Mastering Your Finances: Insights from Evan Lucas

Bryce: [00:00:31] Welcome to get started investing a podcast where we help you learn to invest in 15 minutes or less. Each episode we take a real world business story and apply a key investing lesson to help you build your investor toolkit. If you are joining us for the very first time, welcome. We strongly recommend that you scroll up and start at episode one. Now, while we are licenced, we are not aware of your personal circumstances. All information on this show is for education and entertainment purposes. Any advice is general advice only. But with that said, let's crack on. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you going? I'm very good, Bryce.

Alec: [00:01:07] I am a lot better than I was last week.

Bryce: [00:01:09] Yes. Good to have you back. 

Alec: [00:01:10] When I was struck down with COVID. 

Bryce: [00:01:13] Yes. 

Alec: [00:01:13] And as a result, we have got something a little different for our episode this week rather than doing our 15 minutes or less. One news story, one lesson. We've got a recording from FinFest. Yeah, but this guy might have been the most popular person going around at FinFest. 

Bryce: [00:01:31] Yeah, he drew a massive crowd, which was great to see. And we would love to be able to support Evan Lucas, who has been on Get Started Investing before. And we're really pumped with this episode, which is titled Mind Over Money. 

Alec: [00:01:46] Yeah, that's also the title of his new book. And suffice to say, we were kicking ourselves when we saw he was giving away his book and we didn't bring one copy of ours. But, you know, so much of investing is about mastering your psychology, and that's really what Evan's book is. 

Bryce: [00:02:03] All about. So we recorded Evan's session from FinFest, and we're going to throw to that in a second. But before we do, just a reminder. If you want to hear any of the sessions from FinFest, from any of the domes or from the main stage, they were all recorded and they're all available on the Equity Mates YouTube channel. So head over there, youtube.com slash Equity Mates, I assume. Or just Google it. They're all there. Now before we go, we've got the Australian Podcast Awards coming up next week and we're up against some of the biggest podcasts here in Australia for the People's Choice Awards. We would really appreciate if you could head to Australian Podcast Awards dot com slash vote and cast your vote for our Equity Mates Investing podcast. If you appreciate what we do, if you're taken value from any of the podcasts in our network, we would really appreciate if you could to throw a vote our way. We are up against some absolute giants in the industry. Any vote would be appreciated. We'll put the link in our show notes, but it's Australian Podcast Awards dot com slash vote. It'll take, you know, more than 2 minutes to cast your vote. We are incredibly proud as well that we've been shortlisted for publisher of the Year, The Dive is Up for Business Podcast of the year and a superannuation campaign last year with Super Hero is shortlisted for Commercial Campaign of the year as well. So really proud here at Equity Mates that we've been shortlisted, but we would love if you could support us and throw out the vote. Australian Podcast Awards dot com slash vote. But Ren, let's hear from Evan.

Alec: [00:03:32] Let's do it. 

