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Transcript

Casey Combest: Welcome to the Insurance Leadership Podcast, the show where we explore real world strategies and insights from top industry leaders so you can strengthen your leadership and elevate your organization. You might remember Sam Dogen from season three, episode 27. If you haven't heard that one, I encourage you to go back and listen to his story.

After a successful career in Goldman Sachs, Sam retired at just 34 years old and went on to launch Financial Samurai in 2009. Today, we're excited to welcome him back to the show. We've got a lineup of thoughtful questions and new topics to explore with Sam. So, let's get started. Welcome Sam.

Sam Dogen: Hey, thanks for having me again, Casey.

Casey Combest: Absolutely, we'll catch us up to speed a little bit. It's been a while since we've talked. Tell us a little bit of life updates, things like that.

Sam Dogen: I'm 48 years old now, so two and a half years older than since we last spoke. Kids are eight and five and came out with a new book, Millionaire Milestones, Simple Steps to Seven [00:01:00] Figures, and I hope everybody watching and listening has at least skimmed through it or read it.

Casey Combest: Awesome. A great, another great resource that you're putting out there for us. Thank you for that, Sam. And you've written and achieved financial independence really early in life, 34 as you've listened to Sam's last podcast or done a little research what would you say, Sam, are some of the mindsets or daily habits that helped you stay on track toward that milestone you were trying to reach, that goal you were trying to reach, and how can sales professionals apply those?

Sam Dogen: I think it's very important, to forecast your misery, and I think nobody really thinks about this, but the thing is, we'll all get excited in the beginning, first job, after five, 10 years plus later we start getting a little bit miserable because it's, things are a little bit mundane. It's the same old thing over and over again, so it's important, to forecast your misery and to think when in the future will you no longer enjoy doing what you want to do, because that'll keep you motivated to save and invest as much as possible. The personal saving [00:02:00] rate in America is about 5%, which means it takes 20 years, 20 years to save one year of financial freedom. That's crazy. So if you work, huh, 60 years, you're gonna save three years of financial freedom, that's nuts to me. And then what we saw during the pandemic was that the personal saving rate in America rocketed from 5% to about 35%. So in other words, it told all of us that we can save more if we want to. We just choose not to. And if you're saving at a 33% clip, for example, that means that every three years you work, you save one year of financial freedom. And if you save at a 50% clip every year you work, you save one year of financial freedom. So really it's about focusing on when you think you no longer want to do the job that you want to do so you can focus on saving and investing as much as possible every single month.

Casey Combest: That's great, Sam. Forecast your misery, what a great way to say that. That's awesome. And sales people that are listening to this, they [00:03:00] often have variable incomes, they get these big instant payments from a sale or closing a deal or something like that. What would you say to someone who has that inconsistent cash flow month to month?

Sam Dogen: So what you want to do is you wanna calculate what is that baseline average cash flow. It is all volatile around an average, right? And you wanna stick to that average, spending amount. So whatever you're living off the average, spend that or try to spend less. So every time you got that big influx, please don't go crazy and just spend according to that one time bump or that once a year bump, year end bonus or that big sales. Yeah, celebrate it, maybe over a dinner or drink with your loved one. Have some fun, but don't go crazy, don't spend as much as you're making, right? That's the key to personal finances, to grow that gap over time in terms of income and expenses. And I would challenge everybody. Really to so calculate your baseline average income and try to spend 50% of that. If you can do [00:04:00] that, I think good things will happen in 10 years because too many people, and I've been doing this since 2009, writing on Financial Samurai, too many people, they don't have a plan and they just wing it. They wing it in their finances and then 10 years later they wonder where all their money went. And that's not what I want for y'all. If you are intentional, you have a plan, you stick with that plan over a 10 year period, you're gonna have more money, then you realize.

Casey Combest: So someone listening to you say that and they're like, Sam, there's no way I can do that. Is there still value in starting small and building up to that?

Sam Dogen: Absolutely, so hedonic adaptation is always, they always talk about it as the more you make, the more you're gonna enjoy and a luxurious life. And then you get used to it and then you're thinking now what? Let me go try to make more money. But hedonic adaptation works in reverse as well. So the less you make, it might stink for a while, but you get used to it. So it's like with your 401k or your tax advantaged savings accounts or even your taxable account. Let's say you start at 10% saving rate. Okay, that works. And [00:05:00] then the next month you bump it up to 15% and then by the end of the year, you bump it up to 30%. It's gonna sting a little bit. It's gonna force you to change your habits a little bit, but I promise you that you're gonna get used to living on less. And that's great for your future because you'll have a lot more.

