 everyone. Welcome to Money Talks. I am your host, Shonda Park. And I'd like to thank you for joining us today. April is National Financial Literacy Month. And on my last show, my guest was Rayan Ischevez. So we discussed the importance of financial education. She shared where to get it, how to get it, the importance of choosing to become financially educated, and just using that and applying that in order to build up a strong financial foundation. So I have Rayan Ischevez back in here in the studio today because we went over the layers of the financial foundation. So starting with proper protection and having that protection in case of unforeseen events. And then we moved on to debt management and teaching people that they can get out of debt in half the time or less to become debt-free. And then we moved into emergency funds, the importance of having three to six months of your income if and when some kind of emergency happens. And we touched a little bit about investments. However, we want to really expand on that today because it's such a hot topic. So welcome, Rayan. Welcome back to the show. Hi, Shonda. Always great to see you. Thank you so much for this opportunity again to be on your show. Thank you. I just want to continue with our conversation about financial education from the last time that you were on. And because investment is such a hot topic, and most people will ask, well, where do I invest? How do I invest? Why should I invest? What's your take on that? And how do you answer these questions? Yeah, so that's actually a great one. So if you look at the slide, we do have the financial house that you summarized for us. So again, proper protection. So like building a house, you want to build our financial house from the ground up. That's why we always say proper protection, meaning income replacement, right? And then debt management, emergency fund, and investments. And so we actually get that question a lot. Actually, Shonda, it's quite common. People always ask, where should I invest my money, right? And I think when it comes to investments, people always think more specifically about investment vehicles, right? So right now, like the hot topic that you hear people talk about is investing in the stock market, or you hear a lot about cryptocurrency, or that's right. Yeah, that's a new one, right? That I mean, NFTs, you talk about metaverse, you put, you know, there's tokens, coins, there's so many different investment vehicles, right? So I think a lot of times when people think about investment, which is the last layer of our financial house, they always think about specific types of investments. Whereas, you know, for us, our organization, we really want to focus on again, going back to the financial education, right? Because when we talk about personal finance, it's exactly that. It's personal. So when you ask, why should I invest? Well, everybody has different goals, different objectives for why they're investing, right? And it could be a short term goal, like over the next few years, they want to be able to save for a down payment for their home, they want to buy a car or whatever their or long term goals like retirement, right? So there's different reasons why people want to invest. Now, what we want to share with people is not just thinking about your investment vehicle, but really understanding some of the core concepts that we teach. So if we could have the slides show the wealth formula. So when it comes to investing, I think this is one of the core concepts that we really want people to understand. So when I first found out about the wealth formula, I was like, oh my gosh, there's an actual formula. Like, isn't that great news that there's actually a formula that many of us can follow to be able to build wealth, right? Oh yeah, the children's book. They should create one, put it in a children's book. And that's the first book that we should have our children read when they first start reading. Oh, yeah, absolutely. Because, you know, like when you look at this formula, right, when something on one of the concepts on a formula is time. So the formula, the wealth formula says, we need to have money, we need to start saving money. And then, of course, time, time can be our best friend, or it can actually be our enemy too, right? Depending on how it's used when it comes to building wealth. And then we look at a positive or negative rate of return. So when we talk about rate of return, we're really talking about interest rate. And the reason why we say positive or negative is because, you know, again, we have to ask ourselves, where are we saving our money? Are we getting a positive return on our money or a negative return on our money? Are we actually making money or losing money, right? And like, and then we have to also factor in inflation, right? So you see minus inflation, minus taxes. And these two, you know, inflation and tax, we can't really control. However, if we understand how it impacts our wealth, we can plan around it, right? I know last time we talked about inflation, right? At the last show, we talked about how high inflation is right now, right? We're at an age of 8.5. Yeah, all time high. And so, you know, I actually just came back from South San Francisco and I thought our gas prices here in Hawaii are pretty high, you know, like upwards like $5 plus. When I was in South San Francisco, actually took a picture of it because I wanted to show everybody, but their gas prices are like $7. And so I know. So, you know, so that again, gives us an idea of inflation. We know that, you know, sometimes goods and services will cost more, which means less purchasing power. So then you can really see how that can really take away from our ability to build wealth if we don't pay attention to it. Because when we look at, well, what's the rate of inflation and are we beating it with the interest rate that we're getting or the rate of return that we're getting on our savings and