Guest User

February 3, 2022

Fundamental Topics, Financial Literacy, Decision Making, Financial Planning, Goal Setting, Happiness, Index Funds

Episode 186: Andrew Hallam: Balancing Money, Relationships, Health, and Purpose

Guest User

February 3, 2022

Fundamental Topics, Financial Literacy, Decision Making, Financial Planning, Goal Setting, Happiness, Index Funds

Andrew Hallam is the international best-selling author of Balance: How to Invest and Spend for Happiness, Health and Wealth; Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. Profiled on such media as CNBC, and The Wall Street Journal, he's also the first person to have a #1 selling finance book on Amazon USA, Amazon Canada and Amazon UAE.

He has written columns for The Globe and Mail, Canadian Business, MoneySense, Swissquote and AssetBuilder. Since 2016 he has spoken at businesses and international schools in over 30 different countries.

One of our favorite things to do on this show is talk with the amazing authors of new books related to sensible investing. Today we do just that, welcoming back Andrew Hallam to the podcast to talk about his new book, Balance. In it, Andrew tackles the relationship between our finances and happiness, looking at the areas of life that need the most attention, and how we sometimes overlook important aspects of our wellbeing. This is Andrew's third book, and we previously hosted him on the show in Episode 99, so make sure to go back and catch up on that if you have not already listened to it. We have a fascinating chat with Andrew again today, getting to grips with some of the main findings in the book, with our guest unpacking his arguments about material purchases, spending on experiences, gratitude, and financial literacy. We also get to hear from him about the importance of staying light-hearted, and how he defines success and failure. Balance is such an eye-opening and illuminating piece of work, which we highly recommend our listeners check out, so tune in today to get a taste of what it's all about.

Key Points From This Episode:

Andrew's explanation of his definition of a successful life. [0:02:53]
The questions to ask when prioritizing aspects of one's life. [0:04:35]
Worthwhile material purchases and when spending money can truly have a positive impact. [0:06:12]
Confusion about real estate and investments; Andrew clarifies the idea of buying property. [0:08:59]
Andrew's 'desert island litmus test' for evaluating purchases. [0:12:18]
The relationship between social media and our spending habits [0:14:03]
Times that more liberal spending might be a good decision; Andrew's emphasis on experiences. [0:17:39]
Thoughts on reaching a level of maturity regarding material wealth and satisfaction. [0:24:05]
Andrew's reflections on his experiences of cancer in 2009. [0:27:28]
The role of gratitude in a good life and increasing its presence in our practices. [0:31:37]
How our network and social circles support and enrich our lives. [0:36:39]
Index funds and financial literacy; Andrew weighs in on what these allow you to do. [0:37:26]
Questions to ask when hiring an advisor; recommended products, financial stories, and more. [0:40:55]
Andrew speaks about whether it is smart to have 100% equity. [0:45:59]
The ghost story that Andrew uses to illustrate a point about risk assessment. [0:47:48]
Deciding between simplified and complicated portfolios. [0:50:11]
How parents can approach educating their children on saving and spending. [0:51:39]
Andrew weighs in on retirement, career, purpose, and the last phase of life. [0:52:38]
Personal finance and good humour; why Andrew embraces the inner child. [0:55:57]
Andrew's definition of failure and why it is so important to understand the finite nature of life on a behavioural level. [0:57:04]
A round of Talking Cents cards with Andrew. [0:57:38]

Read the Transcript:

Andrew, because of the content of your book that actually is officially released today, we're going to flip our usual format. We usually ask how you define success in your life as a final question, but I'm going to ask first, in your view, what are the four quadrants of a successful life?

Relationships are one key. A second would be money. I mean, we need to have enough money. I say enough money would be, obviously a roof over our heads, enough money for us to be able to save for our future, good, healthy food, that sort of thing. And a little bit of money for spending on cool experiences. Health is another important aspect, and then a sense of purpose. Yeah, I view success as a four-legged table.

Do you think, in general, people are good at balancing all four?

I think it's hard because I think once we start to focus on one, we can start to sometimes drop the balls in other areas. I would notice this when I, and I mention this in the book, Balance, and this was just very anecdotal, but I would be giving talks at corporations, and I having dinners with CEOs of those companies and recognize that, not a traditional sense, they were very successful. They had a lot of money. They earned a lot of money and they had a high status position, but often I would notice that they weren't as satisfied overall with life as you might expect.

In a lot of cases, I think it was just the drive to succeed and to really excel in one area, had them dropping the ball in other areas. Those other two areas were often health and their relationships, the time they were spending with people that they loved.

One of the parts of your book I appreciated the most, Andrew, was when you talked about asking the question why, and the importance of that in making decisions. What do you think people can do to reflect on the why behind what they're doing with both their money and their time?

Yeah, it's such an important question, I think, Cameron to ask, because as I mentioned in that book, when you ask someone why they do anything, like anything, why are you getting that degree? Or why are you going to the bathroom? Why are you deciding to run a marathon? Whatever it is, invariably, if you continue to dig with why, the response will come down to something related to life satisfaction, like they'll want to feel happy, safe, or secure or good. I think, what's really important is to try to recognize what it is that really allows us to enhance our life satisfaction?

What Daniel Kahneman says, the behavioral economist who won a Nobel Prize, he suggests that we don't really know what makes us happy in the future. We think we know what makes us happy, but we're really bad at predicting what will make us happy. I thought bringing the scientific studies, the behavioral based studies on life satisfaction into a single entity like this book would allow people to have a look at perhaps, and reflect on some of the things that they're prioritizing in their lives and some of the things that perhaps they should be prioritizing a little bit more looking at the behavioral science instead of entirely going with their gut in terms of what they think will make them happier.

One of the things that comes out of the research that you're talking about is that experiences tend to be more valuable than things because we're, like you mentioned, we're bad at predicting what's going to make us happy. We think things will make us happy, but we adapt to them quickly. Do you think there are any cases where material purchases are worthwhile?

