When most people think of financial planning they think of the stock market, Wall Street, or buying, selling stocks and only for wealthy people. That is all part of it but it isn't the whole picture. It is far more than that and frankly it is and should be for everyone who makes a living and looking for a clear road map to a brighter financial future for themselves, their families and future generations. The problem is people tend to think it isn't for them or , they don't make enough money. Well we aim to simplify financial planning. This week we sit down with a long time volunteer for the SDFLC, a Certified Financial Planner, Paul Lim of The Wealth Consulting Group.
Paul graduated from Johns Hopkins University with a bachelor’s degree in economics and has been recognized throughout his career for both his professional achievements and outstanding community service in the greater San Diego area. His dedication to achieving both personal and professional excellence began early on as evidenced by his being named a “30 Under 30 – San Diego County Leader” by Patch San Diego.
Enjoy!
When most people think of financial planning they think of the stock market, Wall Street, or buying, selling stocks and only for wealthy people. That is all part of it but it isn't the whole picture. It is far more than that and frankly it is and should be for everyone who makes a living and looking for a clear road map to a brighter financial future for themselves, their families and future generations. The problem is people tend to think it isn't for them or , they don't make enough money. Well we aim to simplify financial planning. This week we sit down with a long time volunteer for the SDFLC, a Certified Financial Planner, Paul Lim of The Wealth Consulting Group.
Paul graduated from Johns Hopkins University with a bachelor’s degree in economics and has been recognized throughout his career for both his professional achievements and outstanding community service in the greater San Diego area. His dedication to achieving both personal and professional excellence began early on as evidenced by his being named a “30 Under 30 – San Diego County Leader” by Patch San Diego.
Enjoy!
[inaudible] welcome to Talk Wealth To Me, a safe space podcast, where we chat about anything and everything related to personal finance, the information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal, tax or other professional advice.
Chase Peckham:Hello, and welcome to another edition of Talk Wealth To Me This week, we sit down with a true friend and an incredible volunteer who has volunteered his time more than five years doing pro bono work for our organization, the San Diego Financial Literacy Center. And he is a certified financial planner. And most people find that when they think about a certified financial planner or they think about financial planning in general, that that is just for the 1% that is for people that have money, but not Paul. He truly gives back and he simplifies what financial planning really is all about.
Music Intro:(Music intro)
Chase Peckham:I mean, this is really, Really fun. We've been working together for, for years now. And you've been a part of the San Diego Financial Literacy's, uh, board of advisors, um, for a number of years now and also the lead Certified Financial Planner, uh, and you head up our volunteers and why would we, why would we do something like that? Um, but what does personal finance mean to you in the form of giving back your expertise?
Paul Lim:Well, chase, I'll tell you that whether you're very wealthy or whether you're just starting out a lot of the same principles about money apply at all income levels. And so what we're supposed to be doing here is bringing that information to the public, which may have been previously only reserved for some of the people who could afford to pay an advisor in order for this advice. And it's something that people still need anyway, because everybody wants to quit working. Someday. Everybody wants to have a nice life for their family, and being able to understand the rules about money in America is such a fundamental, important survival skill. It's, it's shocking how badly it's taught in school. And really our core of volunteers seeks to bridge that gap. That's given to us through the public education system and, and that which, which is often rendered to maybe more higher income clients.
Chase Peckham:And that is a common misconception that most people that we work with that, you know, lower to moderate incomes, uh, they feel like they're, they, there's no reason for them to talk to somebody such as yourself because they feel like, you know, I'm not this money bags rich guy or a rich person. So, um, and I hate that term by the way, rich, but elaborate a little bit on, you mentioned earlier that, you know, whether whatever your income is, the principles are the same kind of expand on that a bit.
Paul Lim:You know, I'll say that, that characterization about only the wealthy needing advisors that might've been true in the past. It's true that if you don't have a large amount of investible assets and an investment advisor is not going to be of much use to you, but the financial industry has changed a lot. It's evolved. And a lot of it has been geared more towards rendering advice. And it's advice that is really stemming from the fact that laws have gotten more and more complex over the last 20, 30 years. All that's happened for the most part is more and more regulations are added. And the end result is that it becomes more and more complicated for ordinary people to do ordinary things, which seemingly were much simpler. In past times. These days, the best advisors are the ones who have expanded their service capabilities from trying to have a crystal ball view of the market and figure out where things are gonna go, where interest rates are going to go more towards having a money plan, having something where you set up systems, instead of setting money goals, you basically set aside a certain amount of money each month, and then plan on what to do with that discuss accounts in which to save so that it will help you with tax planning, retirement benefits, other things of that nature. And it really comes down to changing the role of the advisor from, instead of guessing where the stock market is going to go, it's more about what do you do with the money you have right now? And that capacity has expanded in the last few years to the point where that sort of conversation didn't happen in the eighties and nineties.