Casey Combest: So let's shift a little bit to the book, Millionaire Milestones. What's one of your key takeaways, tease the book a little bit for us. Why should we read this book?

Sam Dogen: You should read this book. And I hope y'all have a copy because I know Janice purchased 50 copies, so hopefully all y'all have a copy.

Casey Combest: No excuse, right?

Sam Dogen: And not go buy one. No excuse. The reason why you should read this book is because nobody cares about your life as much as you. And nobody cares as much about your money and your future as you. So you are the only one that has control over your future, and you have to take action because I promise you. At some point, you're gonna be a little bit tired of what you're doing and you want to have options. And when that time comes, you're gonna be thrilled that you read the book, you [00:06:00] saved, you invested, you asset allocated properly, and you stayed consistent. Because when that time comes and you have those options, that's where you feel free and that's where you really appreciate all the quote sacrifices you made today, which really I don't think are sacrifices at all because life is both long and short and at the back end when you're older, you're more tired, you're less enthusiastic, maybe you have more responsibilities as a parent, or you're taking care of your aging parents. You're gonna really appreciate that financial stability, that financial vault that you've created to have more options in the future.

Casey Combest: Yeah. Sort of planning for your future self. Yeah, absolutely.

Sam Dogen: You have to do it.

Casey Combest: Yeah, so someone who is in a high performance career and they're bouncing like the pressures of monthly quotas with also the long-term wealth building that they're wanting to do and their personal goals. Can you speak to that a little bit? How do those tie together or do they tie together or can we tie those together?

Sam Dogen: Oh, it's absolutely, totally correlated. The better you do at your job, hopefully the more money you'll make, the more you can save, the more [00:07:00] you can invest, and then the quicker you can break free if you want to. I hope everybody sees their job, as a privilege actually, because a lot of people can't get jobs, and if you've lost your job in this economy, it can take a long time to get that job back. It really seems like it's taking much, much longer for people to get that job and any job you land in this economy, I feel it's like winning the lottery because probably hundreds of people wanted that job as well. So don't take it for granted. Treat it as something that it's like a gift that you continue to work on as hard as possible, because at the end of the day, at the end of your life, you wanna look back and say I gave it my best shot.

I gave it my best shot to be this best sales person possible, to generate the most income possible, to build the best relationships possible. But even more importantly, is to save as much as that as possible so you have those options in the future.

Casey Combest: This next question might be a little more nuts and bolts to what we're talking about, but what's the best perspective and best way to invest commissions or bonuses, especially when [00:08:00] they come in large or like incremental chunks?

Sam Dogen: We talk about dollar cost averaging a lot in the personal finance world, where you just continue to invest a set amount, at a set of time period. Usually that time period is, let's say every two weeks biweekly. But if you have your commissions every month or quarterly you wanna just be consistent in that. Don't skip out on contributing during any type of income windfall, you have to be consistent. And the easiest way is to just set a percentage allocation, so then the percentage is the dollar amount will change based on your income, but as so long as you set a percentage that's what's most important. And I do recommend everybody start with at least a 20% saving rate. So whatever your gross income. After taxes, you can do 20% of that, or you can shoot for 20% of your gross income. That's gonna be a little bit harder, but set a percentage and try to hit that every single month for two, three months. And then once you start getting accustomed to that. Raise that.

Casey Combest: So if we're talking about sales in general, Sam it [00:09:00] can really be a grind as any thoughts on avoiding lifestyle creep burnout while still enjoying the journey to financial freedom? Because I think a lot of times when you think about financial freedom, it's like this lofty goal and it just pull, it sucks you in a lot of ways, but hey, there's a lot of life in between. How do we enjoy that? Sam Dogen: It's a tough question. I'm 48 now. And I worked 60 hours a week in my twenties and early thirties, and I went to school part-time for business school for 20 hours a week. So that was pretty brutal. But then now that I look back upon it. Honestly, I wish I worked harder. I worked harder. And obviously you don't want to work so hard that you just quit life and quit your job and just go on a, walkabout in Bali, Indonesia for six months. That sounds fun.

Casey Combest: Hey, that sounds pretty good. Yeah.

Sam Dogen: That sounds pretty good. But then you're gonna get off that track and then you're not gonna have that fi financial stability you need in the future. I think you always have to take a moment to be appreciative of the job that you have. You have to take a moment to celebrate your wins. I didn't celebrate my wins enough when I was growing up, whether it was a client win, a sales win, a [00:10:00] bonus, a promotion, I don't know what it was. I just said, you know what, I'm gonna just keep my head down and keep on grinding and not celebrate with my loved ones. So I think you gotta celebrate your wins. Every single client, every single commission you bring in, every single promotion, celebrate those wins, so you're reminded about the joys of progress. And then also continue to remind yourself that all the hard work will eventually pay off on the back end. Because if you don't put in the hard work now, on the back end it's gonna be really tough when you're older and have less energy and maybe your health is not as good.