Yeah, I think so. Then I think, if it's something that you're purchasing that will give you an experience, so a lot of things that we buy don't give us a unique experience, like a new phone, for example. Often an upgraded car doesn't really give you a new experience, unless the car you currently have keeps breaking down every day. If it's something that you're going to do on a frequent basis, and it will give you a different experience or a new experience, then I think that's worthwhile.

In the book, I brought up the example of a friend of mine who I used to bike race with when we were younger. I met him when I was 19 and he was, I guess, early 30s. These days, he's heavier, he's got a few health problems. I guess, as a result of him having knee problems and back problems, he just kept getting heavier because he couldn't get out and he couldn't exercise. It was just painful for him to ride a bike.

He decided to splash out on an e-bike, and it wasn't cheap. This thing was probably, I mean, a good quality e-bike, it can run you $6,000, $7,000, but because he loves cycling, and because he uses this thing and he knew that he would, it's helped him tremendously because he's now riding with his friends again. So, he is spending time with his friends. I'm spending time with him as we go out and we ride together, and he is getting fitter. Like he's losing weight, he's getting healthier. Actually, since the book was published, he ended up buying another regular bike.

I mean, he had sold his regular bikes because he just couldn't really ride them anymore. Yeah, that was a game changer for him in terms of his life. I think, also, if it's something that you're buying that can bring people together. When we look at studies on life satisfaction, so much relates to relationships. When we're thinking about what we're actually purchasing, if somebody is purchasing, say a cottage by the lake, and they know that they can draw friends and family to that cottage and spend good quality time with them there, and that they're going to do it on a regular basis, like not just for a couple weeks a year.

If it's going to be a couple weeks a year, it's a waste of money. You might as well rent it. If it's this thing that you are legitimately going to use, and you are going to be able to draw people that you love to spend time with, to build memories, I think that's definitely money worth spending.

Those are two great examples. In your book, you talk about a friend of yours who lives in his car by choice and is actually very happy with that arrangement. How do you think people can fight what I think a lot of people live through, which is a desire, or even social pressure, to buy a big or a bigger house?

Yeah, that's a really good question. I think one thing people do think is, and I think incorrectly, is they believe their house is their investment. It's an actual investment. Your house is your shelter. It's not an investment. So, bigger house does not equal better investment. If you are buying a big house and your purpose is to have a series of suites within it, well, then it's an investment, or your second home is an actual investment. But the idea of a home being an investment, I think is one really flawed premise, because you have to live somewhere.

Unless you're going to sell that place and then move to Guatemala, that bigger house isn't necessarily considered anything that can give you some kind of cash or it'll put food on the table. But there's another element too, where when you're upgrading something, there's an interesting German study that was done on life satisfaction pertaining to people upgrading their home homes. A lot of people do that. They'll upgrade their homes thinking, well, I'm going to feel better in this home. I'm going to be happier in this place. But then hedonic adaptability takes place there as well.

So, people get used to whatever it is that they end up purchasing. If they are struggling to meet that mortgage in that big home, it essentially means that they're not able to save for other things in life. This could ultimately lead to lower levels of life satisfaction. In the book I talk about, and this is quite a famous study of the town of Roseto, Pennsylvania, where in the 1800s, people came over from Sicily, and they brought their old school Italian values. For them, it was considered distasteful to, if you had money, it was fine, but it was considered distasteful to rub it in your neighbor's face.

To own like a better car or to own a bigger house, they recognized that it created like a social wedge. And our relationships are so, so important. Social wedges are things that we never really want to consciously or subconsciously put between us and the people we love and the people we're around. That was interesting because the people in Roseto ended up living a really long time, and one of the reasons, one of the theories behind that was just how socially connected everybody was. A big part of that was, if you had money, not to show it off and rub it in the faces of your neighbors. Interestingly, like in the 1980s, when a lot of the younger people in Roseto ended up getting a sense of the American dream and building bigger houses, moving into bigger places and getting better cars, it fragmented the community.

I say it fragmented it, just in as much as the people there no longer live extraordinarily lengthy periods. So, they used to live much longer than they would live in a typical American town, and these days, Roseto, Pennsylvania is just like any other place.

That's so interesting. Can you describe your desert island litmus test for high value material purchases and why doing that thought experiment is important for people to do?

Yeah. If you want to buy something, and I have nothing against anyone buying something really, really fine, if that's what they're into. If you really want to drive a top of the line Mercedes-Benz, or a Porsche, that's awesome, if that's your thing. However, you have to ask yourself a really hard question. Would you still buy it if no one could see it? And that's key. That's why I call it the desert island litmus test, like literally, if you lived alone on an island, and you had a bunch of roads, and sure, you could enjoy that car, but no one else could see it, would you still buy it? Then, if we ask ourselves that question, I think most people would say no, because at least, in part, we're buying things to impress other people. The irony there is that we actually don't love and respect people anymore who have better stuff than us.

That is a weird sort of behaviorally primitive aspect of human nature, where I'm going to buy this thing in part so that other people can see me, that other people might respect me. But ultimately, we don't love and respect anyone more or less based on what they end up owning. In fact, sometimes it draws envy. I laugh at advertisements that say, "Hey, live in this place or own this and be the envy of your neighborhood." Envy is not a good thing. Envy isn't love. Have people love you is cool. Have people respect you is cool. But envy, no. It's not such a good thing. But again, back to that question, if you love this thing, and you would own it if no one else could see it, awesome. You've bought it for the right reasons.

I love that answer. This next question, I'm going to start it with a quote from your book. "There are almost as many index funds or ETFs as there are narcissists on Instagram." Okay, I'm exaggerating. The question Andrew is, do you think, or how do you think social media contributes to materialistic spending?

It's funny, because back in the day, you'd know what your neighbor owned and a few of your friends who were close by. Maybe your colleagues, a couple of your colleagues. But today, with social media, with Facebook, with Instagram, the way we are connected is such that, when my friend just bought his daughter a brand new car and they live in Las Vegas, I mean, it was posted on Instagram. It was posted on Facebook. I can see it and all of her friends can see it. Not only friends who are close to us, but we have something like Instagram or Facebook. Most of those people aren't really our friends.