Chase Peckham:So there's a common word that people hear it. That's fiduciary. Uh, a lot of people don't know what that means. It's they think it's a very, just a complicated word, elaborate on what fiduciary actually means.
Paul Lim:Fiduciary capacity basically means that you'll always put the interests of the client ahead of your own. Now, you would think that that is part of any relationship that you'd enter into with a trusted person, but this way the is mandated. So now there's oversight. Now there is compliance departments that look over the work that you do. And if for some reason there appears to be a conflict or some action or recommendation you're taking that appears not to be in the best interest of the client. I mean, that transaction will be shut down before it happens. So part of it is just the firm's oversight in terms of providing you with that. But the standards by which these fiduciary professionals are trained, are all done with the client in mind. And that has not always been the case with financial services, but those who were basically trained using that mindset are going to have a different perspective when it comes to formulating recommendations for any perspective client. And just that perspective and philosophy alone is going to differentiate them from just say your average stockbroker.
Chase Peckham:You give a lot of time pro bono to organizations like myself. Um, you work with a lot of individuals, uh, who not necessarily could afford your services, or even think that they need to seek out your services. What drives you to work with individuals like that? And what kind of, if you don't mind, just a few, a story or two of where you really saw somebody who thought they had no chance and they, they just took off,
Paul Lim:Well, you know, people have said this all the time. There are these personal development coaches that talk about how one of the best things you can instill in your life is a sense of giving back and contribution to your community. And so, in a way, the volunteer role fulfills that one purpose, but it also has a really specific business development and really just professional development purpose. And that really is learning about how to explain concepts in a way that is both understandable. And then also cogent and persuasive. What do people really understand and what are the ways to illustrate these concepts in ways that anybody can comprehend, not just people who are highly educated or highly affluent, understand their needs and their concerns and what they think about, and what's on their mind all the time. It's a, still a ubiquitous principle. It still applies to all people, even if they've come into some wealth, or if they've managed to achieve higher levels of wealth. It also gives you a real perspective into how there are some real unintended consequences of laws that are imposed on ordinary citizens. And I'll give you the example. You know, we had a person who was previously homeless, but they came into an inheritance and it was a, a modest amount, but it was a large amount to them. And it was amazing how hard it was for them to just navigate the complexity of all the things that occurred during that time, the state, in which the person passed away, that state income tax board withheld taxes from this, person's his share of the distribution. And they had no idea that she doesn't make any money. And that there's no way that she would owe those taxes, not even being a resident of that state, but they still did it anyway. It took the help of a CPA who was willing to do pro bono work to help them fill out and do the appropriate filings in order to ultimately get that amount received back to them. And again, it's, it has to do with the fact that there's no state agency that can understand every single person's circumstance and be ready to accommodate all those things. It's really just illustrative of the complexity and how you need to have real competent advisors just to help you do even the most seemingly simple things.
Chase Peckham:And that person, I mean, without the help of yourself and that generous CPA, that filled out the paper, because paperwork can be daunting numbers to a lot of people are extremely daunting. And so that, to that person, you made a huge difference in their life. Not just the fact that they get to keep the money that they inherited, but peace of mind, right? Because how much even somebody who's homeless can stress about even the most nominal amount of money and things that a lot of us just become every day. It might be overwhelming to somebody else.
Paul Lim:Absolutely. You know, the amount that was deducted from the check itself to some people might not seem like a gigantic amount. It's not going to make or break that person. But she said that to her, that was two months of food. And so that was just very, um, I think an example of how different amounts of money can mean different things to different people. And so just that small amount being withheld. I mean, that was, that was a life changing sort of a difference to her. And so being able to just understand a couple of rules and to know how the system works amounted to what was a large amount of money to this person.
Felipe Arevalo:And it's often time, an intimidating, uh, what's, uh, what to some may seem like just normal, everyday paperwork to another person can seem like a very intimidating, very cumbersome process. So is it something that, um, do you feel that if the general public were to just gain a little bit of more of that knowledge, they would be able to handle these better on their own, um, or, or is it something where, um, it just becomes so overwhelming because it's not something you do on an everyday basis?
