in that position. 

But you know what I'm going to do, Jeff? I'm not going to tell you now. We're going to take a break and I'll tell you, I'll tell you in the second part of the show.

Hey everybody. Welcome back. Hope you had fun in the first part of that show. We are now, Jeff, you and I get- 

Jeff Santoro: Left us with a cliffhanger, Jason. Come on.

Jason Hall: I did. I did.

Jeff Santoro: Everyone's waiting. 

Jason Hall: I did. So now you and I, Jeff, we're going to talk. You go first. How are you investing differently in 2024 [00:45:00] than you did in 2023?

Jeff Santoro: So you're not going to, you're not going to answer your question first? You're just going to-

Jason Hall: I am, but not first. 

Jeff Santoro: So I am not in a position where I can stop contributing to my retirement accounts if I choose to. So I've been talking a lot over the last couple months, whenever we've had a chance to talk about my personal investing journey, that I've been deciding, thinking about making some changes.

So I've arrived at those changes. What I'm basically doing now is I no longer buy by, I'm no longer buying stocks on a regular basis. I'm not forcing myself into a decision every week. I'm not even putting myself on a schedule at all. 

I'm just gonna buy when I think it's the right time to buy. And build up a little bit of cash when I don't, I have to do that a little bit because what I'm going to also try to do is buy larger amounts of each stock versus tiny amounts over and over again. So it's a little bit less dollar cost averaging and a little bit more buying in thirds. and so that's the big thing that I'm going to be doing differently in 2024.

I'm [00:46:00] also going to try, this is my, this is like a framework type goal. Like I'm not going to hold myself to it. I want to see if I can go the entire year without selling a stock. 

I want to, I have the portfolio at a point where I think it's an amount of stocks I can live with. That's been a big challenge. I've been trying to get down to a number I like. 

There's a few that I still don't have super high conviction in. I'm just going to leave them. I'm going to leave them alone. This is hard for me because I'm a little bit of a OCD about this whole thing. I don't like having things in my portfolio that I can't make decisions about.

But I went back and looked at everything I've sold over the past four years and while I mostly have made good decisions, these last two months have shown me that I was been, it was a little bit impatient with some things that I was just trying to make decisions on. 

Now those could go right back down in the next month and I don't feel so bad about them. I'm going to try to be a little bit more, walk the walk about being a long term buy and hold investor and try not to sell [00:47:00] too much

. And I think the last thing is all of this I'm hoping, leads me to a place where I'm making better decisions about the price I pay for stocks. Cause now that the stakes are a little bit higher in terms of it's a bigger chunk of change when I do decide to click that buy button, I'm no longer going to be like a cavalier like, ah, it's only a couple hundred bucks, boom, , I'll buy it. I'll buy a couple hundred bucks 10 more times and this will all sort of shake out in the wash. Like I have to be a little bit more disciplined about the price I pay.

Jeff Santoro: And that's why I really didn't buy too much the last couple months of the year because everything in my portfolio is getting more expensive. And not just price. I mean, valuation wise to I've been tracking that, looking at the multiples. So hoping there's some better buying opportunities in 2024.

But those are the big things that I'm doing differently this year. What about you, Jason? What are your, what is your 2024 investing going to look like? 

Jason Hall: Well, I want to, I want to make some observations about what you were just saying that you're planning to do before I share it, not that I'm [00:48:00] trying to increase the tension here. Keep this cliffhanger going.

But no, I just, some things that I want to acknowledge. Number one, I really like this evolution that you're going through because I think one of the challenges as an investor, particularly when you're younger, you're contributing more money and you have more opportunity to invest than somebody like yourself that's putting a lot of time into it, you do feel that drive to do something, right? You feel that drive to do something.

And the doing something, buying and selling becomes the proxy for doing something, right? And the real doing something is studying the companies and owning them. Every day that you own a stock you made a decision to own it. You don't have to, buying and selling isn't the only decisions that you make. 

