Robert Leonard (03:10):
In the NFL, what was the culture around money for the players? How do most players think about their money?

Jedidiah Collins (03:16):
Gut answer is they don’t. And that’s just the truth. That’s not to come off sticky or even rude to NFL players. We’re 22, 23, 24, 25, and you have more money than you ever imagined. So when you’re living on a $600 scholarship check and all of a sudden that turns into $600,000, there’s no end. It’s like how we used to see oil is these are endless streams of this currency. And then you enter into this idea that is extremely competitive. The NFL is made up of the best in the world at their chosen profession. And when you look at that, you really start to understand money is no different. Guys want to compete both for the contract on the field, as well as the flash and the cool stash off the field. And it is extremely humbling sitting next to a ten-year veteran as a rookie and telling yourself, “I can’t act that way. They’re on their third contract. They are a multimillionaire. I may feel like one, but I am not today.” And that’s what else is kind of unique in an NFL room is you know exactly how much everybody makes. I don’t know how many companies abide that way. But if you pointed to a guy on the roster, I could tell you pretty close what his salary and contract looks like.

Jedidiah Collins (04:35):
So what we really need to understand in the NFL as millennials, as people is there is a vast difference between being rich and being wealthy. And being rich in the NFL, most guys, all guys are. When you make a half a million dollars in a season, you are rich in the moment. Being wealthy means you have many tomorrows that you don’t have to worry about money. So one of my objectives working with NFL players, athletes, and young people is really seeing that differentiation of, “Hey, I have money today. I am rich.” Verse, “I don’t have to worry about money for six years.” That is wealth. And when you can say that six turns into 26 or even 56 years, that’s true wealth and true generational wealth.

Robert Leonard (05:23):
One of my favorite books is The Millionaire Next Door. And one of the main prevailing concepts in that book was Keeping Up With the Joneses and try and keep up with your neighbors, your friends, your family, whoever it might be. Does that take place in the NFL? Because like you said, they’re making 600,000. That’s a lot of money. But when you look over at Russell Wilson, all these other stars on your team might be making 10, 15, $20 million a year. 600 grand is really not that much money. So do NFL players fall under the same trap? And the reason I think this is important is because it’ll allow people to realize that even if you’re making a ton of money, you still fall into this trap of Keeping Up With the Joneses.

Jedidiah Collins (06:03):
Oh yeah. And the Joneses are not only in today’s world, we have virtual Joneses, which kind of puts us on this hey, we can always see what else is out there. In the NFL, you’re right. You walk into your meeting room with the Joneses, and you walk out to the parking lot and the Joneses are there. There is a sense of trying to keep up, of trying to show. But I will be the first one to say the tone of professional athletes over the last five years really has begun to evolve and shift into a modern day athlete, one that sees themselves as a business both on the field and off the field. So what I’m really excited about is this new wave of Keeping Up With the Joneses is no longer who’s got the coolest car, biggest piece of jewelry, but is who made the coolest investment? Or where did you go and where did you get that extra money from money out of the football world? So it is again, a copycat kind of persona. But in many instances, peer pressure can be a good thing. And I think the peer pressure right now is shifting towards who can not just be a millionaire athlete, but who can be a billionaire businessman or woman beyond the game.

Robert Leonard (07:19):
Some people listening to the show today might’ve heard this idea of people playing checkers versus chess in many different areas of life. People talk about this in all kinds of different things. But what does it specifically mean in relation to money?

Jedidiah Collins (07:33):
I love this analogy. And if you haven’t watched The Queen’s Gambit on Netflix, highly recommend it. I actually heard it was the most watched show. And now, chess is all of a sudden a relevant game again. I’m teaching my six year old daughter how to play chess because of how it forces you to think, how it forces you to plan and prepare. So as you look at checkers and chess, they’re played on the same board, and yet the strategies and objectives are completely different. So when we look at them, we see checkers as a move by move one at a time kind of process. Chess, you have a goal, and end in mind with a checkmate. And you have to plan moves in advance, understanding the opposition is going to change the elements.

Jedidiah Collins (08:15):
So when we look at money, it is the perfect analogy in how the vast majority of us treat our paychecks. We’re checkers players. I got money. I’m going to go and spend it. That’s the one move. That’s as far as we can see it. When we stand back and see the board and start to see the game of chess, we begin with our end in mind. We begin with that checkmate. What is that goal? And sure, a lot of people say financial freedom. I don’t love that as your goal because it’s not tangible. How do you work towards that? Make those measurements your goals.

Jedidiah Collins (08:49):
And then as you look at the chess game of knowing which piece is allowed to make which moves as well as how you are going on an attack and a defensive, you really begin to see the holistic perspective of money. Money is every bit about making money. But then you got to manage it. You got to protect it, you got to preserve it, and you really have to be able to transfer it. So that chess game of not only looking at three, four moves in advance, but also specifically of I have a lot of pieces in front of me. How do they work together? And which one is going to be utilized in which scenario? So it’s a really good analogy that I love to show people. And I really encourage people to just learn the game of chess because of how it forces you to think in that dynamic.

