“Money is a tool. It's not a goal. So, when people say ‘I want to make a lot of money,’ then the next question is, ‘okay, well, if you made a lot of money, what would you now be able to do, that you couldn't do before?’” ~Joseph Okaly
(Transcript available below)
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Heidi Higgins: Hi there. I'm Heidi Higgins, and you are listening to K12 On Learning. For a short while, when I was very young, I lived near my grandparents. It was during this time I remember my first experience with money. Grandma had invited me to help her with a chore in her home, and when the task was complete she took my hand and gave me a quarter. I held it like a treasure. I knew it was valuable because my grandmother treated it as though it was.
Over the days and weeks that followed, I would help her with additional little chores and she would add more coins to my collection. I remember asking her when I would earn some real money, the green stuff. She patiently showed me that I could trade in some of the coins I had earned, and she would exchange them for paper dollars. I remember thinking that it surely did take a lot of coins to equal a paper dollar.
I am grateful for those early conversations that helped me begin to understand money, finances, budgeting, and goal setting. Our children need and want us to have these conversations with them. They need the confidence that knowing what to do with money can provide.
In our episode today I have invited Joseph Oakley, host of the Enjoy More 30s podcast. Mr. Oakley is a certified financial planner and helps advise families with their money questions. He uses his podcast to specifically educate young families on how to make their money work for them. Welcome Joseph. How are you doing today?
Joseph Okaly: I'm doing great, Heidi. Thank you so much for having me on today.
Heidi Higgins: We're honored to have you join us. Will you please share a little bit more about your background?
Joseph Okaly: Yeah, absolutely. So, I live still and grew up in northern New Jersey, and so I went to school in New Jersey and went for a degree in finance thinking that I would commute into New York City like so many people around me did. And fortunately one of my professors brought in what was called a financial planner, which I had never heard of before. And so they went through how you could actually use math and statistics and all this stuff that I enjoyed but to help actual real people. So, I was like, "Great, I don't have to sell my soul for the next 10 years going into New York."
So, I hooked up with this company that I'm still with, New Horizons. Got an internship here and almost 15 years later I've been working here ever since. I was fortunate enough to meet my wife, Lauren, at college. She's a social media marketer. And we have two awesome young kids, Avery, who's five, and Noah, who's two.
And so when we started our family and we're building things out and I'm working here and I'm learning all these things to try to help other people out there with their finances and with their money, I just did kind of the same stuff for myself. If I'm learning how to help John and Mary, I'm going to apply those same principles to me. So, I went from single to married to having kids, every new life step created new financial challenges, new goals.
And as I was learning to adapt to those with my training, I realized that the people around me were not at all ready to deal with that stuff. And I was one of the few people that had the knowledge and the resources just by complete luck to be able to help myself. And when I looked online and I said, "Okay, what is out there for young people, young families in particular, middle class people that don't maybe have the knowledge that they should, what is out there for them?" And when I went onto my podcast app, I found absolutely nothing.
There's 100,000 different podcasts out there to help you if you're about to enter retirement, but for when you're young and you can actually make a really big difference and make life easier for the next 30 years, there was nothing. So, I felt like I needed to fill that void, and that's why I created my Enjoy More 30s: Family Finance podcast, to try to help all those people out there that don't get the advice and education that they really should have available to them.
Heidi Higgins: That is excellent. Where did you start that interest in being able to work with finances? Where did that begin for you?
Joseph Okaly: Really, like a lot of people, I think they look to their parents to what they did. So, my father was kind of a business guy in general. And so I decided to do finance just because. So, I never had a clear direction of, hey, I'm going to be a financial planner. Because, like I said, I didn't even know it existed until college. But I'm just so fortunate that this is where I wound up and the direction that I went into because helping people with their money and helping them really do the things that make them happy in life, it just gives me so much energy. It gives me so much reward for my job.