Evan: [00:03:35] When I came into this industry, I've been in it for 15 years. I was absolutely straight out technical. I have background in economics and I love economics. I also love speaking and you'll get a very big, clear indication that I don't shut up. So I do apologise for that. But my background is also behaviour and the reason I talk about that is that you're going to hear a lot of stuff today and you're going to hear a lot of, you know, points about how markets work and all that kind of stuff. And I can talk to you about that too. The cows come home, but what my biggest thing is, my biggest learning and my biggest understanding has happened over the last 15, 20 years is that actually it's behaviour, it's your experience, it's your partner, your kids, your mates, your family, your job, the interactions you have it. Those that are actually more important to what you are going to do with your money, and that is the learnt behaviour that you've had. So this is the question that I think to start today and to start your journey of you starting, you're in the middle of your journey or you're experienced in, you have to ask this question to your self, what is money to you? Because I promise you, there's 50 people of you sitting in here. You are you, I am me. And what I mean by that, what money is to you, will be completely different to the person sitting on your left and right. And it's going to be completely different to me. And the reason for that is because what I want to do with my money and how I want my money to work is going to be different to what you want. Some of you are going to want money to get you from A to B, some of you are going to want to make a lot of it. And that's great. Some of you are going to want what I believe is the most important thing, which is that you want financial freedom, because according to the Journal of New England Psychology, the most important thing human beings want in their surveys, their studies and all of the. Research they've done is autonomy. It is our number one thing that human beings want. It is autonomy. The ability to do what you want, when you want, how you want, because that is exactly what here to do. I mean, with if you look at it from that perspective, all of a sudden things start changing in terms of how you look at your money because your money is designed to help you do that. Because if you think of it in another way, doing what you want when you want, how you want can be answered is your money should be there to help you to do what you want, when you want, how you want to have that freedom, that financial freedom to do those things. So that is literally making sure that your money is spread out over time. And this is the other part. Time is something that human beings don't fundamentally and physiologically get right. Time is a concept that we know exists. We have it, but physiologically, we're exactly the same as we were 30,000 years ago. The difference is our lifestyle back then is what we called instant return. You found food. You ate food, you found shelter, you slept. Now think about the thousands and thousands of choices that you make every day. What food to have. What are we going to have tomorrow? What job am I going to do in a couple of years time? Do I need to change career? How much money do I want in retirement? Those are the questions that of talk about time and that's called delayed return and why delayed return is so fascinating is that we do not like it right. We are not geared to understand about it. But money is a big part of that because money needs to be here today, tomorrow and beyond. And that is like one of the beautiful things that Australia has done is not perfect but it works is you superannuation and why I say super is amazing is because that is your beyond money. Now I'm looking around this room and a lot of you here, I can see you're under 30, right? And to talk to you about your superannuation is so foreign because I'll be honest, I'm 38, although I might look like I'm 50 with the grey hair. It's all about the idea that I know that as an Australian male, my average lifespan is 84, so I have to live my life and some again before I apparently will, might pass away. But at least I know that when I get to the age of now 67. But realistically, it's probably when I get to that age got to be 70. There's money waiting for me. So for me, the other thing that's really interesting about the studies and why you guys are fascinating to me is that the other thing that human beings have as a scenario is what we call hyperbolic discounting. And hyperbolic discounting is that actually the shorter time that we have for return, we actually want a boatload more. So that's why and again, I don't want to talk about anything else around here but New Age investing and making double digit returns is so attractive because it's what we as human beings believe should happen. So you are more likely to believe that in a year you should be out to get 20% per annum. Whereas if I was to ask you what your longer term view is, you're probably going to say it's going to be about 9%, maybe even as low as 5% per annum. It's not what you'd expect. And that's why we're beautiful things. That's why human beings are what they are, because we are so unique and we are not rational. We are reasonable because we make reasonable decisions all the time. But they not necessarily the best economic or the best money decisions that we could make. So moving on to my next slide, which doesn't really matter, it just says about money behaviour. And the reason I want to talk about money behaviour is everything I've just talked about is what I've written about in my new book, which I'm not here to pump, but just to get you to understanding that the reason this is called mind over money is that all of this stuff is what fascinates me. And for me, it's all about helping you