Robert Leonard (09:38):
When we think of this idea of financial freedom not being tangible, is that because it doesn’t provide an end goal? When it is financial freedom, can we make it tangible by saying, looking at financial freedom saying I need this much money to be financially free. Now we set a dollar amount to that. Is that now a tangible, real goal?

Jedidiah Collins (09:58):
That is what I used to define as retirement. And I don’t like that word anymore. I think retirement needs to be retired, because it’s just not the world we live in anymore. We used to look at it and say, “I want a million dollars. I want to be a millionaire.” Money was the objective, money was the destination. I love the shift to freedom, because money is not the destination. Money is a tool and a vehicle that we use to get where we want to go. And freedom doesn’t mean I have a million dollars. I know plenty of people who have made a million dollars in a year and have nothing to show for it. I know plenty of people who have a million dollars saved, and that would be two or three years protected. That does not equate to freedom. Freedom is when you have a balance and when you have an understanding of what your lifestyle looks like that you really truly want to afford, and then how you are going to prepare a plan to afford you that lifestyle.

Jedidiah Collins (10:52):
So it begins and ends with you, your goal of your lifestyle, not of a set number of money. And when we really look at that burn rate, how much is going out the door, whatever you want to call it, we really as wealth managers identify our plan based on that first number, because it is so essential in not only building a portfolio, but being able to track and measure if we are achieving your dreams and your goals.

Jedidiah Collins (11:20):
So I don’t love to put a tangible number. I don’t believe we’re going to live in a world where somebody says, “Hey, I got 4 million. I’m out.” I think we’re going to live in a world when somebody says, “Man, at 52, I reached a level where I know I can the rest of my life on $8,000. And that $8,000 a month is where I want to live in my lifestyle. And now I am free to do what I want to do.”

Jedidiah Collins (11:47):
Robert, I’m going to be the first one to say I don’t think people are going to just walk away from working as we have in the past. Because that was again, retirement. I think we are going to see a new day and age of people looking at it and saying, “Now that I’m free, what would I want to do with my life? What is my passion? What fulfills me? Am I challenged to some people?” Myself included being a former professional athlete, I sat and tried to face that question before I reached it. I was a fullback. I am not financially free. I still got a lot of work to do. But I do ask myself and why I started a business, why I’m off on my own and pursuing a passion is because I believe I’m going to achieve freedom. But I don’t want to wait until then to prioritize what I want out of life. And that is a question millennials and younger people are beginning to ponder. And it will be really neat when people can start to pursue those passions.

Robert Leonard (12:48):
People didn’t use to start to consider those things until they were much older in life. I think we’re starting to consider them much younger, partially through listening to things like this show. We’re getting millennials to start thinking about these things. I think that’s going to have a huge impact on the world.

Jedidiah Collins (13:02):
I mean, I don’t know your relationship with your father, his advice or your mother for that matter. My dad’s only financial advice was get a good job and avoid debt. And the idea of what did I really want to do? Go to law school, become a lawyer, get a good job, avoid debt. That was the plan. And you’re right. In the ’60s and the ’70s, there was no podcasts. There was no internet. There was no social conversation around what people want and fulfillment. It was simply get an income, pay off your debt, hope for that one day when you’re 65 that you get to ride off into the sunset. So I think you’re absolutely right.

Jedidiah Collins (13:44):
I think we are flipping a lot of systems, a lot of old expectations. I think the higher education platform. I think working for major corporations. I think how we look at our financial journey, pensions, all of that have gone away. So the game and the conversation has changed. And we are very fortunate to have avenues like this, to where we can educate and empower ourselves. Because that again was not an avenue people could pursue in the past.

Robert Leonard (14:15):
When I started this show, I originally created it with the idea of focusing on strictly investing in the stock market for millennials. Then I quickly realized that to be a good investor, you had to have a strong personal finance base, and you had to actually have money to invest. So I added personal finance and side hustles to the topics that we cover here on the show. Both of which, I think help with investing.

Robert Leonard (14:39):
That said, for someone who might not agree with me that personal finance helps someone become a better investor, why should they care about their money outside of just investing?

Jedidiah Collins (14:49):
I love that. And I’m with you. Most people’s introduction into finances is investing. It’s the sexy engine that everybody wants … mine, no different than anyone’s. My first introduction was I went and bought some stocks, and it was cool. One of my first stocks was Lululemon, and I crushed it. So I thought it was super easy. And I would assume most of your continued listeners know investing is not easy. It is easy to stumble into a win. It’s easy to get one home run. But to do that over and over again is extremely challenging. So the side hustle piece I think is extremely important, because that is the building of our passion. That is diversifying not just our investments, but our income. Diversifying your skillset, diversifying having another avenue.