Casey Combest: Yeah. Let's get real granular here. One of the good things about what you do is you have a bit of a community. How have you seen people practically celebrate those wins, whether it's something in their job that they're doing right now or in their long-term fire goal?

Sam Dogen: I think a lot of people in the fire community, they look for people similar to themselves. They go to conferences, they go to these gatherings around the country, it's actually pretty fun. There's [00:11:00] this conference called FinCon and they just hang out for three to four days and share that bond. If you look at the Harvard longitudinal study about people in the past and what makes them happiest, it's the community. It's always the community. It's your friends in the community. So work to develop those relationships with your clients. With your colleagues and people outside of work. And it's interesting, a lot of us in the fire community, we really focus so hard on making, saving and investing as much money as possible that we can sometimes neglect our love lives, for example. And then, maybe we have all this money when we're 40 years old, but we have nobody to share it with. And so it's really important, I think, to spend almost as much time on your relationships, your love life. That as you do with your money.

Casey Combest: Yeah. 'cause that financial independence isn't great. If you're, by yourself, then you're the only one enjoying it.

Sam Dogen: Yeah.

Casey Combest: Let's move into I guess a little more current affairs, so it's mid [00:12:00] 2025 when we're recording this, this'll release later in 2025. But I feel like we can still talk about the state of where things are right now. So given inflation interest rates, market volatility. What financial advice, pivot strategies would you recommend to people listening or watching right now?

Sam Dogen: As we perhaps saw in around Liberation Day, April, the first half of April, the market was down 20%. And that was temporarily a bear market. So that really, I think, was a wake up call to a lot of people because in 2023 and 2024, we saw back to back 20 plus percent gains in the s and p 500. And so that wake up call in April, 2025 should force you to look at your investments, your asset allocation, ask yourself during that time, were you nervous, frustrated, scared, or were you indifferent? And hopeful that, oh, the markets are down time to buy the dip. You have to be very honest with yourself, have a [00:13:00] good assessment of your asset allocation and how you felt, and if you felt scared concerned, then you probably have too much risk because 20% bear markets happen every three to seven years, and the average drawdown for a bear market is about 35, 36%. And so if you're not comfortable with that. Then you probably have to dial down risk, but if you are comfortable with that, then you can keep your asset allocation the same or take more risk with stocks, real estate and so forth. So in terms of now, I do believe the second half of 2025 will be better than the first half. We've got more deregulation, maybe tax cuts, I don't know, maybe a ballooning deficit unfortunately. But I think the trials and tribulations of trade wars will have largely ended by the second half of 2025. And you're seeing earnings estimates rebound and grow again as a result. You're seeing upward momentum for the s and p 500. So the median target price for the s and [00:14:00] p 500 now by the end of 2025, is about 6,300 to 6,400. So if we're at 6,000, that's about 5%, 5 - 6%. Now it's important at the same time to look at where the risk-free rate of return is. The risk-free rate of return is the 10 year bond yield, so you can buy a 10 year bond yield, treasury bond yield, treasury bond, and earn four point a half percent risk-free a year for 10 years.

So as an investor, you would not invest in any other asset class if you did not strongly believe that, let's say stocks or real estate or crypto would outperform the risk-free rate. Otherwise, it just is illogical investing, poor investing. A couple good situations for investors and retirees and savers right now. On the one hand, we can earn a higher yield four point a half percent risk free, so that cash you earn in a money market or treasury bond is at about four point a half percent, pretty good, especially with inflation at about 3%. And then on the risk side, you have earnings for the s and p 500 getting [00:15:00] upgraded, and usually that market tends to go up with earnings upgrades and increases. Personally, I'm building myself a 60 40 portfolio. That's equity 60%, bonds 40%, because I want income, 'cause I don't have a day job. I wanna have some security. And during the April, 2025 meltdown, I didn't feel too good. I was moody. I was trying to keep my mood hidden from my wife, who is gonna be negatively impacted, and my children as well. And I like that income. And then for 60%, okay, let's go buy stocks long term, they generally returned 10% on average a year since 1926. 75% of the time it's a positive return. So let's go with that. You have to come up with your own asset allocation strategy. The younger you are, you should probably be more invested in risk assets like stocks. The older you are, the more tired, the more you want to just kick back. More allocation to bonds.

