Recommended Listening – “I Need A Dollar” by Aloe Blacc
If you met Tony, he wouldn’t stick out to you. It’s not who he is. It’s not the life he lives. He has one car, a condo, and loves to travel with his wife. But in his past life he was providing financial advice for clients with net worths well over $5 million.
Tony and I both went to Augustana College and studied Finance. After college, Tony spent ten years in the banking and finance industry at companies like Countrywide Financial, Wells Fargo, and J.P. Morgan Chase before leaving that world all-together to follow a passion for filmmaking. I sat down with him to talk about his past life in personal finance to see what advice he could offer students. Here’s my interview with him.
Tell me about your role in banking.
I started off in lending with Countrywide and Wells Fargo and worked my way over to personal banking with Chase. I was initially handling clients with balances of $0 to $250,000; anyone that came in to open a checking account or get advice on a personal loan. I did this for a little over two years before advancing to a new position. In the world of banking you can choose from three different general routes: financial advising, lending, or management. I chose financial advising. When I first moved to that new position, I began working with clients who had banking and investment balances between $250,000 and $5 million. After a few more years I moved to the group that handled clients with $5 million or more.
That’s quite the jump. So you got to see a wide variety of clients.
I’d say.
What were some of the misunderstanding about money that you saw?
I saw a lot of people that didn’t understand the value of a dollar.
What do you mean by that?
People didn’t understand how to take care of their money. For instance, and this may seem old fashioned, but no one balances a checkbook anymore. They don’t. The basic understanding of checks and balances is invaluable. People are so used to simply swiping debit cards, but when you do that, it’s next to impossible to keep track of your money or stick to a budget. We’ve become too reliant on cards and electronic banking and therefore, we’ve lost the practice of keeping track of our physical money. In that process we’ve lost the value of a dollar.
If you want to regain the value of the dollar, my advice for students would be to set a monthly budget, track your spending, and stick to it – hold yourself accountable for your purchases.
“Set a monthly budget. track your spending, and stick to it.”
What other advice would you give?
Stop taking bad advice. Just because someone gives you advice doesn’t mean you should take it. There’s this misconception that if someone makes more money than you, you should listen to their advice. But that couldn’t be further from the truth. We were working with a client who made over $1 million each year and had a $7 million home. At face value you would think he’s the guy you want to get advice from. But that’s wrong. His spending was out of control, I made nowhere near as much as he did but I would bet you that I had a greater net worth. I can’t say this enough, as these students are getting ready to start their careers: It’s not about how much you make, but instead, how much you can save and invest wisely.
“Stop Taking Bad Advice. Just because someone gives you advice doesn’t mean you should take it. “
Before taking advice from anyone, ask the questions you don’t want to ask. If you’re scared of the answer, all the more reason to ask the question. I can’t emphasize this enough, be well informed and do the research for yourself first.
Let’s switch gears and talk about spending. What advice would you give students around spending and getting into good habits early on?
Forget appearances. Spending can easily get out of control when you are trying to keep up with appearances. Basically, just because we see a friend or neighbor get a new car, we want a new car. If they get a new tailored suit, we want a tailored suit. Before you know it, you are attempting to live their life and not your own. You need to handle what you make. Do a budget and track where your money is going. No matter what, pay yourself first. What I mean by this, is put some money in savings before spending. You want to build your savings and minimize your debts as best as you possibly can.
When I was watching our customers, I would typically avoid the person that was walking through the bank in a suit, because he was probably on his way to work and needed a quick transaction. The clients that I went after were the guys wandering through our lobby in a Hawaiian shirt and sandals on a Tuesday.
Why is that?
Because the people that look like they’re worth millions, typically aren’t worth millions. The guy in the Hawaiian shirt told me from his appearance that he had nowhere to be, and had probably retired early. That was the type of client I wanted.
What are your thoughts on credit cards?
Just because you qualify for a credit card doesn’t mean you should take it. People with credit cards can get into the same overspending habits that are created with debit cards accept you have to pay a penalty if you are late on your payment. The credit/debit card succeeds in allowing you to avoid seeing your money as you’re spending your money. If you can’t see what you’re spending, it can lead to overspending.
Another bad habit I have seen people get into is with PayDay Loan Stores. They’re the worst. Their interest rates are terribly high and their sole job is to create opportunities you can’t get out of. For instance, if you take out a loan for $1000, they may charge 30% interest. If you fail to pay that money back, instead of being in the hole $1000, you now owe them $1300. My best advice is avoid them as much as you can. If you are in a situation where you are looking at using a PayDay loan store, evaluate your spending and see what you can cut.
What were some of the most common financial mistakes that you saw?
People tend to overspend. They don’t evaluate the true costs involved. They would buy too much house, cars that were too expensive, designer clothes, etc. It was a lot of trying to keep up with appearances. When people buy a bigger house, it’s easy to forget that their gas, electric, and water bill could potentially be higher as well. It costs more money to run a bigger home. Same thing with expensive cars. Typically, expensive cars have higher operating costs. They may require premium gas or foreign parts. Eventually, it adds up, it’s all relative.
What about saving?
You should always pay yourself first. If you get a new job, go blow your first check…all of it. Go get yourself something nice. Once that’s out of your system, start paying yourself. Figure out all of your bills and when they need to be paid. Once you have that all figured out, start putting the extra money into savings. For instance, let’s say you pay all of your bills and you have $500 leftover that isn’t accounted for. Put that in savings. There will be some trial and error, but stick with it, be diligent.
“Pay yourself first.”
What’s the best piece of financial advice you have heard?
Don’t overcomplicate things. Don’t think that you know better than the people who do it for a living. Be smart with what you spend your money on each month. Prioritize what’s important to you, personally.
Alright. I’ve got to ask. For my last question, what the most lavish thing you saw someone spend money on?
I once saw someone buy a timeshare in a private jet company (a timeshare is where you own something only part of the time. In this situation, someone owned a jet for only a couple of weeks each year). I asked myself, what the hell do you need that for? They could have easily flown first class whenever they wanted without all of the additional costs associated with a timeshare, especially for a private jet.
That’s pretty outlandish. Thanks for taking time out to speak with me.
Any time.
Thanks for reading! If you need a budgeting app, check out YNAB (You Need a Budget) or Mint.com.
Eric Berngen 