Jedidiah Collins (15:35):
But the three reasons why I think people need to take personal finances literally and seriously outside of investing is starting with the golden rule. If you spend more than you make, you’ll never have anything to invest. And that’s just a bar high up in the air to just begin with.

Jedidiah Collins (15:51):
But then you go to taxes. Everybody wants to talk about investing’s returns. How can we get more returns? How can we beat the market? Where’s the alpha. When some people need to understand part of personal finances is using vehicles in front of you and the advantages you can have to mitigate, reduce, or even remove liabilities like taxes. So if I can reduce or remove a tax liability of 15 to 20%, I just increased my return by that much. So that’s the second major piece is if you understand how taxes work, you can begin to prepare your plan better.

Jedidiah Collins (16:29):
And third, and maybe the most important is the least sexy of the topics. Personal finance, we have to begin with the idea of insurance. If I am not properly insured, I can lose everything. And that is a really, really scary thought because in today’s day and age and game, people can come at you from every which way. So if I look at driving a car, running a business, or renting an apartment, I need to be able to understand the personal finance side of it. Because as my portfolio grows, that makes me more of a target for when the insurance piece does not substantiate what I have on the other side of the net worth column.

Robert Leonard (17:13):
We don’t talk about insurance here a lot on the show, but I think you’re right that it is an important component. What are some of the most important areas for people to look into, consider, research more that have to do with insurance? We don’t have to do a major deep dive. But if we could just talk about high levels, what are some of the main topics that you originally just instantly go to when you think about insurance?

Jedidiah Collins (17:35):
Absolutely. So first off as a wealth manager, which I’m not anymore, but I was, our first goal sitting down with clients was what are the hazards to your wealth? Sure, that’s great. You have a portfolio of $5.4 million. But what is the biggest mistake? What is the biggest piece that can take all that away? It’s the lack of protection. So I think insurance is vital. And a lot of people say, “I don’t have $5 million.” That doesn’t matter. If you are earning and you are creating your plan and wealth, you got to protect it. You have to have this kind of buffer in between you and whatever is coming from the right hook.

Jedidiah Collins (18:13):
So I think we all get introduced to auto insurance. I don’t think many people need to really be introduced to that concept. I would look at the standard, the minimum. And it’s state by state. But the minimums are typically only about $25,000. 25,000 per person, 50,000 per accident, 10,000 property damage.

Jedidiah Collins (18:34):
So I just look at that measurement right there. If I hit somebody and they hurt their neck, and it’s $100,000 hospital bill and I’m only covered for 25, that puts me at a big liability. And if I had 70,000 in my investment portfolio, that’s now gone. So looking on your declaration pages, do you have the minimum? And have you surpassed what the minimum’s covering?

Jedidiah Collins (18:57):
I think renters insurance is an often overlooked one because a lot of people say, “Well, I’m in an apartment. Isn’t the building going to protect me?” No, no, no, no, no. Renter’s insurance protects you from liability, much like auto insurance. And it also protects your belongings much like homeowners insurance. So renter’s insurance is not an expensive policy, but it is one that can really set you apart in case of something happening in your apartment or wherever you’re living.

Jedidiah Collins (19:25):
Another one would be disability. So overlooked by young workers. And I’m not saying you need a tremendous amount of disability insurance, but they confuse it with long-term care insurance. Long-term care insurance says, “I have a net worth that I need to now go and have somebody come and help me live in my elderly age.” So people equate disability with elderly age and having a big net worth. Disability insurance is protecting your income, not your net worth. Disability says, “Hey, I am dependent on my income. If I got hurt and couldn’t go to work for the next year, how the heck am I going to make money?” Disability insurance. That is a key measurement in your plan. Because again, for many young workers, your income is your everything. So protecting that is vital.

Jedidiah Collins (20:16):
And then the last one would be, because I know there are an extreme amount of millennials making an extreme amount of money. We are in the right time, at the right age, we are starting our own businesses. Technology is booming. So the last one is one that I recommend for every NFL player, every tech coder who is making two, $300,000. It’s called an umbrella insurance policy. And it says, “Let’s go back to that car.” Maybe you are protected up to $100,000 on your auto insurance, but something catastrophic happened. And God forbid, you owe $500,000 now. That is where the umbrella policy comes in and says, “Okay, your auto insurance has up to 100,000. We’ll take over from 100 to 500,000.” And that again, much like renters is not an expensive policy. It is truly a catastrophic policy if and when major events happen. So I know you didn’t want to get too deep into it, but those are just thoughts off the top of my head for a young person trying to build out a plan and say, “I don’t want to waste money on premiums.” If you don’t want to pay too much in premiums, increase your deductible. And really just protect your plan and remove those hazards to your wealth.