investments, right? So again, we can't control it, but we can plan around it. And then of course, we talk about taxes too, right? So, you know, we can't control the tax rate to however we can control how our money is taxed, which I know we'll kind of cover a little bit more a little later today. So that's a wealth formula. Awesome. And we both know that money, of course, we have to start there and money and time. So we understand the importance of that. And I started working at a young age, I want to say I was 15 and had I had this wealth formula, maybe my mindset would have been different. I don't know. It's hard to say. I didn't grow up with much. So my very first job being that my parents weren't able to afford a lot of things that I wanted. Of course, they provided for my needs. However, a lot of things that I wanted, they couldn't afford. So when I got my first job, I basically spent all my money because now I was able to afford all the things that I wanted. So I didn't start at a young age because I didn't have this information. So I didn't have that money saved and invested over a long period of time. So what are your thoughts on that? And so I'm really glad that you brought that up because the first two things on the wealth formula is money and time. So you started working in high school. So did I actually started working in high school as well. And I think it's pretty common. People start their first experience of money is earning it through a job. And again, like most people, we don't really grow up with having financial education. And so when you look at those two things on the wealth formula, right, it won't work if you don't have one or the other. So for example, like you said, you started working in high school. Can you imagine, you know, like if so you had, you were young, you had a lot of time to grow and save your money. However, if you're not saving it, then it doesn't work. Exactly. Yes. And I think like for most people, it's kind of the opposite where we think, okay, I'm going to start saving when I pay off my student loans and I pay off all my credit card debt or when the kids are grown up, you know, I can really start to save for an investment for my future. However, now when we look at the wealth formula, we're looking at, okay, well, you know, now we've delayed, right, the time to leverage time to grow our money. Right. And so now what we have to do is we actually have to save more money to catch up. Right. So you can see that one won't work without the other. Right. And then of course, in addition to that, where are you saving your money? You know, what kind of return are you getting? So it's not so much, you know, again, going back to your original question, where or how to start investing. But do we have the basic foundation and money habits to start to move towards building our wealth? Yes, exactly. And moving down in that wealth formula, can you expand on the rate of return? And can you give us an example of how the rate of return impacts your wealth? Yeah, so, you know, the rate of return is a big one. You know, so one of the core concepts that we really want people to understand when it comes to interest rate is actually how your money can double. Right. So if we look at the next slide, there's what we call a rule of 72. So this, this discovery was made by Albert Einstein. So we all know Albert Einstein as a genius. Right. And he actually discovered that if you take the number 72, and divide it by the interest rate, that's how long it will take for your money to double. Right. So when now we talk about understanding how money can work for us, this is really the greatest. This is understanding rule of 72, how interest is compounded. This is how money is working for us. So in this first example, right, 72 divided by 6%, that means that every 12 years, right, our money nearly doubles. Okay. So again, let's say, for example, Shonda, you were, you know, you put away, you earned $10,000 at a summer job, right, in high school. So if we, if we could take you way back in high school again, right, so imagine if you were to save the $10,000 that you earned like in your summer job. Yes. Right. And let's say, let's say even younger than some, you're, you know, I say you're 12 years old, right. So now fast forward 12 years later, I know, younger than high school, right. And for some people, they do start, you know, working. Yes. Yeah, that's right. So let's say 12 years old, 12 years later at 24 years old, your money would double. This is assuming that we don't add any more to it. So now when you look at this, your 10,000 12 years later become 20,000, over 20,000, right. And then another 12 years later, it doubles again. So this is incredible. Again, most times we only know how to make money work for us, but understanding how compound interest and the rule of 72, we can see how money is working for us. So now the big question is, how many, you know, 6% sounds pretty generous, right, considering, you know, you think about where typically, where do you think most people save their money, Shonda? I would say in the bank and, you know, some, sometimes there's people that that's the only place that they save. And even for when they have kids, right, the kids have their huge first birthday party, all the birthdays and Christmases after, and a lot of them, they just saved in the bank. So I was just thinking about this because of the rule of 72 and the interest that, that the bank pays maybe about 0.01, 0.02. But say, you know, just to make it for easy numbers, say the bank pays 1% interest. So it would take that money for the child to double in 72 years. And how many 72 years does a person have, right, to wait for their money to double? Yeah, exactly. Right. So, you know, just understanding this super simple formula, right, we can see now, okay, we can pay a little bit more attention of where we're saving our money. Right. So, you know, if we're only saving in the bank, then we can expect