If I was just behind a computer screen helping some large company make even more money or have another yacht, that's not so fulfilling for me. So, it's nice working with people that I feel like I'm like, that I relate to, and seeing them just be more confident and calm and secure in their situation to go out and make life more enjoyable today for them and their family. That's all that they have to worry about. If I can help them do that then I've done my job.
Heidi Higgins: You referred to that as a financial mindset.
Joseph Okaly: Yes, I'm very big on the mindset that you have around money.
Heidi Higgins: Let's talk about that. What should a family keep in mind?
Joseph Okaly: Yeah, so a lot of people don't get taught the mindset part of money. You think of money and you go to maybe investments or something like that. But really money is a tool, it's not a goal. So, when people say, "I want to make a lot of money," then the next question, okay, well, if you made a lot of money, what would you now be able to do that you couldn't do before? So, [inaudible 00:05:40] now I can buy a house with a big backyard to play with my kids or now I could stop doing a job that I don't like. It leads to something else, some goal that has nothing at all to do with money, it has to do with living.
And so we try to help our clients see that it's not about having a large net worth on a piece of paper. It's about trying to enable yourself to be in a position to do more of the things that you want to do in life that make you happy, and less of the things that you don't really like doing in your life. So, that's really the whole goal to focus on. It's not money. Money is just a tool that can help enable us to do those things.
Heidi Higgins: Joseph, what are some steps a family can take to develop that mindset and make a better life, a better financial life, for themselves?
Joseph Okaly: Starting is always important, and also hard. The money mindset is really the first step, and then once you've kind of identified, okay, here are the things that I want to do, now you can start going into developing a plan. So, sometimes when you hear people say, "I want my money to work for me," it's kind of like I want some good investment tips. But that's kind of further down the road, that's after you have the plan set up and established.
So, where I advise a lot of young families to start is where maybe not as the most fun, but is to deal with different forms of protection. So, if you think about your home, you probably have to have homeowners' insurance. That's part of the requirement, and you have that because if your home were to burn down to the ground, you would probably not have the money to be able to build it back up again. That could financially devastate you and your family. That could wipe you out.
So, those are the types of things that we want to make sure we're always protecting and unfortunately things like life insurance and disability, so if you get disabled or if you were to pass away, we're not forced to get those. So, you might have a little bit through work or maybe you chose to get some on the side, but that's really where you need to start. Make sure you protect your family in the case of a catastrophic event.
The washing machine might come with an extra warranty if you pay an extra 100 bucks, but that's not something … A washing machine breaks, you'll be able to fix it probably and go on with your life. So, I really encourage people to start with that protection. If you think of building a house, you start with the foundation. All these forms of protection are what you want in the foundation of your financial house so to speak. So, that's the first main one that I go through with people with steps to take.
The second main one that I go through is make sure you pay yourself first. I'm sure everybody right now that's listening to this does not always focus on that. You have a lot of expenses in life. But I'm sure you work really, really hard for your money. We all do. And so it kills me when I talk to people and they're giving all of their money away to other people every single month. They give it away to the grocery store. They give it away to the mortgage company. They give it away to the cell phone company. All these people. You work really hard and then you give all this money away.
And so I like to say, at least 5%, ideally 10% to 15%, of the money that you're making, pay it towards yourself, save it towards yourself. Out of everybody in this world, you and your family are the most important people. It's kind of disrespecting yourself not to give a piece of your money to you.
And I know it's hard. I know it's not always easy for everybody in different scenarios. But the example that I'll use is if your child got sick and they needed a medication that cost $50 to $100 a month say, you would come up with that money. I have two kids. I would come up with that money. I don't know where I'd find it, but I would get it. And so treat yourself with kind of a similar level of respect, a similar level of urgency. It doesn't have to be $1000 a month that you're saving. 50, 100, build up over time, anything that you put away towards you is a step in that right direction.
Heidi Higgins: Can you give us some hints on how to involve the children in that process?
Joseph Okaly: Kids aren't going to be taught anything at school from what I've seen more times than not. Now, you guys may have some certain resources that may be against the trend, which is phenomenal. But most people here and in other countries really don't get too much financial literacy education.