Robert Leonard (21:33):
I don’t make 200, 300,000 a year. But I did actually just open my first umbrella policy probably about a year ago. I think I got a million or maybe 2 million in coverage. The reason for that is because I own rental properties, and somebody slips and falls. There’s so many things that could happen. I actually know somebody close to me who had somebody, one of their best friends. I ride dirt bikes, race quads, things like that. And they were all out in the winter. And they got back from riding all day. And the guy hopped out of his … he was in the backseat of his truck, one of his best friends. Jumped out of the truck, landed on a patch of ice, slipped and broke his leg or something. Sued him for a million bucks. And it was one of his best friends.

Robert Leonard (22:12):
So you never know. The dumbest things can happen from people that you trust. So for me I was like, and it’s pretty cheap. Like you said, the umbrella policy is honestly pretty cheap. So I just went ahead and got it. I think it was a million bucks, maybe 2 million, but I think it was a million.

Jedidiah Collins (22:26):
Yeah. And I think one around rental properties, I think that’s an excellent one. People say, “It’s in an LLC.” And vice versa. Just having umbrella insurance with rental properties, you should probably have it in an LLC. So it is just that dual idea. That’s a great, great call-out. If you have rentals, umbrella policies are essential. They are no longer a question. And you’re right. It is sad realization, but it is just what we have to face. And today is we are a slip away from a really big problem.

Robert Leonard (22:56):
And it could be anybody as far as I know. I could be wrong. I just moved a couple of weeks ago and I had people delivering appliances. The appliance guy falls and the washing machine squishes them. I mean, it could be as simple as that. I’m on the hook for that. And I’m sure the company has insurance. And I don’t want to even put myself in that situation where I might be at risk. There’s just so many different things that could happen.

Jedidiah Collins (23:15):
Yep. And if you understand personal finances, you can transfer that risk away from you into a policy.

Robert Leonard (23:23):
I want to talk about how we can actually treat our money like an employee. Explain to me what that concept means and how we can do it.

Jedidiah Collins (23:32):
So one of our missions in money vehicle is to empower people to use money. That means they understand their money, they strategize their money, and they are efficient with their money. And when we say treat it like an employee, make it go to work for you, it means you are making the dollars do what you want it to do. Is that investing? 100%. Everybody says when money is working for you while you’re sleeping, that is treating money like an employee. But no differently when I put money into a charity, or into paying down debt, or into any of those other items, that is making money go to work for me because it’s doing what I tell it to. So we really need to look at this idea that we know how to earn money. I know how to go out, and work, and earn it. But how I can go and create money is when money starts going to work for me, and it begins to create its own employees.

Jedidiah Collins (24:26):
And that is a wealthy secret that up until the ’90s, the vast majority of people were not treating money like employees. Wealthy people have always looked at dollars and not said, “How do I go spend it?” They said, “How does this $1 going to go to turn into two?” So treating your money like an employee means you make it go to work for you, you make it do what you want it to do. And you really start to see how it can create more employees for you.

Robert Leonard (24:57):
People that have studied investing I think are probably familiar with the idea of opportunity cost. But it’s something that I think about a lot. And I think if you’re new to investing, you hadn’t studied it much, or you’ve really only just been in the personal finance space, you might not really be super familiar with the idea of it. Talk to us a bit about this concept and the cost of not choosing.

Jedidiah Collins (25:18):
So it’s a misconception. People do not understand the definition of opportunity costs. Is the value of what you gave up? So you make a choice. You need to have measured before the fact, but definitely after the fact. Whatever you did not choose is something that is your opportunity cost, because those values are gone. You can look at it from a personal finance perspective in renting versus owning. Should I rent a car? Should I own a car? There are positives and negatives to both. The opportunity cost is if I chose to own, now I have to fix that car when it gets dinged. Now I have to take care of it. Now I have to do … my opportunity cost was in a rental, I can return it. In a rental, I’m done with it in a year. In a rental, those responsibilities are not on me.

Jedidiah Collins (26:04):
A big one a lot of people ask me is around paying down debt or beginning to invest. And obviously, let’s take out credit cards and kind of the immediate concern. But if we have student loans, or if I have a mortgage, or if I have the ability to take out a new line of credit, should I do that before I start paying off or start investing? And that is an opportunity cost. And Dave Ramsey is a mogul. I mean, the guy has been the biggest name in personal finance for 30 years. And he hates debt. And I think it’s a good kind of brush that he paints so people avoid mistakes. But we, you, I, we want to educate people on what these decisions are about. So I look at it and I tell myself hey, if I have a mortgage that’s under 5%, if I have a mortgage that’s 4.3, right now there are mortgages in the twos and threes, which is insane. But let’s say it’s in the mid fours. My opportunity cost instead of doubling down my mortgage payment and trying to pay off this 30 year fixed liability the fastest I can. Because not only number one, will I remove my tax advantage of the interest. But I’ll also then just have a big asset that is not making me any money.