Paul Lim:Well, the math you need to understand taxes is not hard at all. In fact, when you explain things to people in a very clear way, without using jargon, they all get it, it all clicks for them. They all say, Oh, okay. That, that makes sense. And so I'll give you an example. Basically, what you do is you imagine your gross income is a pile of$1 bills. And the more money you make, the bigger the pile is then what you do is you identify deductions and all that deductions are, are ways to make the pile of money smaller before the IRS counts it. And we talk about lots of different deductions. You donate to charity, you have a business expense, you basically, um, can contribute to a retirement plan. You know, that's the one that we discuss quite a bit. There are all these ways to shrink that pile of money.
Chase Peckham:Family, children.
Paul Lim:Yeah. And once, once you identify all those methods, now you look at the table that talks to you about the different tax rates. And then the way you explain it, as you say that you imagine that different parts of the pile of money are taxed at different percentage rates. So I've got this chart that basically shows a pile with all these rainbow kind of colors in each of the colors represents a different portion, a different rate of tax that they pay on that particular part of the pile. It's not as though, if you go into one bracket, if you penetrate one particular tax bracket, it doesn't cause the entire pile to be taxed at that rate. And when you explain that to people, that's an eye opener. A lot of times, cause most people don't understand that concept, but once they understand the rules of the game, which are very basic, it's pretty much like monopoly is more complex than some of the things. Once you actually break it down to its core, you come to realize that tax planning then does not become as intimidating as it became previously. Now, a lot of the nuances, those get very complicated, but the basic idea behind it is, is completely accessible to anybody that can multiply.
Felipe Arevalo:It's great that you mentioned taxes because I see so much information from time to time on anything related to taxes and getting to that next tax bracket where so many people think that you cross that threshold into the next bracket. All of a sudden you're going to be taxed at your entire thing is going to be taxed at a much higher percentage. And that's, we know that's not the case, but there's so much fear of, Oh, well, if I make that extra thousand dollar bonus, it puts me into the next bracket and then I get really taxed, but that's not how it works. And I love the way you explained it. I watched you present one time when we were doing presentations at the, uh, Miramar Consolidated Brig for, for inmates. And I watched your tax presentation in there one time. And after you explained it that way, it allowed me to better be able to explain it. So I like the way that you simplify the entire, the basics of taxes and it makes it so much easier to try and explain because there's so much misconceptions out there.
Paul Lim:Yeah, it's true. It's a very common misconception, but you see, I have the luxury of not being a person that is a tax advisor, not a CPA. All I have to do is help the clients focus on the big picture and then it's up to their own advisors to figure out the nuances. And then all of the very complicated rules that get involved with the risk, the rest of the story of their money, but for the persons' sake. All they really need to know is the skeleton of the rules, how they ultimately arrive at their final taxable number. That's a whole different story. And then the tax professionals are compensated to understand that and to really navigate all those nuances and, and, and they, they absolutely justify their purpose when they're very knowledgeable. But see, I have the ability to say, I don't do that particular line of work, but I can explain to you the basic structure behind the way that industry works. And that's all you need to know for the purposes of our making a lot of the major decisions that you'll be encountering throughout this time. And you of course validate that with, with the CPA, but you're you're right, because a lot of the tax advisors don't have the time to walk them through it. In that way. They're too busy on figuring out the nuances and making sure that the client gives them the appropriate data and the documentation on time, which is extremely difficult. But that that's right. That is a very common misconception. And I think that people need to eliminate the idea that there are certain thresholds that would cause them to pay a disproportionately higher amount of taxes on the entirety of their income. It's only the dollars that cross into that threshold that are subject to that additional rate.
Chase Peckham:We do these when I say we, the San Diego financial literacy center with help from The Foundation for Financial Planning, uh, has a program that we call our Financial Opportunity Clinics. And we get pro bono Certified Financial Planners, such as yourself that will meet individually with, uh, individuals who, again, we mentioned at the beginning that don't normally feel like they have the opportunity to speak to a financial planner because a, they don't make enough money. They just don't feel like they need one. Whatever the reason might be. They just don't feel like they're in that right bracket to speak with one. You've been doing this for years now with us and kind of give us an idea of, for someone that comes in that you sit with on a, in one of those clinics, talk about what is the typical things that people are worried about, that they really want to talk to you about?