Casey Combest: Very cool, so it sounds like it just continues to move as you get older.[00:16:00] 

Sam Dogen: It is your risk tolerance, is a moving target. It totally is a moving target, and you have to do a assessment, an honest assessment of your feelings and your asset allocation. I would say every single month. A worst case every quarter. And you have to try to align that asset allocation with your risk tolerance as much as possible.

Casey Combest: I'd love to ask you a few rapid fire questions as we get to our last section here, Sam. Sam Dogen: Sure.

Casey Combest: Now, o other than your books, which are incredible. What are some other great reads for financial literacy?

Sam Dogen: I love The Millionaire Next Door, by Thomas J. Stanley, and his book was, it was printed almost 30 years ago, and I like to see Millionaire Milestones as the modern day version of The Millionaire Next Door. And the book essentially explains to everybody. That millionaires are not special people, they're just the average person next door with an old car, a house they've lived in for 10, 20 years. So it tells you that you can [00:17:00] do it too. You just have to have a framework. A strategy, a set of principles to follow over the long term and you're gonna get there. So I really like the Millionaire Next door. I like buy this, not that I wrote that in 2022, because it helps you think in probabilities and not absolutes. I think this is one of the biggest detriments to people. They think they have to have a hundred percent certainty before they take that next job. Or call that prospective client or take a leap of faith and go back to school or retire early? No, that's just not how it works, because by the time you think there's a hundred percent probability, that opportunity might pass you by. You have to think. I think more in terms of a 70, 30 probability, if you believe with a 70% probability or higher. That the choice you're gonna make is the right one, you should go for it. While understanding that maybe 30% of the time you're gonna get wrong and so long as you don't die or really lose all your money or something, you're gonna learn from your mistakes and get better.

Casey Combest: Yeah, that's great. Sam. [00:18:00] So good. Roth IRA or traditional.

Sam Dogen: Roth IRAI think is worth it if you can contribute to it, there's income limits. I think the break even point is about a 24% federal income tax rate. So long as you're at around a 24% federal marginal income tax rate or lower, contributing to Roth IRA makes sense. If you're in a higher tax bracket, just contribute to your 401k and, try to max that out. And of course, if you've maxed out your 401k and you're contributing to your taxable account, you might as well try to contribute to a Roth IRA through a backdoor Roth IRA or mega IRA if you're gonna be investing anyway, right? Because yeah, you contribute after tax, but it'll grow compounded, and you'll have those tax advantages when it's time to withdraw.

Casey Combest: Yeah, and if you wanna learn more about that, just Google Backdoor Roth IRA, is that correct?

Sam Dogen: Yeah.

Casey Combest: Okay, awesome.

Sam Dogen: Yeah and I've written about this topic a lot.

Casey Combest: Yeah, great. What about index funds or real estate?

Sam Dogen: That's, it's like apples and oranges here. Index [00:19:00] funds, ETFs, index funds definitely for low cost. 85% of active fund managers can't outperform their respective indices. Why pay a higher fee to invest in an active fund? That underperforms right. It makes no sense at all. And on that same line, I've been consulting with a lot of folks regarding how to invest their money, and I see a lot of folks with lots of money paying a 1% fee for a financial advisor, and they're just structuring their portfolio. And that fee gets really starts to drag over time. Million dollar portfolio, 1%, $10,000 every single year, 10 years is probably gonna be more than a hundred thousand 'cause assuming your portfolio grows, it's a real drag down on performance. So really try to minimize those fees, that's definitely something in our control. And then obviously asset is in our control. In terms of real estate, I think everybody should be neutral real estate. Neutral means owning your [00:20:00] primary residence, and when you're neutral, that means you're no longer a price taker of rent increases, right? You fixed about 80 to 90% of your living costs. So just like how it's not wise to short the s and p 500 long term, it's wise not to short the real estate market long term by, renting long term. You should try to figure out a place where you wanna live and stay for the next five, 10 years. And when you do, I want you to, I think it's ideal to buy your primary residence and then you're neutral. You're going up and down with a real estate market, and you're really only long the real estate market when you own more than one property because you have to live somewhere. So if you're along, let's say two properties, at least you can sell that rental property, for example, and earn a profit while still living in your place.

Casey Combest: What do you think about someone who wants a little more exposure in real estate? Would you recommend a REIT or having their own personal property as a second rental property or something like that?

Sam Dogen: I think when you're under 40. I think you should try [00:21:00] to build a physical rental property portfolio, because you'll understand the market better. You can do improvements to generate more rental income and boost the value of your property. And you can market and try to find better tenants as well, because that leverage aspect you put down 20%, you leverage five to one with a mortgage really pays off after 10 years, even if the property is only appreciating 4% a year. If you're leveraged, five to one that's 20% gross before all your expenses and all that, right? And so after 10 years, you're paying down your debt. So you're growing your home equity, your property is appreciating generally with the rate of inflation, plus one to 3%, and rent if you're able to charge market rent every year is also appreciating by generally the rate of inflation because your living expenses is part of the input component of CPI inflation.

