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Guest: Eric Brotman

Release Date: 1/30/2023

Welcome to Trulyfit the online fitness marketplace connecting pros and clients through unique fitness business software.

Steve Washuta: Welcome to Trulyfit. Welcome to the Trulyfit podcast where we interview experts in fitness and health to expand our wisdom and wealth. I’m your host, Steve Washuta, co-founder of Trulyfit and author of the book Fitness Business 101.

On today’s episode, I speak with Eric Brockman. He is a certified financial planner, and you can find everything about him and his company at DFGF a.com.

No pun intended here, Eric is a wealth of knowledge about wealth. he has a podcast and a book that go by the same name, don’t retire graduate, that is going to be the lion’s share of our conversation today.

I really enjoyed the book, I certainly recommend it and even maybe more so I recommend the podcast he hits on everything concerning wealth and the podcast.

Not just standard Certified Financial Planner talk about, you know, retirement and why it’s important but he has a really great scope of understanding about the entirety of wealth and you know.

What’s going on from a government perspective and more of a I would say like an economics, you know, macro point of view, which I think is important as a certified financial planner to be able to somewhat almost forecast what’s going on, however difficult that is, in giving your clients advice.

I really enjoyed the conversation. And again, I couldn’t recommend his podcast anymore. Look for iTunes everywhere else I’m sure it is on don’t retire graduate. But no further ado, here’s Eric Brockman.

Eric, thank you so much for joining the Trulyfit podcast, why don’t you give my listeners in the audience a little background on who you are, what it is you do your intellectual pursuits, and then maybe quickly talk about your book and your podcast. I’m

Eric Brotman:  happy to see thanks, I My name is Eric Brockman. I’m the CEO of BFG financial advisors in suburban Maryland. So an east coaster, been in this business almost 30 years and have built a company on the basis that that the key to financial freedom begins with financial literacy and then financial planning.

Eric Brotman:  So we have created programs called financial planning for all that reaches out to folks at every end of the economic spectrum, and have worked with multigenerational families for years. And it’s been a labor of love. And so I’m still I think of myself as a young man, I think I got a nice long runway in front. But I also have some terrific partners and other advisors here as well. So that’s been, that’s been great.

Eric Brotman:  The book don’t retire graduate is my third book came out now three years ago came out during the pandemic. So there was no book tour, the timing of it was wretched, but the book was well received. And it is basically taking all of the steps of building a financial plan and building them almost like it was like it was a college curriculum.

Eric Brotman:  So that each chapter is a course for lack of a better word. I don’t believe in homework, but love extra credit. So each each, each course ends with an extra credit assignment. And that becomes a workbook. And folks who work through this will wind up with their own financial plan, whether they decide to implement that with a professional or to do it on their own.

Steve Washuta: I really enjoyed your book. And I love the give a lot of actionable suggestions. But there are a lot of analogies to college, right? Hence, the title of the book and your podcast.

And I really like those analogies. But you know, I feel like in the process and you hit on this sort of in the in the freshman year part of the book, but you know, in the process of college, you have all these people surrounding you, you have friends, you have advisors, hopefully, you have parents, and you have community, and they’re all helping guide you towards this one specific goal of getting into a particular college right? Wherein you’re kind of left in no man’s land.

Sometimes, when you’re dealing with your finances, you would hope that people have financial advisors and things like this or parents who could teach them but a lot of people are kind of left out on their own. And they’re scared to get what’s called financially naked. How do you get through that psychological barrier to get to have people reach out and to talk to people like you?

Eric Brotman:  It’s a great question. And we do tell folks that the process of financial planning and working with a firm like ours is almost as intimate as medicine. And I will joke use the term financially naked, I’ll joke that there’s no one size fits all gown that you have to wear, there’s no disrobing but you are going to be very transparent with your financial lives.

Eric Brotman:  And sometimes that means things that are qualitative most of the time, because the math is easy. And I don’t say that to sound to think I’m the smartest guy in the room. But the math itself is arithmetic. The hard part is the qualitative stuff, the things that make each family situation unique. It’s the health or age of their parents, it’s the situation with their kids and their education or their special needs or other things that affect them.