Let's be honest. You have these people that have a thousand followers on Instagram, plus, plus, plus. They're not tight with those people, but what do we put on that sort of thing? We put our highlights. We put the things that we think are going to impress other people. We buy new car, that's the kind of thing that we're going to put in on Facebook or Instagram. Yeah, I think it's really, really hard because we're so much more exposed to these material acquisitions where people have these big happy smiles after purchasing something. It makes it, I think, really difficult for people to curb their own spending when they're seeing this happening on a far grander scale than they ever would've in the past.

I can't stand social media personally. I don't have Instagram, I don't have Facebook, and I recently gave up the control of my LinkedIn account to somebody in our marketing team so that I never have to look at it again. Can't stand it.

I was going to say, Andrew, you're not making this argument to people who put a lot of our possessions on Instagram.

Yeah. That's the last thing I want to do. Even the idea of traveling, and there are these benefits to things like Facebook too. I've had this love-hate relationship with it. So many times I've thought about ditching it. Then there have been these moments, and I'm really conscious of what I'm putting on Facebook typically because I have a really nomadic lifestyle. So, my wife and I are often in some really cool places, and we don't need to rub that in faces of our friends who don't have that opportunity. But yet, occasionally, I'll post something. There was a moment I was in Malaysia on an island called Pulau Tioman, and there was just this gorgeous view of the bay, and I posted a picture on Facebook.

This is a place where, and it's a small, really remote island, and I was on the east side, a place called Juara, little village called Juara. I think there are probably about 300 people that live in that village. Supposedly, there are 300 people, but honestly, you never ... It's one of those places where it's like, where do they live? And it's just all jungle and these jungle areas. I did post this thing. Right away, I ended up getting a response from some friends that I worked with in Singapore, and I didn't know this, but they bought a sailboat and they had sailed it.

This was like quite an epic sale. They had sailed it right into that same bay that I'd taken a photograph. So, they said to me, "Look out into the bay."

Wow.

"We are here." And they're the only boat there. This is remote.

Okay, that's cool.

I swam out to their boat.

Come on.

I'm completely exhausted. I'm not a great swimmer, but I'm so wasted when I got there. But I was so happy to see them. Yeah. I mean, there are these elements that are positive, but yeah, I think I'm with you Ben, in that there probably are more negatives than there are positives associated with social media.

That is a very cool story though. A general theme in all of your books, including Balance, is frugality, but are there cases where you think being more liberal or generous with spending can make sense?

Yeah. I think when you're spending it on an experience, it makes a lot of sense, especially when it's like a novel experience. Because it allows us, among other things, one, it allows us to build memories. If it's novel, when I talk about the campfire story, like 10, 20 years from now, you and Cameron are hanging around a campfire, you guys are not going to talk about the stuff you bought back in 2025. Now, when you're sharing stories, you're going to be sharing stories of things you did, the fun things, the dumb things, the places you saw, the people you met.

If you're spending money on enhancing those experiences, and sometimes travel can really do that, or guitar lessons, or like cooking classes. I mean, you don't have to go anywhere to spend money on an alternative experience. Another thing that these experiences do or the money we spend on our experiences do is they can alter our perception of time. Time is elastic. When we are young, you're in the eighth grade, that year seem to go a long time. It just seemed to last forever. In part, it's because one year in the life of a 14 year old is a greater percentage of your lifespan, but there's something else that happens.

When you're in the eighth grade, you're changing so much. Everything is changing, your friends are changing, or you've got a boyfriend, or a girlfriend, and then you're fighting. And then you got a new friend, new best friend. And then you've got this new teacher and then you've got all of these different points of reference that allow us to remember what actually happened or allow us to experience what happened. I'm sure you guys can relate to this, like when you do travel somewhere, if you go somewhere, or do something different, and you think to yourself like, wow, okay. I landed here five days ago, but it seems like it was like two weeks ago.

We often think about that because it's all of the novel things that we experience on that vacation that are totally different, so it stretches that perception. So, we may not be able to control how long we're living, but sometimes spending money on an alternative experience can stretch our perception of time. And although it may not chronologically allow us to live longer, it allows us to live longer based on our perception, which I think really, is the only thing that matters.

Very cool.

What about other stuff? Experiences makes a ton of sense and time perception, that aspect is fascinating, but I think in the book, you also give the example of massages, that you and your wife spend a lot of money on massages. Are there any other things like that, that can be justified, I guess for splurging?

Yeah. I think giving, like when we give, especially if it's pro-social giving, we really remember it. What I mean pro-social giving, I mean, research suggests that when we donate money, we end up feeling better. We end up feeling good. It ends up enhancing our life satisfaction. But what is even more important is when it's what they call pro-social. So, you actually see the results of what it is you've given. So, it's like one of those things that ... For example, my wife and I ended up becoming co-founders of a foundation in Cambodia, where we went to Cambodia, and with a group of other people, we ended up finding a bunch of 10th grade kids.

We went to a series of different schools and we put kids through a bunch of tests of sorts, like academic tests. We had a bunch of Cambodians who actually helped us on the ground administer some tests, but we were really interested in social tests. So, we would ask all these kids like, name three people that you would go to with a problem. Name three people that they really enjoy, name three people who has a great sense of humor or who's really helpful. We narrowed this down to a slight group of kids and then said to them, "Hey, this is what we plan to do. We want you to initiate some kind of community project, and we want to be able to give you some kind of guidance on that.

So, your community project is something you're doing somehow to better the community. And this is a really, really poor area of Cambodia called Kampong Speu. There's no running water. There's no electricity. These people are really, really poor. I mean, they don't have proper outhouses. Most of them don't have proper wells for good drinking water. But we said to them, "You do what you can to work on this project to better the community we'll guide you along the way. And if you follow through with it, not whether you succeed or whether you fail, but if you follow through with it, we will give you a college education. So, we'll pay for that. We'll get a house for you and your cohorts. We'll put you up in a place in Phnom Penh," which is the capital city of Cambodia.