What I've discovered during, especially during the pandemic in 2020, was that REITs generally you think about real estate as more stable [00:22:00] assets that generate income, but REITs actually decline, more than stocks during the pandemic March, 2020's and pecifically, and I was shocked by how poorly they performed, compared to let's say, physical real estate that you don't see the daily ticker symbol in value of physical real estate. You just live and let earn the rental income, or you just enjoy your life, and that's a much more appeasing way to invest if lack of stability is what you're looking for.

Casey Combest: Yeah, that's a great answer. Sam, what do you feel like is one of the biggest financial mistakes that you often see for folks earlier in their career?

Sam Dogen: Oh, yeah. So the biggest financial mistake, bar none is you graduated from high school or college, you get your first job and you spend all your money. And what do you spend all your money on? You spend your money on going out and you buy a car. We love cars in America, 95% of Americans own cars and we spend way too much on a car. When, like the bus, a bike a really beater car will do. If you think about the average household income, the median household income in America is about [00:23:00] $80,000. The median or the average new car price in America is about $49,000. So if there's an average or median household buying the average price car, that's crazy. 'Cause 49,000 is after tax, so that's 65,000 gross income. And so I think the number one personal finance killer is buying too much car. I have a rule, it's a guide. Don't say it's a rule, it's a guide that says spend no more than one 10th of your gross annual income on a car. So if you make $60,000 a year, try to look for a $6,000 car if you really need one. You can find a $6,000 car. It might be 10 years old, but you can get a really economical car or maybe not get a car. Use public transportation something like that. I think if you want a more expensive car, let's say you want a $60,000 BMW or whatever it is, which I think is very expensive. You're gonna have to try to make $600,000. And that sounds absurd, right? Maybe. But I think it's also absurd to spend so much money on a car when you don't [00:24:00] make so much. So it the idea is to tether your wants. The wants that you don't need, right? Wants or wants to your income and your hustle. The more you want something, the more you're gonna have to hustle to earn it. And if you can have that mindset throughout your entire financial independence journey, you're gonna grow your wealth much greater than the average person who doesn't.

Casey Combest: That's a great and very practical tip there. Good stuff. And to close this out, if you had to start your journey over again, what would be advice you'd give to yourself?

Sam Dogen: So I would definitely try to find a mentor who is has been there and who's been to where I want to go. Maybe that person is 10 years, my senior 20 years. Find mentors to guide you and then really listen to them. Don't think you know everything when you're young 'cause you don't. Because the idea is you want to stop telling yourself, if I knew then what I know now, the simple way to counteract that is to just ask someone who's been there before. So the fewer landmines you step on. The more limbs you're gonna have, right? You're gonna be able to walk, run, get there [00:25:00] farther. So you wanna just avoid the massive blowups. I've had massive blowups in my career, one of them was in 2007 when I bought a rental property. Not a rental, a vacation property. I didn't need, 'cause I made the most money I had ever made. And I was think to myself, okay, my income is going to continue to rise forever, right? I'm gonna buy this two bedroom, two bath condo, $715,000 because I'll be able to afford it next year 'cause I'm gonna make more money. And then of course, what happened, the global financial crisis happened. The value of the condo went down 50%. I felt like an idiot 10 year albatross around my neck reminding me every single month I had to pay the mortgage payment. What a fool I was to think my income would continue to go up to the sky forever, right? If only I had found a mentor in real estate who I could just say, Hey, do you think this is a good idea? What do you think? And just. Shake some sense into me. I could have saved a lot of money and heartache. So really find that mentor. And then the other thing is the fear in your head is way worse than [00:26:00] reality. I would say 95% of the time. You just psych yourself out. You have to psych yourself up, psych yourself in, right? Not out. And I would've taken more risk job hopping, more risk taking investments, more risk, and because we know in the mathematically, like 70, 75% of the time, real estate stocks, all these risk assets generally tend to go up into the right. You're gonna have bad times, but if you don't sell at the bottom, you'd probably be okay.

Casey Combest: Yeah, man. That's great advice, Sam. Thank you so much for sharing your wisdom today and spending time with us, we really appreciate it.

Sam Dogen: No, thanks so much guys. Thanks for having me on, and thanks for supporting Millionaire Milestones.

Casey Combest: Absolutely. We'll talk to you soon, Sam.