Eric Brotman:  It’s their job situation. It’s their marital situation. It’s it’s 100 factors that are not necessarily assigned to numbers that require that input. I mean, if you show me 240-year-olds making the same amount of money, but one of them is married with four kids and one of them is a bachelor, I will show you two very different financial plans. I’m not saying one’s better or worse, they’re just going to be completely different because their lives are so different even though they’re at a certain age, certain gender certain background, they could be in the same zip code.

Eric Brotman:  So to me the the Part of this that makes sense is, is making it a story. You talked about the fact that I like to use analogies, I try and paint a picture, I try to provide stories and examples for folks. Because let’s face it, sitting down and talking about finances is both daunting, and in some cases, boring. I love it. It’s what I do all day. But some people would rather get a root canal than talk about their their 401 K statement.

Eric Brotman:  So you know, I have to, I have to work with folks where they are and the people who really want to know how the watch works, I want to go under the hood with them. But for people who just want to know what time it is, and don’t want to have to do it themselves, we can help those folks too.

Steve Washuta: That’s a great point. And we have to do that in fitness as well. Sometimes I have to simplify things. I have people who come into me who let’s say, make a lot of decisions in their day-to-day basis, maybe their physicians, maybe their financial advisors, and they come to me and they want to turn their brain off. I don’t care how this works.

Dave, you have to tell me what’s muscles are firing, give me a good workout. I trust that you know what you’re doing. And there’s other people who asks, Who asked a million questions, they want to know all the little nuances of what I do and how it’s helping them. And I have to be willing to adjust accordingly and give them what they want to help them succeed.

Eric Brotman:  Yeah, no, I don’t want to talk biceps and triceps, and they certainly don’t want to talk synovial fluid, let’s just work out. And you know, I like in financial planning a lot to the gym, because there’s nothing in financial planning for the most part that you can’t do yourself. And there’s very few things in fitness that you can’t do yourself. I know how to do a setup.

Eric Brotman:  But if I don’t have somebody barking at me to drop and give them 20, I might not. And so the accountability partner is I think what makes that resonate with so many folks, I have a trainer who is going to be at my house in three, four hours, and he’s going to beat my tail. And I could do that myself, but I won’t. And I know I won’t. So I rely on professionals to help me in that regard. That’s

Steve Washuta: a great point. And even if you could, let’s go ahead. So you do do it on your own, eventually here and there. You want someone to audit what you’re doing. So even if I am handling my own finances, let’s say or you’re handling your own exercise, you still have to admit yourself, you’re not the utmost expert, right? You know, enough, but you need that expert to come in and say you know what you’re doing this, this and this, right? I would tweak this, and then you go all back on your own.

Eric Brotman:  Yeah, and where mistakes happen, the mistakes are amplified. When you’re doing three or four things, right, but you do one wrong, you can mess up the things you’ve done right now. And so that analogy stays true. If you’re if you’re working every muscle group exactly right, but you pull out, you pull a hamstring, there’s gonna be a lot you can’t do.

Eric Brotman:  And so financially, it’s the same, it’s missing the iceberg. It’s knowing that this is a process, it’s a lifelong process. It’s a journey. And it’s more important to miss the big mistakes, or the emotional reactions, or the the one black swan event that really hurts you, it’s more important to miss that than it is to sort of catch and keep up with the Joneses along the way that that really doesn’t matter. In the end.

Steve Washuta: In your book, you have a lot of what I would call like, zoom out sort of macro ideologies and philosophies and you have a lot of specifics, right. So zoom in things. This is what you should do specifically to help yourself in debt or whatever situation you’re in. But I want to talk about first is, is diversification, it’s a term that gets thrown around a lot for us who are not in your industry, we just typically think of Oh, bonds and stocks, right? I’m diversified now. But I assume it’s a lot more intricate than that. Can you unpack it?

Eric Brotman:  Yeah, there, there are half a dozen types of diversification that that our work will involve one will be asset allocation, diversification, and that’s taking your your traditional asset classes, which to your point of stocks, bonds, and I would add cash to that stocks, bonds, and cash and saying there’s your simple traditional, but then there are asset classes beyond that that makes sense in some portfolios, it could be private equity, it could be private debt, it could be real estate, it could be, it could be commodities, or natural resources, or managed futures, it could be a lot of different things.