Paul Lim:You know, I'll tell you that it's not part of formal CFP training to be able to talk a lot about the psychology of money. This is something that I've come to realize is of importance when dealing with a lot of the pro bono community. Cause I mean, how, how useful is a discussion about asset allocation and effective tax rate? If the person is just struggling to do a lot of their day to day. So a lot of the times what you'll find is that people will come in and they're not in a sustainable position. Their debt is increasing. They're not able to save. They're just working all the time. They can barely afford the life that they have. And that far more common than you might imagine. And there is no specific training that is provided by the financial industry to address the needs of those kinds of people. And what it happens is you need to talk about the psychology of money. And also you want to, one of the most effective things to talk about, and this is not my idea, but it's about putting systems in place instead of having goals. So they say systems instead of goals. And this was done by, um, uh, Scott Adams, a very famous, cartoonist and author things of that nature. But he basically says that instead of having a goal for yourself, which is to say, I want to save this amount of money. By this point in time, you have a system where you say on the first of every month, on the 16th of every month or the day after I get paid, whatever it is, I'm going to automatically have a hundred dollars each check deducted and thrown into a savings account. It's a little bit harder for me to get. And as long as I can stay within the means that are given to me in my checking account, well, I know that I've succeeded because if I can live within those parameters and my saving has already been done for me, then I know that as time passes, my situation is going to get better and better because my good behavior is automated for me. I don't have to remind myself to be conscientious twice a month. I'm instead going to put it on autopilot so that good behaviors happen automatically. And as long as I can live within the constraints that are imposed upon me, then I know that I'm able to not only live my life, but then spend whatever money I have. Guilt-free because you know that if you can spend every last dollar that's in the checking account, after you've already done your saving and do it without beating yourself up about it, because your good behavior has already happened, it's already occurred. And if an emergency does happen, the emergency is there. The funds are there to cover that emergency. But that's an example, instead of saying to yourself, I know I'm going to be good this month. I'm going to remind myself to spend less and put money away, just set it. So it happens automatically without you thinking about it. That's an example of putting in a system and not a goal. Now in the financial industry, they call it, pay yourself first, But it does very little Tell that to somebody without articulating the benefits behind it and actually getting them to do it. It's one thing to tell somebody to do something in a meeting, but is there a way for you to actually see them put that in place? Can you compel them to be so excited to do that later? That's the art of articulating a recommendation that actually happens in reality?
Chase Peckham:Well, it's interesting you say that, when, we work with people quite a bit. We often tell them, it's think of yourself as the first bill that you want to pay every month. Um, before you pay any other bills, pay your, your bill, um, to, to pay yourself and think of it almost like it's coming out like a 401k or anything else that you put money away for, that comes out of your check, right? And then live on the rest. Uh, all of a sudden you've got a nest egg that you've kind of forgot about you. Weren't doing it, uh, by thinking about I have to put this money away every month. Um, I love what you, what you mean by that. Cause people can still have goals, but they don't have to save independently for those goals. Right?
Paul Lim:Yeah. And it's about, again, it's about making a solid plan that is not dependent upon your own individual willpower. That's the idea behind it. The idea is to make it so that it's, it's foolproof, you you've planned for the contingency, which is that I'll be too tired. I'll be too busy to address that particular thing. Just plan for the worst, assume the worst is going to happen. And that way, when the worst does happen, the goal still gets accomplished.
Chase Peckham:You mentioned when you sit down with, uh, people, and I think this is something that does not discriminate against. So the socioeconomic ladder, whichever end that you might be on, but obviously some people come to you and they have debt credit card debt. What have you, how do you work with people or discuss with people on about how to dissect what to payback first? Because becoming whole isn't just about saving, right? There has to be, depending on where you are, you have to come up with a game plan of some kind.
Paul Lim:Yeah. I mean the academic approach is to basically take whatever amount they're paying towards dead and redirect it towards highest interest rate and things of that nature. And then, you know, Dave Ramsey has another thought on it where you pay off the smallest one first and you do the snowball effect and this kind of thing. And that's fine. Those things are true, but you know, there's somebody else that talks a little bit about like small victories versus big victories, little wins versus big wins, things like that. Um, and I think that comes from a personal finance guru Rameet and he's a, he's a really good guy. But the, the, the idea behind that principle is to say, don't make little moves and hope that the little moves are going to make a big difference in the long run. You should take drastic action and focus your intent on giant items that really are gonna make a giant difference. And
Chase Peckham:Yeah, I would imagine that you also run into a retirement. A lot of people, they might put into a 401k or 4013b, or whatever, have you from there, there, uh, companies that, um, set up retirement plans and have no idea what to do with them. How often do you run into that? Where people are just spinning their wheels and don't even know what they have.