So, what you can do to involve the kids is actually just talk to them about money. Money can often times be this taboo sort of a thing. It's not appropriate or you don't talk about money at the table. Mom and Dad handle that, you don't have to worry about that. And what you're really doing is denying them an education. You're denying them a framework to build upon.
They're going to come up with some mindset on their own. It might be a music video that they see online, it might be their friends, all sources that you probably don't want influencing their mindset when it comes to money. And so they'll come out, and when they get a job they're going to be maybe spenders or savers or just afraid of dealing with anything because they have no idea what's going on. So, it's on you to kind of develop that.
And it doesn't have to be even a formal coursework. If you involve them with, hey, here's how I pay the bills online. Here's why I use credit cards for this instead of this. Mom, I really want to buy this at the store. Well, we're going to try to limit ourselves right now because we have this really fun summer vacation. So, showing them the relationship between money here versus money later. These are all really easy things that people can do that they tend not to do because we feel like money isn't appropriate to maybe discuss with kids. I would recommend the exact opposite of that.
Heidi Higgins: I like the fact that you just say, "Just include them in the conversation." Quick personal story. I have six children, and five of them are daughters. And they have long hair. We were discovering that by the time they blow dried their hair, they showered, the hot water and the electricity bills were going crazy.
My husband decided that he wanted to help teach them something. So, he set up a separate account, put a budget to the amount in for the power bill and the gas bill. And then he turned it to them to pay online. So, they would take turns and rotate between the month to pay a bill online. And if they stayed within budget, that was great. But anything that they saved could go into a special account for travel.
Joseph Okaly: Oh, that's fantastic. Yeah.
Heidi Higgins: Talk about motivation. It was remarkable. If they went over, well, of course that came out of that travel [crosstalk 00:11:39]. And such a motivating opportunity, but it taught them the real value of money because they could actually, like you said, pay yourself in a way that they hold back just a little bit, pay yourself before you're giving it away to everybody else.
Biggest difference we've ever seen in our power bills were during those years when the girls were taking care of them. And we saved enough in a couple of years to go to Disney World. And it was just a remarkable experience because they earned it themselves.
So, I love involving families. I love involving children. Why are finances for young families different than someone that's a little older?
Joseph Okaly: Yeah, so, first of all, I love that story that you went through and I love how it ties it to something that's not just, oh, they got to keep the extra. The extra went towards something that was a living life kind of a thing, and it was with the family. So, that's fantastic.
When it comes to young families versus people in other situations, the main differences are, one, young families kind of expect that they shouldn't know what to do for some reason or they don't have resources to go to. You might have I'm supposed to have a 401K, I checked that box, or I'm supposed to have life insurance. I have some, I don't know if it's enough, I'll check that box. What you realize is that you still go to bed at night feeling anxious and not comfortable because even though you're checking those boxes, you have no idea if they're sufficient enough. And, like I said, because there's no education, the only other option would be to go to some kind of a professional resource. In our society, unfortunately, most of the professional resources are geared towards people already about to retire because that's where most of the assets are built up. And in school you can't learn everything. I'm not saying everybody has to learn everything. I don't know how to do any plumbing. But as a 30-yearold or as a 60-year-old, I have access to plumbers, equal access to plumbers. So, it could be a challenging for younger people.
And I try to get the message out that you are allowed to use an advisor when you're young. You are allowed to go out and help. There are people and resources out there that will help you. I love working with young families because I can make such an impact in their life. We have clients who maybe they wouldn't have bought a pool if it wasn't for us showing them that they're on such a good track that they can afford to do that. And now they'll have memories with their kids that they would have never had if I didn't talk to them. So, that's the feeling I get from that I can't really even measure, I can't really explain.
So, don't just assume that because you're young that you shouldn't be proactively trying to take steps. It shouldn't just be I'll worry about that when I'm older because when I'm about to retire and then I go speak to somebody. When I have somebody come in my office that's about to retire, it's pretty much, well, I hope you did everything right the last 40 years because I don't have any time left to really help you.