that, okay, every 72 years, our money will double. And so, you know, I would, I always tell people, okay, wherever you're saving your money now, take a look at, well, what interest rate are you earning? Right, because the higher the interest rate you're earning, the faster your money can double. So, like, if you're, if you have, you know, an 8% account, your money will double every nine years. So, again, same example, your money has an opportunity to double one more time, right, versus when you look at every nine years, or even, you know, 10%, every 7.2 years, your money would double. Right. So, you know, this is, I always tell people, look at where you're saving your money, and then take the rule of 72, and divided by what you're earning. And then you can really see how your money is working for you. So, when you look at the well formula and you plug it in, right, okay, how much money am I saving? How much time do I have to save? And, you know, what kind of return am I getting? Okay, and, you know, and as we know it, yeah, and no, it know exactly how long it will take for your money to double, because that helps people to plan for their retirement. Absolutely. And so, you know, we really want to utilize, you know, these core concepts to apply to our finances, right. And because interest rate is so important, there's other ways that actually where interest rate is involved, right. So, can you think of anywhere else that we have? Yeah, credit card, loans, mortgage, you know, it works the same. I mean, against us in that way, but you can use the rule of 72 to figure out how many years it's going to take for your debt to double, right. And when you talk about interest, you know, you use certain examples of 10%. We would be lucky to find a credit card with a 10% interest. So, we're looking at an average from 18 to 24%, right. How many years would it take for your debt to double if your credit card is at 24%. Yeah. So, you know, 72 divided by 24, that means that every three years, your debt would double, right. So, again, looking at why we say positive or negative rate of return, let's say, you know, you're actually, your debt is earning a higher interest, right, which is really impacting your ability to build wealth, because, you know, all of that, all of your money is going to take forward your interest, right. So, you know, money can work for us, or it can also, or interest rate, I should say, the interest rate, depending on how it's applied, can work for us to help us build our wealth, right, or it can work against us to really deplete our wealth. Yes. So, the next layer, let's talk about inflation in terms of the wealth formula. So, you know, when you look at the wealth formula, right, again, you want to make sure that wherever you're saving your money, you want to make sure you're at least building inflation. So, I know you mentioned, you know, you read somewhere where, you know, 8.5% right. Yeah, that's crazy. So, it's kind of the same thing that can erode our wealth, right, when it comes to having negative, or our rate of return on, it's not our rate of return, actually, we're making others wealthier, right, because the interest rate is being paid somewhere else. But we want to make sure that the interest that we're earning at least, you want to beat inflation, right. So, you can't control it, but we have to be aware of it. We have to understand that it's so important to pay attention to where you're putting your money, because of things like inflation. And so, you know, I just want to give you a quick example too of, you know, really the cost of not being aware of our finances, right. I think I shared with this with you the last time Shonda, you know, I have two very specific client examples that I just want to share. This young lady, very intelligent, very brilliant. She's from Hawaii, but decided, like, you know, most of all, what you students, they want to go off to the mainland and experience, you know, going to college in the mainland, right. And so, she went to, she ended up going to school in the mainland for one semester. Her initial loan was $10,000, right. And, you know, fast forward. And so, college didn't work out. She only ended up going to school for one semester. And four years later, actually, her student loan debt was close to $30,000 because of the interest that accumulated over time. So, it tripled in four years. Her debt tripled in four years. Yeah. Yes. And, you know, so just being unaware of, like, you know, her finances and not even knowing that that was accumulating over time, and which, you know, brings me to my next example too. Another family, you know, they're in their retirement stage, right. So, they're planning for their, I'm sorry, they just retired. So, they're planning, you know, their, their, this season and their life, and they wanted to make sure that, you know, they plan properly. And so, you know, one of the things that we didn't touch up too much on was estate planning, right. So, when we look at the financial house, again, the bottom layer is proper protection. So, we talked a lot about how we can replace their income. But also, part of that protection is estate planning, being able to protect our assets. And so, when they were doing their estate planning, part of that process was, you know, their title report. So, one of the things that they realized, you know, with, when they pulled their title report was that there was actually a lien on their property, right. So, for debts that they thought were taking care of years ago, you know, because sometimes we do our best, right. We work hard. We save for our future. Sometimes, you know, we come into situations where life happens and, you know, we need a little bit of help. So, they actually went through like a loan modification process. And, and because during that time, they were struggling financially, they hired, you know, a third party company to help them take care of their debts and to modify their, their mortgage