"And we'll ensure that whatever is it is that you guys want to do, you'll be able to do it. You don't have to worry about the finances." Yeah, this kind of thing costs money, but in terms of an experience, I mean, I'm able to tell you guys about this in so much detail. I mean, we could talk all night about this. There's a strong reason for that. It's pro-social giving, is we could actually see the results, and we were involved in what it was we were doing and how we were helping others. It felt awesome for us, and of course, they really appreciated it too. So, it doesn't have to be that dramatic where you have to have your own foundation. It could just be a gifting money on Kiva, for example, where you get to pick someone who wants to borrow money for a small business, wherever that might be, in the Philippines, or Cuba, or Canada, or the United States.

You can pick your geographic region, you can pick your gender, and you can actually see the person. This is the person. You can see their photo, you can see what it is that you're looking for. I suggested like getting together with groups of friends and having coffee, maybe once a week, and each of you picking somebody. And it's not a donation, it's a loan with Kiva. So, you'll get most of that, if not all of that money back. I think this is an awesome thing to do with our money. It doesn't really cost us anything, because like I said, we do get most of it back. So, we could just keep recycling that money through the different entrepreneurs.

Incredible. A really interesting part of your book to me was how you described how life satisfaction increases after middle age, which is typically when people have more narrow social network, less focus on status, and less material good focus. A question that I thought about while reading your book that I wanted to ask you was, do you think people can get to that place sooner in life? Or is there a certain amount of maturity that comes around middle age that enables you to have satisfaction from other areas?

I think, Cameron, is difficult, but it's doable. I think too, one of the things about, when you get older too, you recognize your own mortality, and you start to realize what's really important. But I think that young people can recognize this stuff when they see the science behind life satisfaction. I think it can become a lot clearer to them when they see the science behind material acquisitions and hedonic adaptability, for example, and how pursuing things won't enhance your life satisfaction, that perhaps trying to keep up with the Joneses is a futile quest that doesn't enhance any kind of internal satisfaction long-term.

I think once people can see that, it's sort of ... A lot of people tell me when I explain to them about cars, a lot of people, when they get their first job, they borrow a bunch of money and they buy a brand new car. I know that when I started telling people about Thomas Stanley's research on like, what does the average millionaire drive? Did you know that, in 2019, the median price for the most recent car in the United States purchased by millionaires was $35,000? And that most high end cars are not driven by wealthy people. They're driven by people with high incomes, but also high debts.

It's been interesting over time because I've been with a lot of younger people who've said to me, "I remember that." That, I remember that, and now when I see somebody who's young, who's driving a super expensive car, I don't necessarily feel envy for them. I recognize that, that person probably doesn't have, or might not have a lot of money. Most people that drive super high-end cars, most of them don't. Some do for sure, but most of them don't. I think then, back to your question, when you look in at research on life satisfaction, although it's probably harder for younger people to be able to put that aside and decide they're going to be true to themselves at a younger age, they're not going to be as influenced by peer and social pressures, although it's more difficult at a younger age in your 20s, and 30s, and early 40s. Is it doable? Absolutely. I think it is.

You have a table in your book that you did up yourself with the Forbes Wealthiest People list, and then you figured out which cars they drove. I calculated the median vehicle price was $46,000 for the top, whatever it was 15 wealthiest people in the world. The mean was 220,000 because somebody has a $2.2 million McLaren, but the median was 46,000. That stuck with me too. Those data are fascinating.

It's so interesting to me because, and we have a condo in Victoria, British Columbia, and if I go down into the parking area, I would say most of those cars are worth over $46,000. I know for sure that none of them are billionaires. I don't even think there'd be too many millionaires of any millionaires down there either. Yeah, it's something it's worth knowing, isn't it?

Yeah. Yeah, definitely. Andrew, you had bone cancer in 2009. Did that experience or diagnosis change your outlook on life?

It didn't change mine, and I think only because I, from a really young age, kind of recognized that one thing, like I'm not that smart Ben, but I do recognize that, and known, I've always known that I'm going to die. Perhaps it was just no one in my family had ever lived past 62. So, no aunts, no uncles, no grandparents. I kind of just felt that, and I guess early on recognized that life is potentially really short. It's finite for everybody. It's like we all have a terminal illness. When I did end up getting cancer, I already had a really strong appreciation for life.

I think, if you recall what I ended up saying to a reporter who interviewed me on channel News Asia, and basically asked me that very question, and I said something just ... I just shot from the hip and said something that they edited from that interview. I regret how I said it, but I don't regret the message. I looked straight at the camera, and I said, "It doesn't matter how smart somebody's supposed to be. If it takes a life threatening illness to recognize that one day you're going to die, then you're an idiot." And it was harsh, right? I mean, they cut that from the interview, but there's so much truth to that.

Just to recognize the importance that not only are we here temporarily, and we don't know how long we're going to be here. We could live well into our '90s or we could be gone next week, but that extends to everyone we know, all of our loved ones. So, the idea of us always being of that so that we have gratitude for the time that we have, the experiences we have, and the people that we have around us because we've all lost people. I'm sure you guys have lost some friends, and it's been unexpected, healthy people who, for whatever reason, kicked the can early, or loved ones. It's just the reality of life.

I just think it's so important to try to recognize that. It probably takes work, I think too, Ben, for plenty of people, and that's okay. But as long as we're willing to put that work in, and this is what I'm talking about, is when I've read about this behavioral studies on life threatening illnesses, or people who have overcome, and for a short period of time, they have cherished life more, but it's often usually, usually more often than not, it's just a short period of time. So, they recognize and cherish their lives. They recognize the mortality, but it doesn't take that long before they just slip into the same old way of thinking instead of really appreciating everything that they have and everyone they have. I think it's just something that we probably need to take moments to, just short moments to reflect on from time to time, all of us.

My mom had breast cancer, like a very serious diagnosis when I was 11, and that was a mortality realization. And it's a blessing and a curse. It's good to be mindful of the fact that life is finite, but it also kind of sucks. It's a ...