Paul Lim:It happens all the time. It's, it's more common than it isn't and it's not even their fault. The the disclosure documents that are given to a lot of these plan participants, they're like a novel, and you don't even know which parts are important, and which parts are not. And the truth of the matter is that someone who knows what they're looking for can spend probably 15, 20 minutes looking through just the right paragraphs that contain just the right information. And then you can explain it to them in ways. That totally makes sense. So, for example, if you're explaining an employer match, you say, let's pretend you have a magic box. And every time you put a dollar in the magic box, another dollar appears right next to it. How many times would you do that? And they say all day long.
Chase Peckham:Always.
Paul Lim:said, well, that's an employer match, but here's the thing about your company's plan. The magic box doesn't work forever. Here's the way it changes on the first 3% of your income, the box doubles your money, but then once you hit about 3% of your income, once about 3% of your income is in the box. Now it changes now that next dollar you put in only 50 cents appears right next to it. And that's going to continue for awhile. Once you've put 5% of your salary into the magic box, it stops working. So once the box is filled up and the box is basically 5%, your salary, no more magic happens. So the magic goes away, but Hey, wouldn't it be really smart for you to continue to put money into that box until the magic's gone. Right? And then that, that is visual. That's understandable. People can realize the importance of having something like that. If you use examples where you say dollar for dollar, you know, and you're talking about, Oh, it goes into your pretax bucket and this, it doesn't mean anything to people in the same way, as an example, like from a fairytale would. And that would move people to imagine themselves having this thing and using it. I mean, the, the thought of a story that's crafted, like that almost makes the listener excited to get that box. Like, where can I get that box? Sign me up, you know? And so That's, that's amazing.
Chase Peckham:They may not even realize they have it.
Paul Lim:Yeah. Yeah. And you explain that to them. He said, well, I had no idea. And it says, well, it says it right here in this paragraph, but it just says it in really weird language.
Chase Peckham:So expand on that a little bit. You, you, you just piqued my interest for a lot of people because you can w let's just take a, your typical 401k. And the law says that you can put into your 401k up to 15% Tax-free right. Or pre-tax, well, the, really the, the number is a defined figure. So in this year, it's$19,500 right now for somebody making 195 grand. That's 10% to them. Okay.
Paul Lim:Right. But for someone who makes 19 five, that's a hundred percent to them. So it's not necessarily, percentage-based, it's really more numerical it's defined. So, um, if you're describing that example to somebody and, and you're, you're explaining to them, you just say, there's one method of contributing to the box. You get a tax deduction, but you pay the taxes later. And there's another version where you don't get a tax deduction today, but you never pay taxes on the money again. And then that's the example between after tax pretax contribution. And you will explain it by basically saying you you're, you're putting money in a time machine for your future self that's what this is about. So what you can do is you can either put the money in and change. The present problem is you're gonna have to pay the taxes in the future.
Chase Peckham:And who knows what those taxes.
Paul Lim:knows, what those will look like, But there's another version where you can change where you can not change the present. So your taxes don't change at all in present day. But then when you take the money out of the time machine, in the future, no taxes at that point in time. So in that way, you're changing the future, right? So you just give them the example. You pretend like they have their own money time machine. He said, well, there's two settings on the time machine, you can either change the present, or you can change the future. You can either reduce the taxes this time, or you can reduce the taxes in the future time. And that's an example that would give them a very clear choice as to what they want to do. And then there's additional consulting that goes with them to figure out the nuances and which one of those makes the most sense. But at least that's a quick way to explain to them. The dynamic
Chase Peckham:A lot has been discussed, where we obviously are in the middle of, of COVID 19, we were in a pandemic and a lot has changed with yeah. A lot has changed with, um, you know, the stock markets are so all over the place, especially when this first happened. Um, and we had run, we'd gone through, uh, a crash, so to speak in 2008, um, where things, now, I'm not talking about the high end, but for people, your typical person that you tend to work with and, uh, at our opportunity clinics that have those 401ks that have those retirement plans that they're just putting away at, right. They're not necessarily jumping into the market and they're not, you know, they don't have their broker doing stuff all the time. I'm talking about for your standard. You know, probably like most of us that just, we have our retirement accounts, what do we do in a situation like this? Do do you just, gosh, I got to take a look at what I've gotten. Maybe pull it, or do you just kind of go with it.
