Financial Planning

[Host] Hey there! Welcome to Money Talk, the podcast series that helps you manage your money—and improve your financial well-being! This week we’re talking with Joe Saul-Sehy, former financial advisor and current blogger and podcast host at StackingBenjamins.com. Joe learned a lot when he made the switch from aimless spender in his 20s to successful financial advisor in his 30s. In this episode, he shares some of his best money lessons with us.

Here’s the podcast. Enjoy!

[Host] So Joe, what are some basic money lessons young people should take to heart early on to save money for the long run?

[Joe Saul-Sehy] I remember getting my first real paycheck and looking at it and I thought it was you know, like a billion dollars, I’d never held so much money in my hand at one time. But here’s the problem: I began in my head making lists of things I wanted to buy. And it’s not just me, I think as soon as anybody starts making money your thinking changes, right? You feel like somebody who should own things. And I think it’s important to rein that in and give yourself a chance to get ahead.

[Host] Yeah, definitely. So what are some of the common money traps you see young people falling into?

[Saul-Sehy] Well it’s funny I’ve given talks at high schools and colleges and during the Q&A sessions at the end, invariably people will line up at the microphone and one after another ask me some form of the question, “How do I get myself into a lot of debt?” Questions like, how do I get a car loan, how do I qualify for a mortgage, how do I get a credit card that has a bigger amount of money that I can borrow. And I think if you back away from those things you’re going to do a better job. Because you have to realize that if you can stay away from a bunch of debt in your 20s, that frees you up in your 30s and 40s to do the things that you want to do. So think about your future self. A lot of people I know that are in their 30s and 40s are living with not just debt repayments, but a lot of regret and those are decisions that they wish if they could take them back, they would.

[Host] Are there any long-term financial considerations in particular that you think young people overlook?

[Saul-Sehy] I think most people understand that someday they’re going to pass away and that most people may need life insurance. Life insurance for younger people I don't think is the big issue. I think the one most people miss is disability coverage; that’s a big issue for people in their 20s.

[Host] That’s interesting. Why would disability coverage be important to a twenty-something?

[Saul-Sehy] Well statistics show that there’s a large number of Americans already today who rely on disability coverage. And while it seems a little morbid, if you’re in an accident in your 20s, the problem isn’t that you may pass away, the problem is what if you live and you live for a long time, where’s that money going to come from if you can’t work? You know if you’re young and healthy you’re pretty resilient, but I also think that you take a lot more risks in your 20s, so it’s pretty important to be prepared.

[Host] How about some smart financial moves you can and probably should make early in life. Anything you can recommend there?

[Saul-Sehy] Yeah the one thing I think that when you’ve got so many emerging things happening in your life like you do in your 20s, you forget about this magical thing called “compounding interest.” That if you start early, time can do a lot of the saving for you so that you have to save less. I mean I’m as lazy as the next guy; I’d love to save less money and have somebody else do it for me, and compounding interest works in your favor. So I don’t think you should let yourself say that I can’t afford to save, because then you’re going to fall into the trap of letting yourself think there’s a point in the future where you can save. That point never comes.

[Host] How about investing? Is that something you should be thinking about in your 20s?

[Saul-Sehy] Yeah. I think the cool part of investing when you’re young is that everybody makes investing mistakes, right? And when you start when you’re young, you’re starting with a lot less money so your mistakes aren’t as costly. Plus you have time on your side. I know for my son, he and I started investing a little bit of his money at young age, and he’s already—now he’s a sophomore in college—and he’s a kid that knows a lot about individual stocks and he’s made those crucial mistakes that some people don’t make until their 40s and 50s. I’m sure by the time he gets to his 40s and 50s he’ll be as big as an expert as anyone.

[Host] How common would you say it is for people to make investment mistakes?

[Saul-Sehy] Most people that I worked with when I was a financial advisor, during their lifetime they think they’re some kind of stock market genius, and I think what you learn by starting to invest early is you have that knocked out of you. You realize that you know, maybe it is smarter to be conservative and you teach yourself a little bit about how to be more conservative.

[Host] Sure. Lastly, let’s talk automation. Is that something people should start working into their money management routine while they’re young?

[Saul-Sehy] Yes! Being able to automate your savings so you don’t have to think about it is a huge part of getting things saved. When I was in my 20s, I always wanted to put money away on my terms. So what I wanted to do was make sure that I had enough money to pay the bills today and if there was money left over, I would get that saved. The funny thing is there was never any money left over. So life sneaks up on you, right? And even if you have the money to set aside and good intentions, you can lose track of time.

[Host] What are some of the things you should automate?

[Saul-Sehy] First of all, your 401(k) plan if you have one available, that’s easy because the money’s gone before you know it. If you can use some of the other savings plans at work, if you have a stock savings plan at work or a way to get money directly from your paycheck before you see it into a savings account, that’s fantastic. Having your insurances deducted automatically, having your savings deducted automatically, as an example, if you want to save into a mutual fund on the side, let’s say for a new house or a car in the future, mutual fund companies are more than happy to help you set up an automatic savings account into an account with them.

And the last thing that I like, and this one is good, a lot of people think that when they start to save money, that they’re going to save what’s left over like we talked about earlier. Instead decide how much you need to spend, put all your money in a savings account and then have direct deposit from your savings account back into your checking account to spend money. And then that way money automatically gets saved into savings instead of you having to decide how much to put away.

[Host] That’s our show, thanks for listening! Subscribe to the SunTrust Personal Banking channel on iTunes or download the app on Google Play for more Money Talk podcasts with tips to help you get organized, make a plan and stay on track to a bright financial future.