Yeah, it can be a gift as well though, because you know that you've got to also live for the day. I mean, the idea of saving all of your money for tomorrow is quite foolish because tomorrow might never come. So, to have that balance between like, I say, have one eye on today, always have an eye on today and always have an eye on tomorrow. So, don't live La Vida Loca and not put away money for your future. Make sure that you at least have some kind of balance between the now and the later because people are living longer. And so many people who could end up living well into their 90s and beyond. I certainly hope that the three of us do, and that we're relatively healthy.

I want to quickly read the quote that you said to that reporter because the way you said it a minute ago, not quite as aggressive as the way it's written in your book. "If you need your own life threatening illness to recognize that one day you're going to die, then you're an idiot." You can't regret that quote too much. That's pretty good.

They cut that quote from the interview. That was the only thing that I think they did cut too.

It's funny. You mentioned gratitude. How does gratitude contribute to a good life and how can people incorporate gratitude into their lives?

I think back to what we were talking about earlier, just reflecting on it. A friend of mine, a fellow by the name of Bill Green, who I met when I was in my 20s. Like a lot of people, he'd been through a lot of ups and downs in life, and he would write these little sticky of notes that he would put on his mirror, and he would actually say these things. It sounds kind of dorky, but he would write down what he appreciated, just a little note. He'd just stick that on the mirror. He might take one off and then add a new one a few weeks later, and he'd actually say them out loud in the morning. It sounds like a bizarre ritual, but this was something that helped him, it grounded him, and I reconnected with him recently.

I hadn't really spoken to him for years, but reconnected with him and asked him like, "Tell me about this." And he says, "A lot of people don't think they have time to do that or to do a gratitude journal." But he said, "People don't have time not to do that." That's how he put it. When we're looking at research on gratitude journaling, it doesn't have to be anything dramatic, but just taking some time once a week just to write down what we appreciate. So, focus on one thing and then write half a page in a journal about it. Instead of listing off items, just take one thing, take one person that you just really appreciate having in your life and just writing it down. A lot of research has been done on gratitude journaling, and it has a surprisingly long-term positive effect on people's actual moods, which I think is really cool.

There was a study done on people though, who were suffering from depression. It was the first one. I think it was done in 2017. A lot of people were wondering like, does this affect people who are actually struggling with depression already? People, they went, obviously they were going through counseling. They had three groups, one group that was going through the counseling sessions, and then a second group that was going through counseling and gratitude journaling, and a third group that wasn't going through anything. But they found that the group that was going through the gratitude journaling, plus the counseling, ended up in a far better place than the people that just went through the counseling.

And obviously better than the people that weren't doing anything. I think it's an important thing. I don't know about you guys, but I've done it from time to time too, where I've had periods in my life that were, I guess a little bit challenging when I've written things down, like I've written down what it is that I really appreciate, which then allowed me to see and reframe some things in life where a lot of the things that might have been bringing me down or upsetting me, they weren't necessarily as epic as I was making them out to be.

But it put everything into perspective when I would recognize the things that I was really grateful for. When you recognize those things and think about, perhaps what your life might be like without them, or the difficulties you might have without them, I think then you really hold tight and appreciate them. I think too, just that awareness allows you to appreciate other people, allows you then to prioritize spending time with people, people that you love and respect, reconnecting with old friends.

When you're looking at, I know the study that Bronnie Ware, the palliative care nurse in Australia, where she would ask people about the regrets of the dying. I know Daniel Pink wrote a ... I think just this week is releasing a new book on regrets. And he and I had an email conversation about that. And he was saying his research is very much aligned with what the palliative care nurse, Bronnie Ware, found. And it's that when people are in the latter stages of life, the things that they regret aren't having more money or buying better cars or a better house. It's relationship based, and not just relationship based with them and others, but relationship based with themselves.

They wish they were truer to themselves from an earlier age. So, this brings in that sort of, Cameron, you mentioned that you shaped life satisfaction chart, which shows that life satisfaction ends up high when we're in our 20s, and then again, then it drops, and then it improves when we're into our 50s. I don't think we need to do that. I think we can end up embracing gratitude in our 20s and 30s and 40s, and the things that we appreciate so that we don't end up ... I mean, to me, it's a bit of a waste, isn't it? To actually get to your fifties before you're actually feeling true to yourself, great about who you are.

We have the top five regrets of the dying that's in our notes here. I'll read them quick. People wished they had lived true to their values instead of living the lives that other people expected of them. They wished they hadn't worked so hard. They wished they had the courage to express their feelings. They wished they stayed in touch with old friends and they wished they let themselves be happier instead of falling into boring routines. Pretty powerful stuff.

Yeah. All relationship based, isn't it?

Yeah.

Andrew, our podcast has an online community, which I know you know about because you've participated in it. People discuss all kinds of things related to personal finance or investments or decisions that they're making or whatever. How important do you think it is for people to have that kind of support network of like-minded people?

I think it's really important. I was thinking about churches like Christian churches, mosques, Buddhist temples. These people though, have a set of values or an ideology, but if it weren't for their central meeting places, I wonder whether those actual religious beliefs would've perpetuated over time. I see these online communities as potentially much the same. We've got these like-minded people who are reinforcing whatever their beliefs happen to be amongst themselves.

That's really interesting. How do you think index funds contribute to a good life?

One of the things that a guy said to me when I first started to invest money is he said, if you become financially literate, you can do the job that you want to do and not have to chase a higher paycheck. I think, with index funds, there's that essence that, if I'm choosing indexes over actively managed products, especially when you look at the fees associated with actively managed products in a country like Canada, feasibly, I could end up with twice as much money when I reach retirement age as I would have with active managed products from a major Canadian bank.