Paul Lim:You really have to reframe the entire way that stock market investing has already been presented to the public, because the way that it is presented to the public, through movies or through TV shows or people like Jim Cramer or items like that, it makes it sound like it's this tactical game where you're supposed to buy and sell and get in and out and do major moves back and forth based on what you think is going to happen in the future. And for most people, that's a fool's errand only because of the fact that they just don't have the ability to watch it all day long. Most people work during the day. So if you do have to make some time sensitive action, how's that going to happen when you're at your job, doing your thing. If you have a 401k, that sort of strategy is impossible. They're mutual funds, mutual funds get priced one time at the end of the day, because there's so many moving parts within that fund itself. So you could never price those things in real time. It doesn't matter if you place a sell order. First thing in the morning, or right before the bell rings, you're gonna get the same price they're priced at the same time. So the ability to time in most retirement plans is not existed for the most part. So instead, what you have to tell people is you have to say, it's not a game where you're trying to win by taking action, which is the way that pretty much every video game is illustrated. It's the way that dramatic movie scenes and TV shows are written. And that's just not the way it's supposed to be the way you're supposed to view it is. You're supposed to view owning stocks and bonds in the following way. You say to people, what's the best kind of income. And the answer is residual income. You see typical income is where you're trading hours for dollars. Most people are kind of in that paradigm, you have to trade time for a specific amount of money. Now that's hard because if you want to make twice as much money, you got to work twice as much time. Impractical, not scalable. You can't really grow that thing. Residual incomes the best way. If you own a business, if you own the real estate that pays you this, if you own shares that pay dividends, those are all examples of residual income, where it doesn't cost you X amount of time to make X amount of money. It's completely scalable. And instead of going out and starting your own business, that makes money for you while you're sleep. Why don't you just buy a little piece of a business that already exists? And then you can own a piece of that thing you see, because if I like Apple, let's say, and I buy a share of their company. And over time, all the employees of Apple go to work, make better products and services. And my little piece paper that represents my ownership becomes 5% more valuable. I made that much money. And how many hours did I spend going into the office? Chase working for Apple.
Chase Peckham:Zero.
Paul Lim:Zero. You spent zero hours going in to make products and services for Apple yet all those employees in Cupertino made your piece of paper more valuable. Does that make you the boss somewhat.
Chase Peckham:Of your own kingdom sure.
Paul Lim:How nice would it be to be the boss of a company where all those employees work to make your little shares more valuable in the future than they are today? It's very appealing. When you say, when you say it's easier than starting your own business or trying to compete with something, that's better out there.
Chase Peckham:A bit.
Paul Lim:Alright, that's what owning a stock is. And instead of doing something where you have to then ask the question, well, which, which company do I get? Do I buy, do I buy this company or that company you're, you're killed by the paradox of choice, there's ways for you to purchase entire indices that cover whole industries that cover whole parts of the market. The most common ones say S and P 500. That's just the 500 biggest companies in the United States. I doubt most people could even name the top hundred companies in the United States, right? Imagine owning something which derives its value from the performance of the 500 biggest companies. Now, if any of those 500 companies do really well, you'll capture that gain. But if any, one of those 500 companies crashes, you don't have all your eggs in that basket, so to speak. So it's a way for you to cast a wide net while at the same time, spreading out your risk. It's pretty much one of the most practical ways to go about owning stock when you don't want to pick. Most people don't want to pick it's too much of a responsibility. It's too much of a burden. Well, there are great ways for you to just own large portions of the market that comprise huge swaths of ownership. And that way you take the guessing out, you're also mitigating your risk at the same time.
Chase Peckham:So you're owning a bit of everything.So to speak.
:Yeah. And all you have to do is own multiple indices, and then you can pretty much own it.
Chase Peckham:So that, so when you talk about mutual funds, and I know that there are different types of mutual funds, uh, how do people go about deciding, you know, which portfolio or mutual fund they're going to go with?