Eric Brotman:  They’re not for everyone. But understanding when to use those things, when to pull each lever makes sense. But that’s only one kind of diversification. You also want to diversify your type of accounts. You don’t want to have all your money, for example, in your 401k and no place else, because it creates a different kind of diversification problem, which is a tax diversification problem. So all your money’s in the same kind of account.

Eric Brotman:  And it’s all subject to the same tax regime, you’ll have no flexibility when Congress 10 or 20 or 30 years from now when it’s your turn to make withdrawals. When Congress changes the rules, and some of them are really adverse for a period of time, you’ll have no flexibility you’ll be you’ll be victim of that game. And so it’s important to have some capital gains property, it’s important to have places where you will never get taxed again on $1. I mean, I think there are four places where most Americans can put money where it’s never taxed again, if it’s used properly.

Eric Brotman:  And I think that’s incredibly powerful, because I don’t know about you, but I don’t expect tax rates in this country to go down. This isn’t a political statement. It’s that the government is largely broke. We’re spending money that we don’t have, and rates are kind of at all time lows right now. There’s only one way to go. And so if taxes are going to be higher later, you want to make sure some of your income Isn’t taxable?

Steve Washuta: That’s great information. And I think you know, I also compare health and fitness to finance all the time. One of the things I talk about is there’s a cost to everything in fitness. There’s a structural cost, right? What am I doing to my body at that given time, but there’s also a benefit cost. So what sort of calories am I burning, right? But we have to understand that structural cost can be too much.

Sometimes you want to look a certain way, you want to look like Arnold Schwarzenegger, you want to look like Ronnie Coleman, well, guess what they’re paying the price with injuries down the road, right, there was a structural cost to what they were doing, not just a positive metabolic cost. And in finance, that seems to be the case, too, right?

You see these people who make a lot of money, but they’re putting it in the wrong places, and they’re using it too much, or they’re all there, you know, it’s all it’s not diversified, as you would say, right. It’s all in one area, as opposed to saying, I want to have the most money, when I’m the most capable of using it, I need to take care of myself from a health standpoint, and from a fiscal standpoint, so that I can go into retirement, I could walk around Rome, and not be in a wheelchair, when I’m 75.

Eric Brotman:  They’re very much aligned, you know, and I had, I’ve done a talk for audiences called the three secrets to the happiest retirees. And it’s nice that they’re only three because people can typically remember what they are. And the first one is to be debt free. And by debt free, I don’t mean you have no debt. I mean, you have no adverse debt.

Eric Brotman:  It’s one thing to have a mortgage on your home or a business loan or something that’s collateralized, where you’re making money by utilizing your capital, that’s fine. But as a rule, consumer debt is always bad debt. So if you’re carrying a balance on a visa, I don’t care why it’s never a good thing. It might be a necessity in your world, it happens. We all have been there, I’ve been there too. But it’s not a good, it’s not good debt.

Eric Brotman:  So being debt free is number one. The second, second is taking care of yourself, physically, it’s being healthy. And there’s only so many things that we can do as financial advisors to help people keep healthy, that requires other folks, it requires medical professionals, it includes your acupuncturist, and your massage therapist and your trainers and all the folks who help keep you healthy, your nutritionist, all these folks.

Eric Brotman:  And it doesn’t mean you have to hire them all it just means you have to be aware of what they’re doing, you have to take care of your health or nothing else is going to matter. You can be wildly wealthy. But if you’re if you’re unable to move, you’re not going to enjoy yourself. And then the third thing is to have a purpose, to have a reason to get out of bed every morning. And so when you look at these three things, only one of them is quantitative, it’s the debt piece.

Eric Brotman:  The other two are qualitative, it’s take care of yourself, you can’t wake up one day when you’re 70 and decide you’re gonna get in shape. I mean, I guess you could, but it’s not the best plan, it’s better to stay healthy all along, it’s easier to stay healthy than to get healthy. And I would argue it’s the same way with wealth is much easier to stay wealthy than it is to get wealthy. So you might as well build a track to run on there.

Eric Brotman:  And having a purpose means you’re not going from 50 6070 hours a week to Oprah and shuffleboard. It just you have to have a reason to get out of bed every morning or people stop doing it. And the crossword puzzle is not enough. You’ve got to have volunteer work. It could be spirituality, it could be it could be all kinds of philanthropy, it could be consulting or part time work. It could be writing, it could be anything, but figure out what you want to be when you grow up.