This can allow you to, I think, not necessarily chase a position just for the money. You can end up doing something where you might be more passionate about it, even though it ends up paying you a little bit less, knowing that if you invest in something like index funds and you're financially literate, with respect to your spending, yeah, I think that it can enhance your life satisfaction. Because when you're working, if it's a job that you don't like, you're basically prostituting yourself. Now, if you have a choice, if you don't have a choice, that's one thing, but if you actually have a choice where you could do something that you kind of enjoy, this is awesome. But if you're doing something that you don't like and just chasing that dollar, you're giving away pieces of your life to an employer.

It's crazy to think about because it probably goes the other way too. Like if people think that they can get a higher return with actively managed funds, they might feel like they don't need to take the higher paying job, but the data would say they're wrong, but that might be what they're chasing.

It's hard to say, isn't it? Yeah, it's so hard to say.

It's a good point.

I just presented one angle there.

How do you think an investor should decide whether to manage their own stuff, like become financially literate, and take the time to do their own investments in financial planning versus hiring somebody else to do it?

Yeah, I wanted to ask you guys, what you guys thought about that myself, that actual question. I would think about, how complicated is your financial situation? Number one. So, if it's more complicated, then yeah, it can be a better idea to get some help. And then two, emotionally, I mean, do you want to be putting in the time managing your own money. With a financial advisor too, it's not just about them helping you with your investments. There's far more to it than that overall, holistic financial planning, goal setting. That role is a lot more than I think a lot of people think it is.

Yeah. I agree with that. I think that there's also an aspect of, how do you value your time? Because some people love trying to do this stuff on their own, and if somebody really enjoys it, then maybe it wouldn't make sense to pay for it. Whereas if somebody, like I personally am happy to pay for ... I'm not in my office right now, as people who are watching on video will know, because there's people in my garage, which is where my office is, replacing our hot water tank. I'm very happy to pay for stuff like that.

I think if people want to offload those tax, I think complexity's huge. When you asked, how would we answer the question? The first thing that I would've said is complexity, which is also the first thing that you said. Then there's, related to that, is the ability, because obviously, with more complexity, it becomes like objectively harder to do. Yeah. So, I would say similar to stuff to what you said, Andrew.

What questions would you suggest to someone is hiring an advisor? What kind of question do you think they should be asking before they do make that decision?

The first question I think would be related to the products that they would be recommending. So, index products, ETFs, and only index products and ETFs would be one. I'd written this down in my book, and I'll list them out here. Do you only invest with low cost index funds or ETFs? First, how do you earn your money? So, is it based on commission? Because if it's based on commission, there's a conflict of interest and we don't want an advisor who's getting paid based on commissions or potentially high trailing fees.

Does your firm use research to forecast the economy or the market's direction? That would be a great question to ask because most firms will tell you that they have some kind of proprietary service where they can predict what's going to happen, or at least watching the economy and forecasting. If they say they have any of the sort, runaway. That's not the sort of firm that you want to be investing in. Ask if you can see a model financial plan and portfolio. So, if you're sitting down with an advisor, ask them to actually show you what a model portfolio would look like and explain it to you, explain the plan to you.

If they can't explain it in a language that you can understand, that's not really going to be a good fit, because you have to be able to understand what it is they're expressing. Obviously credentials help. So, we all know that you can walk into a major Canadian bank, there can be somebody there who says they're a financial advisor or a representative for the bank selling mutual funds and they've got like a Canadian securities course under their belt, which isn't all that thorough.

So, something like a certified financial planning certification is worth, definitely worth looking at. I would ask some questions too about, and I guess it's the interview process can work both ways too, where clients can be asking the questions, but advisors should be looking for the right fit as well. But one of the questions I would be asking is like, tell me about your financial story. Are you somebody who's actually tracking your finances, and what you're spending, and what are you invested in? I would ask that as well.

Good questions. Do you think people that have financial advisors can afford to take more equity risk than DIY investors because of the behavioral coaching aspect?

I think they can afford it, but I don't think they do it. I'll back that up and I'll say that I've been looking at a lot of Facebook forums, investment group forums, financial independence groups, and such, and most of the people I see are 100% equities. I think that 100%, or maybe they'll have like 90% equities and 10% bonds. You've got this period of the last 10, 11 years where the markets have essentially just gone up. So, a lot of these people are new investors who haven't necessarily experienced a massive crash, so they don't really know what their risk tolerance is.

They have these really high risk portfolios versus, let's assume somebody goes to like a firm like yours. You guys are going to do a far more thorough risk assessment with them. And my guess is that far fewer of them are going to be picking 100% equities just because they're going to have a broader sense of the historical realities of it. When I started with that question, I said, they could. They could afford to go higher risk because they have a gatekeeper, like when they freak out, there's somebody who can talk them away from the edge, talk them away from speculating, which is hugely important.

Because I often look at, you see, portfolios with higher stock market allocations versus bonds, we see the historical returns on those, and they're higher, but it's not necessarily how the portfolio allocation performs. It's how the person performs with that particular portfolio allocation. So, when I look at the results for funds in the United States based on Morningstar's asset when we look at cashflow analysis, to see how investors actually are performing in these multi-asset class funds, like Vanguard's target retirement funds, they actually behave reasonably well, and better in fact, than a lot of investors who are going 100% equities.

There's that gap when Morningstar publishes the research, in their mind, the gap research, like how do the funds perform and how does the actual investor perform? When looking at, and I remember Morningstar used to make it really quite clear with different mutual funds, and DFA's one of them. I always found it really interesting to see how the behavioral gap with DFA funds was a lot lower than it was with say Vanguard's individual indexes. I think one of those reasons is that there's a gatekeeper.

With DFA, I mean, traditionally, you haven't been able to just buy them. You needed to have a financial advisor, and that financial advisor also drinks a certain Kool-Aid. I mean, trained to understand that, and practice the fact that we can't forecast, we shouldn't forecast. We should maintain a consistent allocation.

Yep. We've drunk that Kool-Aid too. I want to follow up on your comment about all the people that you see in the DIY forums being 100% equity. Do you think that's smart for them?