understand that because the next day's talk about money behaviour is also, as I said, ingrained in it. You guys are sitting in a room being completely silent because you innately know from your biases that you're here to be quiet, to listen to me, even though I'm probably talking a lot of rubbish. But that is because you know, that's the right thing to do. You also know that if you were to meet one now the king, but the queen, right? You know how to behave around her. That is what we call innate biases. It's the social cues that you just get. You know, you're my body language, obviously. I'm talking a lot. I'm quite loud. You can read that. And you know, when you meet somebody new, how to be direct with them. But you also can sometimes get that feeling that something's a bit different about them if they have a like a body language that you can't rate. That is what we call a night bias in psychology. That's a night biases in money. They're. Really strong. Really, really strong. So. The biggest one, the biggest study ever done by this was an American economist who won a Nobel Peace prise for it as well. His name is Daniel Kahneman. If you don't know who he is, he is absolutely world famous. But he did all this and one of his big studies is loss aversion. And in money, loss aversion is huge. And why that matters is because this is the way to think about it. He did a different study and I'll let you read my book about it. But if you were to put your hand in your pocket now and all of a sudden you found by just pure chance 50 bucks that you didn't realise was there, you'd get a small elation out of it, probably loss at maximum a couple of hours. Let's say you knew that $50 was there and then you've gone to find it and it's gone. And no matter what you do, you can't find it. You are more likely to fix. On that note, just for the day you could actually fix on it for up for several weeks. That is your innate bias around loss and that's why money is so fascinating around it. So when you're investing, this is the hardest thing about investing. You need to expect that when you invest, there's going to be some loss. There is going to be times where all of a sudden right now things are pretty scary and learning to deal with the ugly and scariness that comes with investing. Because what you are doing again is something that human beings don't like doing, which is that you are taking risk and risk has returned. It also has downside and risk reward is what we're here to do. And that's why time is what I talked about before, because time heals all. So the reason I always talk to you about, you know, the average return of the index over the last 15 years is 9%. What is the last time the ASX returned 9%? I know you can ask because you all got headphones on and never, not once in the last 15 years has the ASX actually given you its average. The closest it got was 2016. It gave you 11% per annum, right, but the average is 9%. But right now the ASX is down what, 12 and a half percent year to date if you're invested overseas in the States it's down 23%, forgetting that last year the S&P 500 gave you 24 and a half per cent and in 2020 covered. It still gave you 15%. Longer term investing. Tough work because right now, everything scary. Ugly, really scary. Ugly. Human psychology. And it's about understanding your behaviour and the West. Why? And what I'm so lucky to do with who I work for, with investment. The way to talk to you about this and help with your behaviour is I present it to you so you can recognise it. And that's what I try to do in my book. But B, it's about education. Education is so incredibly important and it's as simple as understanding, you know, how you actually start investing. Or it's also about understanding about money psychology, which is what I'm talking to you about now, is also about learning to deal with strategies, positioning your money for today, for tomorrow, and for beyond, and what you can do to help that. To also you start to make you understand from an educational point of view that you do not need your money to be there right now. Again, that's that time scenario. I bet most of you in here because you're here for a reason, you're engaged with your money. So the beauty of this is that I don't have to talk to you about things like spending and things like debit, etc., because you guys are engaged. But a lot of people that are in this room are what I call savers slash investors and savers, particularly a really interesting because they want their money to be right there in front of them. And I promise you, I can already see giggles in my face in front of me is that I bet you a lot of you sit there and open up your CommBank app or you open up your NAB trade or you open up your banking app almost twice three, four or five times a day to go check it out. I've got money in my bank, right? Because it's physically there, although it's electronic numbers now, it's physically there in front of you. And that is something that your overall mind goes, great, brilliant. I've got money, but it always has to stay like that. And that again, gets back to that question about how do you deal with time? How do you deal with the idea? Actually, if I took 20% of that and said, I don't need that today money because that's what your bank account is you today money and took 20% of that and put it to tomorrow and by tomorrow meaning three five days away because tomorrow it could be tomorrow it could be a year or it could be five. And one of again, what I try and talk about in the book is also be really honest and I'm really honest about my experiences. So, for instance, your life isn't linear and particularly for you guys that are younger, particularly for those of you under 35, you're at a point in your life now where your career is probably moving really fast. You're probably starting to advance quite nicely. Things are starting