Jedidiah Collins (27:22):
So I looked at that and I said, “Okay, should I pay down more on my mortgage? Or should I take that extra payment and go start investing?” Well, if my goal and my sleep at night number is not be debt-free as fast as possible, I’m comfortable paying someone 4 or 5% on my mortgage, and taking that extra excess money and going and investing. Because historically, those dollars are going to earn me 7, 8, 9%. And now with this same stream of income, instead of paying down my mortgage quicker, I am now creating my employees. I am now treating my money like an employee. And now, I am getting ahead of the game by years and by payments with that measurement of opportunity cost. What do I want, and what am I willing to give up in that scenario?

Robert Leonard (28:15):
This might blow your mind, but I just bought a property on December 11th. I locked in a 2.25% fixed rate for 30 years. And I was literally at the closing table signing the paperwork. The closing agent said to me, “This is the lowest interest rate I’ve ever seen somebody close with.” And I paid zero points, and didn’t buy down the rate at all.

Robert Leonard (28:35):
So anyway, that said, I find myself battling that same dilemma. And when I first found Dave Ramsey, I just was totally against him. I was like, “I think this guy is so wrong. It just doesn’t make sense.” I’m a perfectionist by just how I am. So to me, if I could earn 4.1% versus 4%, I’m going with the 4.1, because that’s the optimal solution, right? So for me, his idea of the snowball method where you just pay down the smallest balance first regardless of the interest rate, that just made no sense to me.

Robert Leonard (29:05):
And then I started to study him a little more. I understood that it was more about human psychology than being perfect with your finances. And I understood that. But still, I think that’s good for a lot of people. Like you said, it paints a broad stroke. But if you’re a little bit more advanced, like you, I, probably the people listening to the show, I think they should consider what you just said in terms of what is the interest rate spread? 2.25% for me on my mortgage. I’m not going to pay that off quick. I’m going to get three, four times that in the market easily. So there’s no real reason why I should do that. It just wouldn’t be financially smart.

Jedidiah Collins (29:35):
It is an ongoing conversation I have with very intelligent, bright people. But it’s because our parents’ generation, their only financial savviness was be debt free. If you’re debt free, you’re fine. And I will be the first one to say again, I was in wealth management. I saw a bunch of balance sheets. None of them were debt-free.

Jedidiah Collins (29:55):
Let me rephrase that. Maybe not none of them. The 85 year old widow was probably debt-free. But the vast majority of wealthy people have debt because they use money. They see that opportunity cost. And yeah, if anybody offers to give you money for 2.25, you take it, you smile, and you run. And shoot brother, I’m going to come find you next time I want to find a rental property.

Robert Leonard (30:23):
Yeah, it was awesome. And it’s a rental, and it’s going to cashflow a thousand bucks a month. So it’s like if for two unit, I’m like why would I not just lock that in and let that just sit for as long as it can?

Robert Leonard (30:34):
The only component of this that does kind of stink is that you have monthly payments, right? I mean, nobody really likes having the monthly payments. That is a piece of it that if you don’t like the monthly payments that much and you don’t care about the financial optimization, then maybe it is right for you to pay off the debt. But for me, I’m okay with floating those debt payments until they’re paid off. As long as that means I’m acting in the most optimal way with other investments.

Jedidiah Collins (30:58):
But it’s even seeing that monthly payment as understanding again. the opportunity costs. I took out $100,000 of debt, meaning I have $100,000 in my pocket. And if that monthly payment is 2, $300 a month, whatever it is, I have $100,000 to pay that off right now. Now if I can turn that 100,000 into 110,000, now I have five years of that $200 a month already paid for.

Jedidiah Collins (31:26):
So again, it’s holistic thinking. It is not just identifying a monthly payment, debt, liability, bad, bad, bad. It is seeing how money works, seeing your plan. Seeing again as you mentioned, if your goal is get out of debt, that’s the plan. That is your why advisors today are no longer measuring their value as market returns, but as goals is because that is true freedom. That is the true point of money is to bring you what you want. Not to just say, “Hey, the S&P got 7%. We got 8%. We won.” So I agree. A lot of people look at that monthly payment and say, “Well, that’s a bad.” It’s not a bad if on the other side of my net worth, I’m making $200 and this monthly payment is $100. I’ll do that all day long.

Robert Leonard (32:15):
There are a couple of terms that sometimes get thrown around interchangeably, even though they’re not quite the same thing, or people get them confused or mixed up. And those three terms are market indexes, index funds, and ETFs. I want to clarify the difference between these three terms. So explain to us the difference between the three of them.