They think they understand their tolerance for volatility, Ben, but they don't. Again, just like with Daniel Kahneman, when he says, "We don't know what will actually make us happy in the future," we don't know what will make us scared to death in the future either with respect to market declines. So, the idea that we could get a market decline such as we had in 2000, 2001, 2002, and then that other drop that went down to March of 2003, three straight years of market declines.

Then too, looking at Canadian dollar terms from 2000 to 2013, everybody's favorite stock market right now is the US stock market. That was everybody's favorite stock market in 2000 too, right up to that point. But for 13 years, you wouldn't have made money measured in Canadian dollars. Then, of course, it's probably 14 or 14 and a half years whereby you wouldn't have actually beaten inflation in Canadian dollars either. That's a long time to wait.

I don't think people really fully respect that when they're investing today, because everything has gone up. I think this is pretty easy. They tell me things like, "Well, I can tolerate volatility because I was able to handle what happened in 2020." When someone says that, you know they don't understand, because when someone says that, you're like, that was a blip for a couple of months, and I think the year of 2020 ended up a 20% gain the calendar year growth for the US market anyway. So, no, I don't think that most people can have 100% equities.

Maybe a better person to ask is someone who's been investing in value stocks for the last 10 years.

Another case in point, right? Yeah. I mean, sticking that through.

Can you tell a short version of your ghost story from your book? Because I thought that was a brilliant analogy to think about the personal risk assessment.

So, if you asked me on the street like, Andrew, do you believe in ghosts? I'd probably say no, but when I was in Singapore, I took a bunch of kids to an island and Indonesia, and we ended up, it was super remote, we ended up hanging these hammocks in between these trees. We had a guide there, an American guide, and we slept the night. I woke up in the middle of the night and there was a woman standing beside my hammock who threatened to kill the kids. And it was a dream, but it was a triple dream.

It was a triple dream where like I woke up after begging for my life and begging for the lives of these kids. I woke up sweating. I'm on the equator and I'm freezing cold and sweating. I'm freezing cold. It's 30 degrees celsius the middle of the night and I'm cold. There she was again. I said, "I swear we'll never come back." She says, "Never come back? I told you not to come." It scared the hell out of me. So, this happened where I had this triple dream, woke up. I was talking to the guide as we were hiking out of there. I told him about it, and he was really quiet, and he said, "Andrew, we had a really hard time actually getting a permit to camp there because the locals told us we couldn't, and that it was haunted."

And that what had happened was the Japanese had come through and they had slaughtered an entire village right where we camped. Nobody lived there now. They'd slaughtered an entire village. So, I said to him, "I'm never going back there." If I were transported there right now, and I'll say to you, if you ask me, Andrew, do you believe in ghost? I'll say, no. But if you transported me there, like Star Trek style, I swear you guys, my bowels would release. I would run across those rocks in that jungle like a man who totally lost his mind, and I'd completely wet my pants.

What I think, and what I say, is completely misaligned with my actual reality. I will say, "I don't believe ghosts." I will tell you that. I won't tell you that in that jungle, if you send me there, but that whole disconnection, I think, happens with people with respect to their tolerance for risk that comes to their investment portfolios too. Yeah, I can handle 100% equities. Well, when you're given your own metaphorical jungle, no, you probably can't.

I think that's brilliant.

You mentioned to targeted funds, which prompts me to ask you this question. How do you think investors should decide between, and they're quite widely available now, these one decision globally diversified, either ETFs or mutual funds, between that and say a more complicated portfolio optimized for things like asset location, the value or small cap, profitability tilts, any thoughts on that?

Yeah. I think that the more moving parts for a DIY investor, the more challenging it's going to be. I've got a friend who's a financial advisor, who can manage money for his clients, but for his own personal money, even he ends up speculating. What he's done is he's recognized this weakness and he's actually given his personal portfolio to one of the guys he works with. He's like, "I can't do it. I can't do it with my own money. I can do it with my client's money, but I can't do it with mine. So, you manage my money for me." That's somebody who's been through a lot of training, understands market history, understands obviously how tempting speculating can be and how detrimental it can be long-term.

He gets all that. Behaviorally, he can't actually do it with his own money. Now when we're talking about a typical DIY investor, I would say, in most cases, I think most of them would be far better off, just with an all in one portfolio ETF, where there's less for them to do fewer moving parts, less temptation to speculate.

What are some of the things that parents can be doing to get their kids started on saving, spending, and even thinking about all the other stuff, the living well stuff?

Yeah. My sister used to split the money into thirds, which would be really common, like for the kids' allowance. Like, here's a third that you can spend on something that you want, anything that you want. A third would go to charity, kids would've to pick the charity. And then a third that would go into an investment for their future. I've spoken to some parents who have said that, when they match the contribution that their child is making to their investments, their children are more encouraged to actually do the investing, or to invest that money.

Because it's not money that they can see or spend right away. But that little carrot that shows them, much like a US corporate 401k, where it's a life lesson, so people can end up, as a parent, you can match what your child is contributing, and hopefully encourage them to save for the future and get them thinking about that.

What's your thoughts around the traditional view of retirement where people have a whole career, then just do a hard stop at the end?

When I was in my 20s, I thought that was awesome. I thought that idea was awesome. Now, I recognize that, like for me, I continue to work, even though, theoretically, I'm financially independent, but we need a sense of purpose. We need to keep engaged, we need to keep interacting with other people, and work, in some capacity, helps us do that. Research on that suggests that we live longer when we are able to maintain some kind of work related engagement through our latter years. What it also does too, I think, Cameron, is it alleviates a lot of financial stress as well.

If somebody is earning $15,000 a year through a part-time gig that they enjoy, based on something like, let's say a 4% inflation adjusted withdrawal rate, I think you need something like $370,000 to throw off $17,000 of annual income or annual spending. So, it alleviates a lot of financial stress too, I think, if people feel that they could continue to work. People do live longer as a result of that too.

How seriously do you think people in Canada, for while we have people that listen to the podcast all over the world in Europe, Canada, the United States, and elsewhere, people living in countries like, or places like that, how seriously do you think they should consider spending a portion of their retirement in lower cost living countries?