loans. So, long story short, what ended up happening was it was not taken care of, you know, and a lien was placed on their property. And, you know, when we talk about being able to protect your assets, if we were not aware of what was happening, they could have gone years and the debt that on this property would have continued to balloon. So, their original debt was about 20,000. And now, a few years later, for about 45,000, right. And so, what I think about their original debt, what year, I would like, how many years ago was that when they ran into trouble? This is about 10 years ago. And they, you're saying that it was a third party company? It was a third party company because they felt like they didn't know what, they didn't know what to do. They didn't know where to go. They didn't have any education, right? What was the advice that was given to them at that time? So, they were told to ignore calls, ignore letters, don't pay your bills, right? Because they were going to handle everything on their end. And so, unfortunately, again, they thought it was taken care of because their credit score is great. They had no issue until we were, they were in their phase of retiring and really doing their estate planning where they found all this out. And thank goodness, you know, now, because they were introduced to our campaign and they understand about being able to protect their assets, right? They started doing that part of the planning and that's where they found out, you know, this was happening with their property. So, can you imagine if, you know, they went years and years and years, they didn't do any proper protection with the state planning. That debt would have ballooned and it would have probably been such a nightmare, you know, for inheriting the property, you know. You know, they don't plan, especially at retirement age, they don't plan on moving. They're going to live in their home for the rest of their life. So, how much people would actually pull their own title report, right? So, without pulling their title report, they wouldn't have even known that their debt was accumulating. Yes, absolutely. So, you know, that's definitely one thing that we, yeah. So, you know, again, big on financial education and being aware of, you know, really taking a comprehensive look. So, sometimes when it comes to building wealth, it's not just like, oh, I'm going to earn all this interest and make money quick in these types of investments. It's really taking a look at everything. Exactly. And taking a look at everything, but building the wealth formula, let's take a look at that last layer, which is taxes. So, who knows what day today is? Yes, the big day, right? Tax day. So, you know, that slide with taxation, you know, we just want to show really quickly that you, you know, with this formula, again, you can't control the tax rate. However, you can control how your money is taxed, right? Most of us have tax now accounts, tax later accounts, but most of us do not have tax advantage accounts, right? So, we always tell you, ask people, where do you keep your money and how is it being taxed, right? Because although we cannot control the tax rate, we can control where our money is being taxed, right? Because we all know that tax now, like right around this time, tax season, you know, you've got to submit those forms that you paid taxes on those gains and the tax now counts and then the tax later accounts is basically just before deferring taxes for later. And then your tax advantage is really being able to control the tax rates that you pay now. It's like, if you were a farmer, Shonda, and you had, you know, would you rather pay taxes on your seed or your crop? I would rather pay taxes on the seeds. Yeah, so paying taxes on the seed is like being able to control what the taxes you pay now, because you know what the tax rates are. And you know, a lot of the conversations now is, it's not a matter of how high the taxes will go. It's, I mean, or if the taxes will go up or down, it's how high the taxes will go, right? So, you know. So tax, you know, we're not tax advisors. Yeah, but tax advantage basically means possibly never taxed, right, upon distribution. Yes, absolutely. And so, you know, I would encourage everybody, you know, again, we're not tax advisors, but taking a look at how your money is being taxed. And really encourage people to take our workshops. You know, these workshops that we have, which is on the next slide, they're, you know, these resources available for anyone who really want to expand their knowledge in their personal finance, right? So these are some of the topics we cover. And just understanding where your money is going is important so that you can allocate more money to pay down your debt faster and also build, then it kind of has that positive effect, right? Yeah. You can start to build your emergency fund. You can save more for your investments. So these are great resources that we have that we, we just want to share with everybody. Because again, when it comes down to your personal finance, every single one of us has different goals. It's just really understanding what these core concepts are through the workshop to help you really plan so that you can fulfill, you know, your long-term or short-term financial goals. Wonderful. Thank you for sharing all of that. And for everyone that joined us, thank you for joining us. And Reanne's information is going to pop at the end. You can contact Reanne or you can contact me and find out where you can get this education, where you can wear and how you can take these workshops. So please feel free to contact us. And again, thank you for joining us. This is April National Financial Literacy Month with financial education. You can learn how to go from a net worth of zero to millions. Thank you, everyone. We'll see you next month. You can also follow us on Facebook, Instagram, Twitter, and LinkedIn, and donate to us at thinktecawaii.com. Mahalo.