Jedidiah Collins (32:35):
So the market index to me is the measurement, is what is actually out there being held. Now we look at the two forms that you can go and own what that measurement is with a mutual fund or an index fund, and an exchange traded fund and ETF. So when I look at the two of those, I really compare them to how are they traded and how much do they cost?

Jedidiah Collins (33:06):
When ETFs originally came out, the big differentiator was mutual funds are traded. And I say mutual fund. Index funds are a version of mutual funds. So index funds are traded at the end of the day. They are not traded inner day like a traditional stock wood. ETFs began come out and say, “Do you want to buy this at 9:00 AM or 2:00 PM? You got it. Here you go. This is an exchangeable security.” But what really began to say was ETFs can charge much, much less because they were having trade fees. So every time you traded was a $7, $5 fee along with it.

Jedidiah Collins (33:46):
As all of the fees have kind of come down, there really has no significant difference between a ETF and an index fund. Your underlying cost, the basis points may tilt a little higher in index funds, the mutual fund side. But even today, they are pushing those all the way to zero. So for you, the institutional investor when you look at big broad companies, they want ‘a little more stability in mutual funds and how they are valued.’ ETFs are a little bit more volatile. So the institutional investor is going to tilt toward the mutual fund index fund. Whereas I think the individual investor can look at that, pick up in basis points, and start to say the exchange traded fund is something that still gives me the diversification. It still gives me the same ownership. But now I can save on the upfront, which if you buy real estate, same in stocks. You make money when you buy it as well as when you sell it.

Jedidiah Collins (34:51):
So it’s what is being measured. And then two avenues on how to own those. And in today’s landscape, they are taxed slightly differently. Mutual funds having distributions. Again, ETFs being taxed like a stock. But I would compare them pretty much equal for the average investor looking to get into a broad diversification.

Robert Leonard (35:15):
When we think of the word risk, we often default to the stock market and then further to volatility or the loss of capital. We even think about position sizing, diversification. But in a more broad sense, when we think about risk, what are your four ways to handle that?

Jedidiah Collins (35:35):
So again, I look at this in a measurement perspective. And I say what is the likelihood it will occur? And what is the damage it would cause? And if you build out a little four square of high likelihood, high damage, low likelihood, low damage, and then high, low, high, low, you begin to be able to look at the risks in your financial life, in driving a car, in really any aspect. So as you look at the four ways you really can look at and say, “How can I measure it?” And I look at the likelihood and the damage. And the likelihood of it occurring if that is high versus low, in the damage it will cause high versus low. And if you look at those four squares, you can begin to place your risk in one of those four places. If it is a high likely and a high damage, you want to avoid that at all costs. That’d be like drinking and driving, getting pulled over for a DUI.

Jedidiah Collins (36:31):
So low likely to occur in a high-end damage, that is something that I want to transfer through an insurance policy. If it is a high likely to occur, but a low end damage, that is something that I want to reduce. How can I lower the risk of that? Let’s say running out of gas driving around in your car. I reduce that risk by filling up my gas tank. I can reduce that. Now I look at a low likelihood and a low damage. That is something that I’m comfortable retaining. So I look at damage, and risk, and likelihood all in the same lens. And when you start to look at your financial plan and your financial path, you really take those two questions and ask it in any sense. Sure. Can I invest in Bitcoin? Sure. Should I buy this ETF? Sure. Should I get an insurance policy? Sure. Should I buy that rental? All of those is what is the likelihood something is going to occur? And then what would the damage be if it did? And then you can begin to say, “I want to avoid it. I want to reduce it. I want to transfer it.” Or, “I want to retain it.”

Robert Leonard (37:37):
My next question is a big one, and we could probably have an entire podcast episode on it. And I realize you’re not a CPA. So I could bring on a CPA to talk about the nitty gritty. But I want to talk about it from a high level. Break down the U.S. tax code for me. And I chuckle because I know just that sentence of break down the U.S. tax code. That’s huge. Just from a high level, explain how the progressive tax bracket works in the U.S. tax code.

Jedidiah Collins (38:02):
I love this. And again, what money vehicle is trying to do is create stories and analogies that really communicate these topics in common day tongue. So I love, and in the course, we bring people into an ice cream parlor. And I come in and I say, “Bobby, what do you want? Bobby wants one scoop of vanilla. Costs him a quarter. That is great. Good job Bobby.” I’d think people who go into ice cream parlors and order vanilla are just absolutely insane. It doesn’t make any sense to me. But Bobby, here’s your one scoop for a quarter. Then Susie comes in and says, “Well, I don’t want just one scoop. I want three scoops of ice cream.” I say, “That’s great, Susie. I charged Bobby a quarter for his first scoop. I’m going to charge you that same quarter for the first scoop. That second scoop, I’m going to charge you 50 cents. And your third scoop, because you’re so fortunate to get three scoops, I’m going to charge you 75 cents for that scoop of ice cream.” And they look at it and they say, “Okay, why would anyone charge that? That’s not how companies do it. They reverse it. You get cheaper the more you get.” And I say, “Just go with the analogy for a second. Why would somebody charge the same for the first scoop of ice cream?”