to really happen. You've probably started to see an increase in your pay and it's a very exciting time. What I found was exactly that and I was on the up and up and then all the sudden some formal event will come along. Now whether that's a GFC. Now I learnt through the GFC, which was fantastic and still things happened for me, but independently for me. All of a sudden I realised that I couldn't go any further in my career at where I was. So the ability to also and that money that you're currently earning, what if it was to go away tomorrow? And that's tomorrow. Right. That's what I mean by tomorrow. What happens if the job we had was to disappear? How would you behave? How would you react to that? What would you do? And so it's about understanding that if your money is waiting for you for tomorrow, all of a sudden that isn't as scary. That isn't as life changing, losing your job or having to go into a new career. Or if you do need to step off the precipice and actually change your direction, your money is waiting for you. Your money's there to help you because, again, that's financial freedom. That ability that your money is actually giving you the freedom to do what you want. When you want. How you want. So that that is a way of thinking about it. So for those of you that are cyber and they have five money personalities, sometimes I say this ten cyber spend a debit to an investor and an ignore. You guys are really, really important for that last one because you guys are engaged with your finances. Ignore us, ignore those of your friends. When you ask them like, where does your money come from? They will literally go, I don't know what eBay, how much you've got your back. Me? I don't know. I don't check. I don't care because money to them just comes. But they're also doing it because there's a choice, right? There's a choice. And choice comes with the other human emotion that we have a problem with, which is mistake. Right. And humans hate making mistakes. So if you don't have to make a choice that happy days because I can't make a mistake. So ignore is for me one of the most fascinating people in money because they are the ones. They're not necessarily in huge amounts of debt. They're not ones that are huge spenders. They are just so as well is ignorant of their money because they want to be. And they're the ones that I didn't trust you guys to go and talk to because once they start becoming engaged with their money, they can also start to find what you guys are here to do, which is finding financial freedom, learn about investing, understanding the the ability and the freedom that comes with having that level of money behind you. And that's what is such a fascinating thing about it. The final thing I'm going to do when the last time that I've got getting back to education, you're all at different steps in your career. You're all in different steps in your money line and you're all at different points. And you'll also have different views about what markets to be in. So the Australian dream is a fascinating one. Property in this country is absolutely one of the most fascinating things from a behavioural finance perspective, because the thing about a home and why we love it from a money perspective is that it's completely tangible. You can touch it, you can feel it, you can change it. So if you want to spend money on it and change it, you can because that is the advantage of a home if you want to invest in it. Same thing. Not only that, you can go like your money in your bank account. You can go and say it right. It's physically there, whereas a share or a bond or what have you is again just something on a screen. So this is where the next thing to talk to you about is understanding that today, tomorrow and beyond is also about understanding the difference that there is other asset classes that work in that time. Cash is clearly today, but that also means that things like fixed income is probably tomorrow because it's not as it's a little bit more risky than cash, but it gives you some return properties the next step up there as well. But understanding that property is what I refer to as an asset inside your overall elephant paradigm. What's the elephant paradigm? I've got kids about a four year old and a 11 week old child. And the reason I talk about them is because I get to hear all my four year olds jokes about things. And so the old adage of the elephant about how do you eat an elephant, one bite at a time, and why I talk about that and where education and where behaviour comes in on that is that human beings also when it comes to their money, look at individually, you look at the bite of the trunk, you look at the bite of the foot. You've got to see your elephant as a whole. You've got to say your investment property or you've got to see your home or you've got to see your, you know, your money in your cash balance account. You've got to see your shares, whatever it is as a unit. Because if you can't see it as a unit, your ability to therefore understand where your money is at will be really, really impaired. And the reason for that is that siloing, as we refer to it, will make everything look significantly smaller than it is. And that's again, if you sit there and actually do your own personal balance sheet, and that's what it is like if you actually sat and said even, look, if you've got a car, if you've got a bike, whatever it might be in your tired, your career, look at them together as the elephant because that is your wealth, that is your overall wealth. And once you actually understand that, you may actually be in a better position than you realise your freedom starts to come. And again, getting back to that personal experience and I live and breathe this and I do this for a living, I couldn't see that. I couldn't see that. And that was until it was forced upon me to actually go, Oh, actually what