Paul Lim:You know, when you compare two mutual funds from different companies, that'll cover the same category. You chart them over 20 years, they're going to kind of end up in the same place. You know, the performance between maybe the number one and the absolute worst sure. You're going to see a big difference between the performance of those two. But if you're going to use mutual funds that are within the same basic category covering the same basic thing, the economy itself is mostly going to drive the, you know, the performance of that particular sector, whether it's big U.S. Companies or small international companies, or this type of bond, it, the sector itself is going to determine the performance of that fund more than anything else. So for you to agonize over Coke or Pepsi, it's a little bit, not a productive use of your time. What you should instead focus on is how can I be a great saver and just make it so that I have lots of money with which to work. And then the product is just a means to an end. The product is not the end. Really the performance of that part of the world is going to be the ultimate determinant to how that goes. And I usually, should never own just one part of the world. Either. You should own all parts of the world. That's the nature of the diversified portfolio. The diversified portfolio is pretty much the only replicatable completely proven. Great deal over time. It's amazing because there's virtually no serious financial company that disagrees with the philosophy of the diversified portfolio. And you look at all the arguments we have these days between everything between everyone. No one can agree on everything. People are polarized on both sides of almost every issue that is out there yet everyone in the financial industry agrees that the diversified portfolio is a good idea. That's kind of shocking. If anything, the way they compete is they'll say, Oh, well, our diversified portfolio is better than their diversified portfolio. That's what they might say, but there's no one serious that would say, Oh, don't do that diversified portfolio thing. That's a stupid idea. No one says that
Chase Peckham:A lot of people are afraid of the cost when working with a financial planner, what are the different ways that you can work with a financial planner and how you might pay them or how they get paid?
Paul Lim:Yeah. Some people, especially the do it yourselfer investors would rather pick their own funds and do these kinds of things and, and talk about, uh, how they, they like managing their own. You'll meet that a lot with the engineers. You meet a lot with like the, uh, very, uh, intelligent professional. Some of them just don't want somebody managing their portfolio for them. They take interest in it. They don't find it to be a burden. They, they enjoy learning about a lot of these.
Chase Peckham:That's not common though.
Paul Lim:It's less, it's less common, but they want somebody to help them with a specific project. If it's something like that, project based, sometimes people will just pay a flat fee, more common way to go Is four. You to basically render that advice mostly around the persons as goals, but then to monetize it by managing the assets for them. And
Chase Peckham:So if they win, you win.
Paul Lim:Yeah. Absolutely. And, and, you know, um, a lot of the personal finance gurus will put out information where they say, Hey, you know, if you have a portfolio and you increase the expenses by 1% over the course of 30 years, and we assume that you contribute this much, well, that equals hundreds of thousands of dollars over a lifetime. And that is true. That's just math, right? But it goes the other way too. If an investment advisor can squeeze out an extra 1% for you every year, over the course of 30 years, because they did things you wouldn't have done by yourself, that also amounts to hundreds of thousands of more dollars per year. The advisor should not be a net loss to you. They should be a gain. Their, their, their performance should more than make up for the amount that they are charging you. And it could be even occurring in down markets. Maybe they caused you to lose less than you would have lost. If you had done things by yourself, you know, coronavirus is a perfect example of that. How many people wanted to panic sell in the middle of March? If you had done that, there was no time during this year, you know, as of the date of this recording at which it was obvious to go back into the market, there was no day when it was worldwide news, that it was a smart idea to get back into the market. It was a slow creep back up to its initial levels. And again, I'm saying that as of the date of this recording, but if you had panicked sold and you had delayed getting back in for that period of time, how much did you lose as a result of how many losses that were just on paper? Did you manifest in real life because of your decision, every investment advisor who had a solid philosophical underpinning discourage their clients from panic selling, they said, don't do it. It's just, it's, it's a buying opportunity. Instead is the way you should look at it more than anything else. But the worst thing you can do is lock in loss. This is something that is very specific. We all know what's causing this. There's a defined period of time when this will no longer be around. Yes, the, the expectation of future earnings for these companies is going to be greatly impacted. But that doesn't mean you take someone's offer to buy your shares from you at such a low number. All you have to do to not manifest a loss is you reject an offer to sell at a price. You don't like, you just reject it. You do nothing. And as of the date of this recording, if you had stayed the course, you you'd pretty much be back to where you were for the most part. And that's an example, a perfect example of how advisors can bring so much value to their clients just by articulating that sort of philosophy, uh, as an example.