So I think it can be, it's going to be a really healthy thing for you and help you really focus your energies in ways that are going to be more useful and productive. I really believe that very strongly. 

We've often joked about how I kind of go on these benders, right? Where I'll go months and I won't buy anything. And then I might buy 10 stocks over two weeks. Sometimes it's new [00:49:00] or just I'm adding money because I'm observing and waiting for the opportunity to buy at the price that I want. Or specifically just when I feel like there are certain catalysts that it's time, the business has told me it's time to buy. 

So I think that's going to be really healthy for your results and returns. 

One thing, we had Alex Morris on last year The Science of Hitting Investment Research. And one of the things he talked about was Microsoft. It's been a massive winner for him. And when he was looking at buying it, I don't know, 10 or 12 years ago, I think at some point the stock had gone up like 10 or 15 percent over a short period of time and he was still buying more and it was just kind of an acknowledgement that it didn't, like you think about how big of a winner Microsoft has been now buying the stock for $27 or $34 didn't really matter a ton. 

This is, it's a $370 stock now, right? It was either going to be a 12 bagger or an 18 bagger. Either way, it's going to be a life changing amount of return. So I think that's one of the things that you'll find too. So [00:50:00] kudos to you for evolving and not letting like the, like that incentive, there's the incentive on the show of the guy that buys every week and that became part of who you were, like the perception of you. 

It's, you know what? No, you're going to continue to evolve and that's awesome.

Jeff Santoro: Yeah. I just hope it works. 

Jason Hall: It will. I have faith that it will absolutely work. So what am I doing in 2024? Talked about this wonderful position that we're in, how awesome that it is. And by and large, we're not going to change very much. And for a couple reasons. 

Number one, there's what you plan and expect, and then there's what happens, right? Again, it's nice to have this roadmap. But we learned that the markets are not a topography that stays the same. They change. And at my age, I'm still not, I'm not 50 yet. I'm still in my forties. It doesn't make sense-

Jeff Santoro: Really close, though. Really close. 

Jason Hall: Yeah, that's all. Yeah, no I'm closer to 50 than I am to your age. That is true. You jerk. 

But again the point is that it doesn't make sense now to make that change.[00:51:00] But over the next couple of years, we may pull back the amount of money that we're contributing to retirement accounts. Put more money in cash, particularly of interest rates stay high, right?

Think about other things that we can do with that money. Maybe increase our charitable contributions. There's a lot of things that we could do. Go on more vacations, right? 

But 2024 is going to be a lot like 2023. Maybe, honestly, Jeff, maybe more buying. I have more cash in our investing accounts than I ever have. So I could see a situation where I'm, this may be a year that I actually buy more than I have, than I did last year. 

Jeff Santoro: Yeah. In terms of that for me, at least, and I have a feeling you'll agree with this, the amount of buying I do will partially base be based on what the market does. If it's another 12 months of up and to the right I might not buy a whole lot this year.

Or if I do, it's going to be like a new stock that just has missed the ride , and I have conviction in or something. But I don't want to call it a regret because it was all part of [00:52:00] my learning experience.

But I don't want to get caught in the position where I was in 2022, when things, certain stocks started to look like generationally cheap and I wasn't in a position to capitalize because I'd been spending all my money in these tiny increments.

And not that I think I'm ever going to get to a point where I just buy 2 percent of my cost basis in one stock in one day or anything like that. But I do want to have the flexibility when there's, whenever the next big pullback is, whether it's this year or the next year or the next year to, take advantage of hopefully the learning I've had in terms of what's the right price to pay for great businesses.

Jason Hall: There you go. There you go. Okay. Jeff, we did it, buddy. 

Jeff Santoro: We did it. 

Jason Hall: Words about things. All right, friends. As always, that big reminder. We love to give our thoughts about these hard questions about investing, personal finance. But it is up to you to find your answers to life's hard investing questions. You can do it [00:53:00] even in a new year. I believe in you. 

Okay, Jeff, we'll see you next time, buddy. 

Jeff Santoro: See you next time.

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