I do for a living I do reasonably well. And it was ready for me. My tomorrow money was there. When I got out of my scenario, my money was there. And not only did I have the capacity to have the freedom to do what I wanted, I actually had the ability to take my time. I had time to sit down and go, What do I want to do? What do I want my money to do? Do I want to sit down and write a book? Mm. Well, at that time, which was seven years ago, I didn't think so. But now I have because I can, because my money is offering me the ability to be financially free. I'm not here to tell you that I'm worth millions dollars. I'm not. I don't. And I don't want to be. That's me, though, again. You are you. I am me. What you want and what I want will be different. And that's great. And this is the last part of the discussion. The other thing you're going to find today when you walk around, there are lots of people doing lots of different things and they're going to tell you why their why is best and not. That's great for them. Not necessarily for you. And I want to tell you the same thing. My wife she is my wife. I can also say this, too, in the book and in the education that my employer investment offer. It's about leading you to understanding your what is best for you, because that is how this is going to work. If you can be honest with yourself, understanding who you are, what you are, and what your money will be. You will find that your journey in the investment world will be so much more engaging and so much more rewarding is the word. So that is why we are offering bootcamp, which is something I put together with a colleague from my work in investment together to actually sit there and help you start your journey. Click on to that QR code. It will actually take you to the page. I'll talk to you about it in a minute. It's going to give you my books and I'll come and sign it for you as well. And boot camp, which is normally worth 50 bucks for ten bucks total. It'll help you through money psychology. It'll help you through markets, it'll help you understand bonds, etcetera. But it's also it's for us. We don't we are more about just wanting to help you get the education that we think you need, because financial education is, in our view and definitely in my view, as you can hear, the most important thing that we think we can have. And unfortunately Australians are not great with finance because even from a very, very young age, if you remember at school, financial maths is described as business maths and as sort of given to you as an idea that is the maths that you do. If you can't do maths, that is absolute rubbish. Business Mass and finance mass is the most important mass in your life because compound interest is the most important piece of mass that you can ever learn at school. Understanding a balance sheet is the most important thing that you can understand, because your personal balance sheet is something that lots of people don't get. If you put together what know your apartment, your house, your car, the money in your bag and your bank account actually, is that your balance sheet? But you don't learn about that at school because it's not an education they want to give you, which for me is really sad, really, really, really sad. And it's something that someone like the Barefoot Investor and I have talked about this many, many times that we think should change. And that's why investment and I are so happy to start trying to get as much financial education out there as we possibly can to you, because it's going to help your money journey. It's going to help you ask the question I asked you at the start, what is money to you? Because it is such a fundamental question that where do you start when you're in the middle and when they're at the end of your money journey? There are still people that don't know the answer, and that is fine. But if you can give yourself an understanding of who you are, what your lifestyle is, what kind of lifestyle you want into the future. That money question starts to get a bit clearer. And as soon as you can start to be honest about what your money is and who your money is and how it works, because the next part of it is not just for you, it's for your friends, it's for your family, it's for your kids. It's for your brothers and sisters. It's for your culture. And by culture, this is the last thing I'm sorry. I've sort of jumped around a bit. I do apologise. But the reason I say culture so fascinating is that it's just started to be study in money and it's a really contested area. But culture, I actually believe, is the next part because in the current world where things are getting more expensive, the amount of debt that we hold is getting larger. The weight of fund debt is getting different. There are cultures that do things with money that Australians as a culture and we are fantastic because this room is a perfect example. What a beautiful, diverse nation we are. But that means that those diversity we should be listening to. How do you know the bank of Mum or Dad is a fairly new concept, particularly for those of a Western idea. But in a collective idea the bank of Mum and Dad has been around forever because it's not the bank of Mum and Dad, it's the bank of the family, it's the bank of the village, it's the bank of the group. And those are the other parts of the education that come into those parts. To understand it, if you can bring that money culture, that money thought that money behaviour into your thought process, it will also not only benefit you but it benefits the overall group that you're in. And in the end, isn't that the most important thing? Isn't family, isn't the community, isn't isn't that part of it? As I said, please click on the QR code. Ten bucks for a boot camp and you get my book and I'm outside of with as many questions as you want. Thank you so much for listening, guys.