Jedidiah Collins (39:12):
And it’s because they want to charge everybody the same amount for that first scoop of ice cream. And if you look at it through the income tax code, it is the exact same reasoning and thinking. For your first scoop of ice cream, for that first tranche of money you’ve made, we’re going to charge you X percentage. I don’t care if it’s a kid working at Starbucks or Elon Musk. His first $10,000 is going to be charged the same. And then as you progress, as you earn a second scoop of ice cream, a third scoop of ice cream, and beyond, I can now charge you because you’re fortunate to have more scoops. I can charge you more the higher you go. So really looking at it through that lens, our progressive income tax code says the more money you make, the more I’m allowed to tax you. And I want to point out that the vast majority of our income tax code is about how to reduce and avoid taxes, not about how to pay them. Only about 10% is actually explaining how the payment works. The rest are how to structure in organized ways to reduce your tax payment.

Jedidiah Collins (40:22):
So I really love the idea of the income tax code. One of the biggest mistakes people always tell me is, “I don’t want to get a bonus at the end of the year, because then I’m going to end up losing money because it bumps all my money into a higher tax bracket.” You only get charged per ice cream scoop, per amount of money or bracket, you get charged a certain percentage, and then you do get an effective or average tax that you pay on all of your money, but it is not one bracket. It is how much did you pay overall versus how much income did you make?

Robert Leonard (40:57):
I have to admit and put myself on the hot seat a little bit here. You have a 30 question test on your website. And I was playing around with it before the interview. And I think I got like 28 or 29 out of the 30 right. And I like to think I’m pretty well educated when it comes to financial topics and investing in money. I got this one wrong. I’m not a tax professional. I don’t know the tax code that well. And I admittedly got this question about this progressive tax system wrong. And it highlighted to me that I need to learn more about this. This is an area that I need to focus on and research a little bit more. And for people listening, what can you take away from that? And that is you never know everything. And I never thought I knew everything. But sometimes, you’d be listening to podcasts. You’re like, “I already know this.” Well, there might be something right around the corner that you don’t know. And for me, this was one of those examples.

Jedidiah Collins (41:44):
Yeah. And that is one, I have yet to have somebody get a 30 for 30. So don’t feel bad. And the idea is all your money taxed the same. Is the first dollar you make taxed the same as the last dollar you make? And a lot of people do. They think, “Well yeah, it’s all in the tax code.” But the answer is no. If you line your dollars up in an actual line, the money you put at the end is taxed differently than you put at the beginning. And why it is neat to look at tax deferral 401(k)’s, IRAs is you take money out of the back of the line and save taxes from that group, not from the beginning.

Robert Leonard (42:20):
As a former athlete and entrepreneur, I know you’re somebody that works super hard. You’re used to hard work and putting in the effort that’s needed to get things done. So I’m sure you’re not sitting back and letting the pandemic pass you by without using it as an opportunity to get better in some shape or form. So during this time that we’ve had, what are you doing to learn or just better yourself?

Jedidiah Collins (42:44):
From the first week we heard about the pandemic, which nobody could ever foresee this, I set goals for myself. And I said, “Hey, if I’m going to have some,” what I called spare time free time at home, “What do I want to do with it?” My book had just published. I knew one of my biggest goals was to create the virtual course. So I had to go film, edit, and begin to develop a virtual course, which we’ve completed. I wanted to start a podcast, which I did. I wanted to start a weekly live show, which we did. And then from a diversification of interests, I began cycling. I really got back into meditating, stretching really for the first time. And I started to challenge myself and say, “Where’s the world going? And how do I better prepare for where it is going with my current skillset?”

Jedidiah Collins (43:30):
I love talking. I love speaking. I love engaging with people. That public speaking forum was taken away. What was the new avenue? Where could I go and capture some of the opportunity and the chaos? I’ve had a long 10 year vision of creating a virtual financial literacy course for the masses, one that could go through schools across the country. And during the pandemic, this was a kind of a two, three year goal that we sped up into four or five, six months. And that’s really what we went to work on all day, every day. Not just the content, but the creativity, the editing, the video, as well as the feedback on what should and shouldn’t be in the course. So the pandemic is going to be a litmus test in the future of what exactly did you do with your time?

