Transcription
Bobbi Rebell:
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Manisha Thakor:
He showed me how to calculate how much money I would have by the time I was 65 if I invested my babysitting and my lawn mowing money, and then we did a couple scenarios. We tested how much I would have if I was earning 5% after inflation, if I earned 6% after inflation, and when I saw how big those numbers were I was just hooked.
Bobbi Rebell:
You're listening to Financial Grownup with me, certified financial planner, Bobbi Rebell, author of How to Be a Financial Grownup. You know what? Being a grownup is a really hard, especially when it comes for money. But it's okay, we're going to get there together. I'm going to bring you one money story from a financial grownup, one lesson, and then my take on how you can make it your own. We got this.
Bobbi Rebell:
We are geeking out here at Financial Grownup, but stay with me friends because you will have more money and be wealthier if you listened to this episode and follow my guest advice. Manisha Thakor is the author of Get Financially Naked, How to Talk Money With Your Honey. She is also the force behind MoneyZen, and is a practicing certified financial planner. If that sounds pretty cerebral, well, she will take that as a compliment. She started learning about investing very, very early. Here is Manisha Thakor.
Bobbi Rebell:
Manisha Thakor, welcome. You are a financial grownup. I'm so excited you're joining us on the Financial Grownup podcast.
Manisha Thakor:
I'm so excited to be here, and to be deemed by you a financial grownup.
Bobbi Rebell:
You're very much a grownup. You're the author of two books, On My Own Two Feet, and I love the second title, I know everyone does, Get Financially Naked. You also have MoneyZen. Lots going on.
Manisha Thakor:
I feel super excited about the world of personal finance and investing.
Bobbi Rebell:
Good, and I'm super excited about the story that you brought to share today, because it has to do with some father-daughter bonding around, not the dinner table, around the HP 12C calculator.
Manisha Thakor:
I love this. When I was around 11 years old, my dad, he's an MBA and a CPA, he sat me down in a moment of father-daughter bonding that only financial geeks, like ourselves, could really appreciate. He had an HP 12C calculator, which for folks who may not be familiar with it, is a financial calculator that enables you to do sophisticated compounding calculations on it.
Manisha Thakor:
He showed me how to calculate how much money I would have by the time I was 65 if I invested my babysitting and my lawn mowing money, and then we did a couple scenarios. We tested how much I would have if I was earning 5% after inflation, if I earned 6% after inflation, if I earned 7% after inflation, and when I saw how big those numbers were I was just hooked.
Manisha Thakor:
That was really my first introduction to the power of compounding, and I think because he had my physically touching the buttons on the calculator, and then he made me write down the numbers in a little grid on a notepad. I can literally still even remember what the notepad looked like. It was so tactile and so visual.
Bobbi Rebell:
Do you have the notebook still?
Manisha Thakor:
You know, I wish I did. He and I both say in retrospect, "We totally should have saved that for the grandkids," but it's in my mind's eye. That's how I got hooked on saving and investing.
Bobbi Rebell:
So then what is the lesson for our listeners? Should everyone be bonding over calculators?
Manisha Thakor:
That's right.
Bobbi Rebell:
We know that's not going to happen.
Manisha Thakor:
No, I-
Bobbi Rebell:
Let's bring it down to a realistic level.
Manisha Thakor:
The lesson for me, and the lesson that I want to scream from the mountain tops, is, and particularly for women, is that it's not enough to just save money. Saving is great, and it's freaking hard to do, but you must invest it as well, first and foremost to offset the corrosive power of inflation.
Bobbi Rebell:
Which is picking up by the way, so that's something we need to start being more aware of, and a lot of young people haven't really seen inflation at the level that other generations have. But it is going to become a bigger part of our dialog.
Manisha Thakor:
Yeah, and Bobbi, you've nailed it. We've just gone through such a bizarro period of de minimis inflation. An example I love to give is 100 bucks over a 30 year period at 3% inflation is worth $40, was, at the beginning. If you just increase that inflation to 5%, which doesn't sound like a big jump, but that drops the value of $100 in 30 years to what $20 would have bought.
Manisha Thakor:
So small [inaudible 00:05:54] inflation have a huge, huge impact, and that's why you cannot just save. You have to invest, because the first step of investing is keeping your money growing at least with the rate of inflation. If you do investing well, then ideally over the long run you grow your portfolio even faster than inflation, which increases your real purchasing power.
Bobbi Rebell:
Okay. Now for your money tip, Manisha. We're geek out even more, because you have actually brought a formula. Your, Manisha's, magical formula for investing success. I promise everyone, just stick with us, she says it really well. She's going to explain it all, and we're going to have it all written down in the show notes for you as well. Go for it.
Manisha Thakor:
The way I think about how to take your hard earned savings and invest it is the following. First, take a look at the total dollar value of your current saving and investment portfolios. Second, subtract out any money you know you need to spend in the next five years. This could be money you need for a home down payment, or it could be your six month emergency fund.
Manisha Thakor:
Then, for any of your long term money, which for most of us is our retirement money. So it's any money that you know you don't have to spend in the next five years. What you do, is you take 110, and you subtract your age to get a back of the envelop estimate of what percent of your portfolio should be invested in stocks. That was a mouthful, and Bobbi, as you mentioned, it will be in the show notes, but I'll give you an example.