Felipe Arevalo:No, I was going to say, that's something where you could see it in, in the personal finance, uh, Twittervers Twitter world where people kept saying, it's okay, don't sell. Don't sell. Don't sell. And, and yeah, I had people, you know, in the office or something say, Hey, have you looked at your 401k or. Not even gonna look at it, because you're, you know, you're not looking to sell. Cause like you mentioned, that's when you truly see the loss is when you make the sale.
Chase Peckham:That's right.
Felipe Arevalo:As long as you don't sell, then you haven't lost any money. You still have the shares, the same amount,
Paul Lim:The shares, the price that's expressed each day. It's not necessarily a daily valuation of the company. It's an offer for what somebody else would pay you to take that share away from you. It's not necessarily a future projection of what that company is going to be worth at your retirement. That's an unknowable number. So for you to equate the price you're seeing for a company today versus the price that's going to be worth when you choose to sell it in your old age or when you need to pay for that wedding or when you need to pay for junior's, college fund or whatever it is, that's a totally different number and it's unknowable. So it's important to just realize that you can mitigate the effect of a decreased share price by rejecting the offer. And that's totally within your control every day.
Chase Peckham:It's funny. It's interesting. I should say that through our, the opportunity clinics it's to watch people walk out of those opportunity clinics when they're finished talking with our great volunteers, um, yourself and so many others that we have just kind of the smile and the kind of relaxed look of their face of pure, just understanding kind of where they are now. Because so many of us, so many of our population, we just go to work, we pay our bills, we put our kids through lessons. We put our kids into sports. We, you know, money's going out. And a lot of times we just don't realize where it's going. And so the plan of actually executing it and following it is very hard to do when you don't have one. And so everybody think about this, just the idea of you're much more comfortable when you have an idea of how your day is going to go, right. It would be a lot more uncomfortable when you wake up and you're just like, okay, well what's this day going to bring that's a little bit more disconcerning, right? People are uncomfortable with the unknowable. So when they walk out of that room or they walk out of that meeting with those individuals, just the kind of more relaxed, kind of smirk little smile on their face is really unbelievable.
Felipe Arevalo:People look a lot happier, a lot more relaxed if they're filling out like a post event survey than they were when they registered. Um, and the feedback is over overwhelmingly positive, uh, from people as they're leaving, you know, and they always say, you know, Ooh, when's the next one? So that I can tell my sibling, son, daughter, mom, dad, friend, significant other whoever, uh, to attend because I got so much out of it.
Paul Lim:Well, that's great, guys. I'm really happy to hear that kind of feedback. It's very encouraging.
Chase Peckham:Most organizations and people are not allowing people to see each other face to face. And that has put a strain on our clinics in 2020. Um, but I can tell you that, uh, Paul and we have gotten together and we do have the opportunities to put together, um, an opportunity clinics virtually. We are going to do that in October. So you can meet with a financial planner like Paul and many of other financial planners that are volunteers with the San Diego Financial Literacy Center. Just you two one-on-one in a, uh, from the privacy of your home.
Felipe Arevalo:It's on, it's on by the time this episode airs, it is on right now. So you can go on sdlc.org/online to register. We'll set you up with the, uh, match you up with a Certified Financial Planner who can help you out answer these questions for you. And, and yeah, you don't, you know, adjusting to the current world that we're in. You can visit and talk to a, a Certified Financial Planner from the safety of your own home, uh, virtually. Um, and, and it's, it's great. It's there, uh, thank you to our volunteers who are taking the time right now to meet with people, uh, you know, but it is available and it's something that we highly encourage. If you have any questions. And if you have just one or two little questions, it's okay to register and have those questions answered.
Chase Peckham:Paul, how do people, if, if they're just interested, just because they heard this podcast and they have never worked with a financial planner before, or they're looking for another one, how what's the best way to get ahold of you?
Paul Lim:Well, uh, our company's website, uh, is wealthcg.com. Uh, I have to just mention to you that I really am operating as a volunteer here for the San Diego financial literacy center, but I'd be remiss not to mention the great work that my company does and then the wealth consulting group. And that's where I spend a lot of my time there. You know, that website has a lot of informational material here that applies to a lot of people, a lot of resources. So that would be just be something I've mentioned just as a quick promotion for my firm. I really value the work that we do. The coworkers that I'm with, they're all very high quality.
Chase Peckham:Well, I know that we at the SDFLC can't thank you enough for all the volunteer work that you do with us and making our community a better community, a more financial literate community. So thanks very much Paul.
Paul Lim:Thank you guys for having me.[Inaudible].