Jedidiah Collins (44:19):
I’m not opposed to watching Netflix. I’m not opposed to grinding out on a show. But I also look at it and say most people wasted a lot of the start, came summer and got moving. I prided myself in actually over the holidays, I broke this. Every Monday through Friday since March 11th when we were told to go home, I got up at my same time, 5:09 AM. And my neighbors, people, my wife were like, “Why are you doing that?” And I said, “Listen, a lot of people are sitting on the sidelines. When this does end,” you mentioned the words post-pandemic, which I have not heard yet, but it excited me when you said it. “When we are through this, I’m going to line up everything I went and did.” Was some of it a waste? Was some of it all for not? Sure. but I continually invested in myself and developed skills that are going to prepare me for this new normal.

Robert Leonard (45:14):
I think I got a little bit ahead of myself with the post-pandemic, but I like to think that we’re on the back half, right? Or at least I think we’re in this post shock world, I guess is the way that I would think about it. When it first hit, everybody was in shock. Nobody knew what to do. Everybody was like, “What is going on?” And I think not to say that we’ve become used to it, but we’ve kind of become used to it. And I think we’re past that initial shock phase. I guess that’s kind of more how I would classify it, but I think you’re right.

Robert Leonard (45:40):
One of my favorite entrepreneurs, I talk about it here on the show, his name is Andy Frisella. And he has talked about how this time is going to be so important for people to put separation between yourself and your competitors, whether you’re a business, you’re an employee. Whoever you are, now is the time where people are going to, not losers, but the people who aren’t striving for the best in themselves is going to sit back, and just kind of take the spare time and watch Netflix. And then the winners are going to go out there and use it as a time to get better, and really put themselves leaps and bounds ahead of everybody else that they’re competing with.

Jedidiah Collins (46:15):
Yeah. I think a question in every interview over the next two or three years is going to be, “What did you do with that time? What did you read? What did you learn? How did you diversify yourself?” And it is going to be very interesting to see as the dust settles, there are going to be and already are significant winners. But a lot of people look at it and say, “Well, that just can’t be me. I didn’t know.” And it’s the first time in history the world has had a level playing field. We are preparing for things that nobody had seen before eight months ago. So the idea of I couldn’t or I wouldn’t just means you didn’t. And the time is not over by all means. You still can capture this and see what is happening and where it’s going. And the immense amount of companies that are closing, there are just as many opening and starting. So encourage yourself to find an avenue to go down and just start walking. You won’t know where until a few steps or a few miles in.

Robert Leonard (47:15):
So you’re saying I’m on the cutting edge and forefront of podcast guests questions, because I’m asking that now. And you’re saying in two, three years, people are going to be asking it.

Jedidiah Collins (47:23):
I absolutely think so. And I also think you were on the forefront of this medium. I mean, how many people turned and said, “I want to start a podcast now”? Being two, three years ahead of the game, it’s everything.

Robert Leonard (47:36):
As we wrap up the show today, what’s one piece of advice you would like to leave the audience with? It can be about personal finance and budgeting. It could be about business, investing, entrepreneurship, or even just life in general.

Jedidiah Collins (47:50):
So chapter 10 in Money Vehicle calls for you to open a Roth IRA account. Love Roth accounts. I know there are some people out there who are now criticizing 401(k)s and IRAs. They’re trying to sell you some form of life insurance. But I think that’s a great action to take. As we’re talking about time you can use right now and a skill that is going to help you in any industry you go into would be journaling. I think if we can encourage ourselves to journal, write out our thoughts, write out our goals, write out our weaknesses, write out our frustrations and our fears, you will be able to meet yourself. If you start at 25, if you start at 20, if you start at 30, in five years, in five months, you will be able to go back and really witness your personal growth. One of the greatest things my father gave to me was journaling. And it’s something I’ve done for years now. And it’s how I create content. It’s how I write books. It’s how I speak. It’s how I get through emails. It is such a skill to be able to self-analyze and self-diagnose. So I would say if I was going to start trying to do anything with this extra time I have, journal.

Robert Leonard (49:03):
Jed, thank you so much for joining me here again on the show. I really appreciate it. Where can everyone listening today go to learn more about you and what you’re working on?

Jedidiah Collins (49:12):
I just again, appreciate the opportunity. I think your audience is one that I am particularly interested in helping. So we have a virtual built out financial literacy course and curriculum, one that you can get certified in financial literacy through. You can go to yourmoneyvehicle.com, yourmoneyvehicle.com. The Your Money Vehicle book is also on Amazon. And if you just want to connect with me, I’m the Fullback of Finance on TikTok, Instagram, Twitter, or Jedidiah Collins on LinkedIn. But by all means, I welcome questions and feedback from your audience as well as connections on how we can really make financial empowerment a national movement and change the conversation around money.

Robert Leonard (49:55):
I’ll be sure to put a link to all those different resources, ways you can connect with Jed below in the show notes. So you guys can go check those out there. Jed, thanks so much.

Jedidiah Collins (50:04):
Enjoy the day.

Robert Leonard (50:06):
All right guys, that’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro (40:10):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.