Eric Brotman:   And Steve, I don’t know about you, but most people don’t get asked that after they’re about seven. Yeah, you know, and I love it. I love looking at somebody at two years old and saying what do you want to be when you grow up? And they look at me funny. I said, Well, you do have some more living to do, right? Is there something else you anything else you want to do? And it’s more than a bucket list.

Eric Brotman:  A bucket list to me is a starting point. But it’s not great. Because if you say these are the 10 things I want to do or see and then you’re done. What do you check out? To me, that’s not enough. It’s about a purpose and a passion.

Steve Washuta: That’s a great point, I want to actually talk about all three of those things you just named. But first I want to go back to another reason why, you know, health and finances overlap so much is you know, like sort of a warren buffett compounding thing that works in for your 401 K, let’s say it works almost an inverse relationship and health and I’ll unpack that is that the more you stick with your health, the less time you have to spend on your health moving forward, right.

So that seven-year-old just said, Hey, let’s get in shape. If they haven’t been working out for the last 30 years, they’re going to have to put a lot of time and energy and effort into that, right because they’re behind the eight ball, so to speak, that person has been working out their entire life doesn’t have to do as much right, because they’re already maintaining this flow.

So again, just another crossover that matters so much for people who are looking to again have the most money to in the late in life and be able to use that money in the proper way. So let’s go back to number one here to talk about debt. Different kinds of debt. Let’s say someone didn’t read your book, they got into bad sticky situation here credit card debt compared to student loan debt, and how we would handle those different things.

Eric Brotman:  Right now is a very interesting time in our history, because we have been in a downwardly trending interest rate market for almost 40 years. So there is what we’re experiencing now in the United States and around the world with inflation and with higher interest rates. It’s the first time I’m most generations, half the population has ever seen it, which is kind of unique because you would expect there be ebbs and flows along the way.

Eric Brotman:  But this is really new for a lot of folks, you know, for people who are Gen Xers and Boomers who bought their first home and might have been paying 13 or 14% on a mortgage. And then we’re excited when they got to refinance it to nine and a half. People complaining about six and seven right now sounds silly. But if you grew up only knowing two and 3% interest rates, and now it’s seven, that’s, that’s hard.

Eric Brotman:  So with debt, what tends to happen is people forget that it’s not only the amount of money you’re borrowing, but it’s the impact on your cash flow of having to carry that debt. And the United States is a perfect example, our debt service is a huge piece of our budget. Well, your family budget should not look like that. We can’t print money in our basements. I mean, I guess we could, but we really shouldn’t.

Eric Brotman:  So you’re not supposed to do that. But because you can’t print money, it means you have to use those resources properly. And to me, if you’re borrowing money to invest in something that is likely to make more money than it costs you. That’s arbitrage that’s leverage.

Eric Brotman:  That’s okay. For example, if you’re taking a Small Business Association loan, to create a company, and you’ve got a business plan, and you’ve got people helping you and you’re gonna start a company, that’s an investment, it’s a legitimate investment, it’s a legitimate reason to borrow money. There are situations with student loans, because student loans are a really sticky wicket.

Eric Brotman:  Student loans, in theory makes sense. In theory, it means you borrow, so you can get an education. So you can have a larger income, so you can pay your loan back and then be better off in the end. The problem is, it doesn’t always work that way. And I think you have to look at an ROI, you have to look at return on investment, where you take a student loan, are you going to be a structural engineer, or a poet.

Eric Brotman:  And you know, and I’m not disparaging liberal arts, in fact, I’m a liberal arts grad myself and loved it. But there are certain majors and certain plans of study that don’t necessarily earn back what you’ve borrowed. And then that becomes kind of a lousy investment, even if it enriches you in lots of ways now might not be the time you can go back and study something later in life when you have the resources to do it.

Eric Brotman:  Car notes, generally, I would love to see folks not have a car payment. But if you must have a car payment, because you have to get to work, and you have to commute to work and driving to work is what’s going to pay the bills, then that can be at least in the short term and investment. Credit cards basically always out. Credit cards are the greatest invention ever, if you pay them in full, because they give you free stuff.