Manisha Thakor:
I'm 47 years old. We'll round that down, because at my age you like to round down. To keep the math easy, 110 minus 45 equals 65. So a good starting point for me, for how much of my long term money at my age should be in stocks, is 65%. Lo and behold, that's how much I have of my long term money in stocks.
Manisha Thakor:
The biggest mistake that I am seeing with young people these days is shying away from investing their savings, because they're afraid of losing money. So they're missing those vital early years of compounding. That's why it's so important that you subtract out the money you need to spend in the next five years, so no matter what the market is doing, you're fine. The money you know you needed, it's in cash. It's only your long term money that's being invested.
Bobbi Rebell:
I think a lot of young people witnessed their older siblings, or their parents, really being burnt in the recession, and that's a lot of the hesitation.
Manisha Thakor:
I'll just say, Bobbi, when I hear somebody tell me that 2007 to 2009 ruined their retirement, what I say is, "No. Either you had the wrong asset allocation going into it, or you blink and you deviated from your plan." Because if you followed the formula that I'm saying, and you didn't have any money that you needed to spend in the next five years in the market, in 2007-2009, you would have seen your portfolio drop as much as 50%, but you wouldn't have sold a single share of anything, because you didn't need to touch it, and then you would have seen your money double or triple as you came out of the recovery.
Manisha Thakor:
So the people who lost in 07-09, where the people that were forced to sell at bottom to maintain their lifestyle, or got scared because they didn't have the cash cushion, and sold at the bottom. That's why this formula is so important.
Bobbi Rebell:
Right, and you've got to sit tight. Even the beginning of 2018 we had some scary days. You've got to know your focus and stick with the plan. All right. Mrs Manisha, I also hear you have big news, new projects, new jobs. Tell us.
Manisha Thakor:
I'm so excited. I have just accepted the role of vice president of financial education for an amazing firm called Brighton Jones. I could not be happier. When I think about what I want to accomplish in this world, my belief is that money is power, and women need more of both.
Manisha Thakor:
And so I am going to be doing my darnedest in this new role to help women achieve that. As part of that, I'm really going to be ramping up my efforts with my MoneyZen newsletter. So if listeners are interested, I encourage you, go to my website, moneyzen.com. I'll have a monthly newsletter that I'll be putting out. It's educational, and I'm really going to be working hard to share the most vital resources, articles, tools, each month around women's economic empowerment, and how we can all use personal finance and investing to increase our voices and choices. I always say, "Money gives women, it gives everyone, voices and choices," and financial education, and financial guidance are what helps unlock those doors.
Bobbi Rebell:
Awesome. Before I let you go, where can we find you on social media?
Manisha Thakor:
My name is a mouthful, and I'm the same handle on everything. I'm ManishaThakor everywhere. It's M-A-N-I-S-H-A-T-H-A-K-O-R, on Twitter, Facebook, LinkedIn, Instagram. If you forget that, go to moneyzen.com, because I have all my social media icons right up at the top.
Bobbi Rebell:
All right. Thank you so much for joining us.
Manisha Thakor:
Bobbi, always a pleasure to chat with you.
Bobbi Rebell:
As warned, Manisha and her dad totally geeked out with all that math, but the good news is, you guys don't need to go out and buy yourself fancy HP 12C calculators and do all this kind of fancy math, because these days it's really all there for you.
Bobbi Rebell:
Financial grownup tip number one, there is nothing more powerful than seeing the numbers. And like I said, you don't even have to do the math yourself these days. Log into your HR website from your job, or if you work for yourself and you have retirement accounts, which you should, go there. Go to the provider, and just take a look. Most of them will have nice calculators. They'll do the math for you. They'll have probably some graphic ways to show you how you measure up, where you are relative to your retirement goals.
Bobbi Rebell:
You can actually see how you stand, and see how you feel about it. You might get pretty emotional. It could be a really emotion. You might doing pretty well. It could possibly be not that great, but maybe that will motivate you. But the important thing is, get the information, it doesn't take much work, and make decisions from there.
Bobbi Rebell:
Speaking of decisions, financial grownup tip number two. While you're on that website, look at the retirement savings, and look for a box that says, "Increase your withholding," or a box you should check that says, "Increase your withholding by 1% every year," and of course check that box.
Bobbi Rebell:
Now, you can always undo it, but by checking that box it will automate increasing the amount of money that you are putting away each year, and you probably won't feel it because it's tax deductible, so it won't cost you that full amount, and it will amplify your savings.
Bobbi Rebell:
We have been hearing a lot from you guys, wanting to share your own financial grownup money stories, lessons, and money tips. So we are going to start having one guest a month be a listener. If you want to be considered, email us at info@financialgrownup.com, and tell us, what is the money story that you would like to share, and what is the money tip that you would also share with us, if you are chosen.
Bobbi Rebell:
Subscribe if you have not already, and help us spread the word by sharing on social media. I am @BobbiRebell on Twitter. Follow me, and please retweet these silly promo videos I'm doing. They're a lot of fun. I enjoy making them. Hopefully you guys are going to enjoy seeing them, if you have not already. Help us reach more listeners. On Instagram I am @BobbiRebell1, you can also repost those, and go to bobbirebell.com/financialgrownuppodcast to learn more about the show, and sign up for our mailing list so you can hear about things like how to be guest on the show. I hope you enjoyed Manisha's story, and that we all got one step closer to being financial grownups.
Bobbi Rebell:
Financial Grownup with Bobbi Rebell is edited and produced by Steve Stewart and is a BRK Media production.