The younger you are, the easier it is to make really life changing decisions, life changing paths. You can really get in a position where you're on just a phenomenal trajectory and it doesn't hurt you that much to get in that position. It's like carrying a little marble around in your pocket all the time instead of waiting until retirement and trying to shove a bowling ball in there. So, the younger you are, the better it is.
Heidi Higgins: Thank you, Joseph. Let's talk about some things that are children specific, like savings accounts, credit cards, allowances. What do you think of those?
Joseph Okaly: I think kids should definitely have savings accounts and learn how to put money aside. But when it comes to what they're putting it into, I would say don't write off investments or investment-type accounts. Because if a young kid is not going to be using the money for 10 years or something like that, maybe out of college, they have time where if you use an appropriate investment, they have a much, much higher likelihood of growing it to be something substantial as opposed to just leaving it in a savings account, where it's going to earn virtually nothing.
So, there are easy investment tools that are out there now. You don't have to be a stock picker. You can go out there and look for what they call asset allocation funds, where all you have to know is am I moderate investor, am I an aggressive investor, am I a conservative investor. And then any of those names you see on TV, whether it's Vanguard, it's T. Rowe Price or JPMorgan, they have those allocation funds that you can kind of plug into so it diversifies and spreads you out kind of a little bit everywhere all the time kind of mentality. So, it's an easy way for new and smaller investors to kind of get acclimated without having to be some high level portfolio manager. So, I would say, first of all, don't discount maybe using an account like that.
Secondly, I would say that for when it comes to credit cards, credit cards and building credit specifically is really, really important. So, job applications, they'll check your credit a lot of times now. And what a credit score is not, it's not telling you that, oh, this person has a good credit score because they're really good at not using credit. Credit scores are showing how well you are at being given credit, being given debts, and paying them responsibly. So, it's a responsibility score, not a whether you have it or not score.
And from their perspective, if somebody has no credit, it's like a completely question mark. Someone with no credit is much scarier than somebody that has average or below average credit. That person that's an unknown might be terrible with money. Having credit cards, having some degree of loans is not necessarily a bad thing. Good ways that you can monitor that would be for credit cards, you want to just use it on things you're going to buy anyway. If you're starting to buy extra stuff because you have a credit card, that's a problem. But if you're using it just to buy gas and groceries or things that you normally would buy anyway, now you're getting to build up that credit in a positive way.
The only thing I'll throw out there for some people is what's the most common credit cards that people tend to come across are department store credit cards, where it might be Macy's or whoever else, and those have very low limits on them. So, it might be $1,000 limit, and so when you put $800 on it, what the credit card company says is, oh, this person's not that responsible because they're using up 80% of what was given to them. So, try to have one credit card or two credit cards, and every year or so ask to increase the credit limit. Not because you're going to use more, but because now all your ratios are going to keep looking lower and lower, which is a sign of being very responsible. They're giving me a $20,000 limit, but I only spend $1,000. That's a very low ratio. Definitely proactively building up credit is more and more important in today's age.
Allowances, I'll preface this with I never got an allowance, so I'm completely biased against them. I had to do my chores and not get paid. So, for allowances, I'm a little bit skeptical about it just because it can … I've seen friends when I was growing up that got allowances, they treated it like a never-ending piggy bank. Oh, if I waste the money this week, I'll just get some more next week. If you tie chores on top of that, they don't get the money until they do some chores, maybe you offset that a little bit.
But I still am a bigger fan of the matching kind of a system where they need to go out, they need to work. I'll put money away for you. Same kind of a thing. I'll put money away for you, but it's going to be separate from what you can touch, and I'm going to use that money to teach you a lesson about compounding interest, time horizon, not having money as the goal, having some future happiness kind of thing as the goal. So, that would be a, again, biased opinion on that.
Heidi Higgins: Joseph, that makes a lot of sense. Thank you. I appreciate that. I didn't have an allowance either. I love your phrase an endless piggy bank.