It's a good question, Ben, because there are people that will move to a low cost country, or spend winters in a low cost country just for the fact that it's cheaper. I think that should be secondary. I think that the primary reason to spend time in a different country in the winter or move to a low cost country period would have to be experiential. Like you actually want to experience something new, something novel, new cultures, but the money shouldn't necessarily be the top priority, because I think a lot of people who end up going down, and making that their priority, they think that they're going to end up living a life that they would live in Toronto.

It would be like little mini Toronto or little mini New York. And it's not going to be. It's going to be entirely different. So, if they're open to differences in different cultures, and if they like to travel, they like to embrace things that are new and novel, absolutely. It's awesome. It can be a game changer with respect to retirement.

What hesitations do you hear people having about doing that, and how do you respond to those hesitations?

Yeah, I think, anything that's unknown is frightening for people. I know that when my wife and I traveled for 17 months in our camper van in Central America, we'd get comfortable with the country, but every time we went to another country, another border, we would hesitate. We would be fearful, and it was just because it was unknown. I think, for a lot of people, the unknown can be quite frightening. So, if they're going to do it, dip their toe in there, like take a short vacation, and then spend a little bit more time, and then maybe rent an Airbnb for three or four weeks, and get a sense of whether they would actually really enjoy being there or not before making a full-time decision.

Makes a lot of sense. All right, Andrew, I'm going to try not to laugh when I ask you this question. I'm already laughing. The word poop makes three appearances that I found in your book, and one appearance for poo, and we were talking about this before we started recording, and you said that there's also a fart in there that I missed when I read it. Now, that was a first for me reading personal finance books. I just wanted to ask you, do you think people take themselves too seriously?

I think you know the answer to that. You're asking me, and I'm just this professional clown. Yeah, I think a lot of people do. I think it's fun to just try to embrace. I mean, some people listening to this are just not going to relate to this, but each day, just try to embrace your inner child with something. Laughter is awesome. Laughter is healing as well. I mean, we heal with laughter. Yeah, I think a lot of us, as we get older, we end up taking ourselves a little bit too seriously, and we have to be able to laugh.

I got to say it was strangely refreshing to read all those poops and poos in a book about money.

Thanks, man.

We talked about success at the top of the conversation and also the last time you were on. I think we'll invert the last question that we normally ask for you. So, what is your definition of failure instead of success?

I think it's not behaviorally understanding that life is finite, not just our lives, but lives of our loved ones as well. We can understand that on an intellectual level, but to understand that on a behavioral level is really, really important. Failure is not understanding that on a behavioral level.

Very good answer. Since you're a repeat guest and a friend of ours, you want to stick around and we'll do some of the talking Cents cards?

Let's do it.

We've never done this in a guest episode before. So, I pulled some cards ahead of time, because we were starting to get into repeats with Ben and I, so here's the card. We'll let you go first, Andrew. If you could try any job for just one month, what would it be?

Andrew Hallam: Personal trainer.

Cameron Passmore: Ben?

Ben Felix: Carpenter

Cameron Passmore: Me, I would be a lead guitarist. I'd love to be a lead guitarist in a band, a popular band. Okay. Ben, I'll let you go first in this one. Would you, I know the answer to this, would you rather follow a path laid out for you or set a path for other people to follow?

Ben Felix: Set the path.

Cameron Passmore: Set a path for others?

Ben Felix: Yep.

Cameron Passmore: Andrew?

Andrew Hallam: Yeah. Who wants to set something or follow something that somebody else's planned entirely? Yeah. I think we have some kind of element of free will. Right?

Cameron Passmore: All right. Three for three, I agree with you guys. Okay. Andrew, imagine you have reached your financial dreams. What words would people use to describe you?

Andrew Hallam: I hope they would be the same words they would use to describe me if I hadn't reached my financial dreams. So, I hope they would be words like kind.

Ben Felix: We've had that question before, and Cameron and I gave the same answer in the past conversation. So, we're all in agreement again.

Cameron Passmore: Here's an interesting one. I know we haven't had this one, Ben, let's say I don't think we have. Some people say that fans' cities and/or players should own professional sports teams rather than individuals. Do you agree or disagree? Ben, you've got a sporting background.

Ben Felix: Holy smokes. Well, in principle, sure, but that's kind of communism, which ...

Andrew Hallam: I wanted to say the same thing.

Ben Felix: Which empirically, it doesn't work out so well. Would professional sports be what they are now, the just capitalist disgusting pig monster that people love to watch? Which is what I think professional sports largely are. Would they still be the same? Would they be as entertaining under the communist model? I don't know. I don't know the answer to that question. In principle, sure. But communism, in principle, sure too. Just empirically, not so much.

Cameron Passmore: People love their teams any more than they do now? I mean, people are crazy about their home teams now.

Ben Felix: Yeah. Well, in the States and Canada, well, for hockey in Canada, I guess. It was striking to me in the states when I went to play basketball, even the university sports is just this massive institution. And in Canada, not so much.

Cameron Passmore: Andrew, any other thoughts on that?

Andrew Hallam: No, I think I would echo most of what Ben has said, communism in the south doesn't seem to work, and it does sound kind of communist, doesn't it? It would become so inefficient, I think. And ultimately, somebody would take control. It's sort of like Animal Farm, looking at pigs around the table, there would be somebody who ends up taking control, so you'd come full circle anyway. It's just human nature.

Ben Felix: Yeah. That's an interesting point.

Cameron Passmore: Would the experience be as creative? I think the whole delivery of these sports has become incredibly creative, both live and on television.

Ben Felix: Yeah, without the capitalist incentives to do that. Yeah.

Cameron Passmore: I don't know.

Ben Felix: Probably not.

Cameron Passmore: Neat question. Andrew, this has been a blast. Congratulations again, in your book, and I think it's terrific, I think it's an important book, in addition to being a good book, but thanks so much for joining us.

Andrew Hallam: It was my pleasure. Thank you, guys. It was awesome to have this conversation with you guys, and I hope to meet you guys in person.

Ben Felix: That would be great.