Joseph Okaly: Yeah.
Heidi Higgins: I witnessed that. I saw my friends have dollars and dollars coming out of their pockets, but it was simply wasted most of the time.
Joseph Okaly: Yeah, I would say sometimes it was even I have $10 left, I got to go buy something because I got to spend it. It's almost teaching the reverse, if you have money you have to spend it. It's teaching bad lessons almost in that case. I want to keep stressing it's very much on you as the parents to make sure they have some level of knowledge. Kids emulate everything we do. My five- and my twoyear-old, if I do something that I shouldn't do, I quickly know because now they're doing it and I have to tell them, "No, no, Daddy didn't mean to do that. Don't do that anymore." They're going to emulate you. And they'll emulate you when it comes to money too.
If they see you being responsible, if they see you talking about it, pay myself first, I put my money into my work plan, I make sure I got the right forms of protection, I make sure that I have a vacation fund, I put … Anything that you can do and talk about, you're educating them. And even if you don't see it come out right away, it's building up subconsciously in there, and some of it's going to stick. And when they have to go out and manage their own affairs, they're going to be in a much better position, a much more educated position, to make sound decisions for themselves.
Heidi Higgins: Excellent. What about a teen job? When a student takes on a job, what should they be thinking when it comes to dollars?
Joseph Okaly: Well, one of the good things that I love, and I'll relate this to parents, is creating some kind of a matching program. So, when a child is working, let's say that the child earns $2,000 one summer. You could say, "Okay, for every dollar you earn, I'll match 50% of that and put it into an account for you for your future." So, when you earn money that you report, earned money, now you're eligible for, let's say, a Roth IRA, which is a tax free growing vehicle that if you have earned money you can use. So, if you put $1,000 into that Roth IRA, that would now grow tax free for the next, let's say, 40 years until they retire. So, you get an opportunity to teach your kid, hey, this $1,000 let's say, that I put into this account for you, let's say it grows at 10% until your retirement, now that might be worth over $40,000. Which translates into, hey, you can retire one year earlier. So, we get to teach them about money, we get to teach them about saving, we get to teach them about compounding interest, money growing on itself, how much it can grow to. We show them the importance of time, the longer time you have the bigger it can grow into. And then lastly, we can teach them about how money is a tool. So, that's not $40,000, it's a year earlier of retiring.
To me, I love if a kid has a job where they're earning some money, you as the parent can now step in and do this kind of matching thing to set them up retirement-wise and teach them all of these lessons that would be very hard to teach them otherwise, at least in my opinion.
Heidi Higgins: That is an excellent kind of education that will have dividends literally.
Joseph Okaly: Literally dividends.
Heidi Higgins: Well, Joseph, thank you for your time today. I've enjoyed speaking with you. And I've really enjoyed listening to your podcast. I want to remind our listeners that it's called Enjoy More 30s: Family Finance podcast. And you have some specific advice for young families that will get them on the right financial track. So, I encourage you to go take a look at that. Enjoy More 30s: Family Finance podcast, with host Joseph Okaly.
Joseph Okaly: I'm doing this just because I want to help people, and I think it's embarrassing as a country that we don't educate our youth more than we do. So, that's why I'm doing it.
Heidi Higgins: Thank you, Joseph. It's been a joy to visit with you today. And any last words?
Joseph Okaly: I would just say that the fact that you may not be fully familiar with all these concepts now, don't let that stop you from taking positive steps forward. You're not alone. You're actually the majority. Focus on taking positive steps forward. You don't have to do everything we talked about. If you do one thing that we talked about today, one step forward, then you're on a better path than you were already, and that's fantastic.
Heidi Higgins: Thank you for listening to K12 On Learning sponsored by Stride. To learn more about online public schools powered by Stride K12, our Stride career prep programs that foster lifelong learning, or any of our private school or individual course offerings, please go to stridelearning.com, or k12.com. Remember to subscribe to this podcast and feel free to leave us a good review. We hope you'll join us next time for K12 On Learning.
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