Eric Brotman:  And the reason they give you free stuff is that companies that accept credit cards have to give the credit card company a piece of everything they bring in that way. So these aren’t freebies, but they’re free to the consumer. So if you use your credit card for everything, and you’re collecting airline miles or cash back or any of these various things, and you use them, that’s great.

Eric Brotman:  But if you carry a balance, you are defeating the purpose of of having that that type of account, carrying a balance on a credit card is like a noose, it strangles you, and it’s not okay. Another kind of debt, is mortgage debt, I tend to think mortgage debt is reasonably good debt if you’re buying a home and you expect that that home over time will appreciate more than the loan will cost you at two and 3%.

Eric Brotman:  That’s obvious. At 14%. That’s questionable. At 7%. You really have to think about it like what is the stability of the neighborhood? How long are you going to be there? Because I think there’s there’s almost taboo in older generations about renting. But there’s something to be said for renting. Yeah. Especially if you’re not rooted in a community if you don’t have all your family in one place.

Eric Brotman:  If your job might mean that you need to move in three years, buy a house and sell it quickly. I don’t care what the markets doing is not a good plan, because it costs a lot to buy. It costs a lot to move, it costs a lot to sell. So I think it is a case-by-case piece. I don’t think there’s such a thing as good debt or bad debt, categorically, with probably the exception of credit cards because it means you bought something you can’t afford.

Steve Washuta: That was a great rundown. And I liked how you said at the end that you know, there’s a big difference between the different types of debt but specifically, I want to go to the to the housing because that’s what’s in vogue right now. People are talking about interest rates that shot through the roof.

But like you said, comparatively speaking to what was at one particular time, yeah, they’re not necessarily high. But is is there a number? Is there a number where Eric says I will I would not buy a house regardless of the market, regardless of my current fiscal goals if that percentage was too high?

Eric Brotman:  The short answer is no not as a rule of thumb, but again, it comes down to your situation. If you’re planning to buy a home that you expect to spend the next 20 or 30 years in and interest rates happen to be high. As long as you can comfortably afford the payment. There will be opportunities Whether it’s in a year or two or five to refinance at a lower rate, interest rates are not likely to go up and stay up indefinitely, they ebb and they flow.

Eric Brotman:  So if you can afford the debt service, if you can afford the payment, and if you’re going to move to your forever home, that’s great. If it’s a starter home, if it’s your first home, and costs are especially high, and you’re not 100% sure that this is where you’re going to wind up because maybe you haven’t met your future spouse yet.

Eric Brotman:  You don’t have children, you don’t know if you’re going to or not, there’s a lot of flux in your life. I would tell people to wait, there’s so there’s a glut of apartments in this country. And I know rents have gone up, and they have because of supply and demand. But there’s still a glut, there’s too many apartments, and not enough renters in a lot of markets. Which means that even where rents have gone up, it often is more affordable to rent than to buy.

Eric Brotman:  And I know people love to own a home. But the reasons to own a home are not usually financial, they’re emotional, they’re psychological, that your nest at your place. This is our, this is ours. Most people don’t own their homes outright. And in fact, even if they do if there’s no debt on them, and they have no mortgage at all, some people can’t afford to stay in their homes in retirement anyway, because of the real estate taxes and the maintenance.

Eric Brotman:  Or they haven’t taken your advice, and they can’t walk the stairs anymore. I mean, there’s reasons why people can’t stay in their homes. So figuring that out and understanding the nuances specific to your situation matters more than just what’s the number, the number, the number, there’s no rule of thumb that for me is comfortable. It’s like that hospital gown we talked about one size may fit all but it doesn’t. There’s not flattering on any of it.

Steve Washuta: I know a lot of people in the health and fitness industry lie about whether it’s the exercise they’re doing or their food to their trainer. right? They say this is what I’m doing. We have to kind of audit exactly what’s going on with the write-it-out. For me, what I found and you know. what’s your take on this as the that the benefit from a house that one says they get is usually Oh always over exaggerated, right?

Like I have the older people in my life. I’m not going to name them who say,. Oh, I made X amount of dollars after selling my house. It’s like, okay, well, you replace the air condition. You have to eat warm all the time. You’re not like you’re not adding in all of these other externalities that are interconnected, right else including inflation. right? So you So you bought it at this, you sold it to this, but it’s 15 years later. So what about the the actual inflation result around there? I think that’s a big sort of disconnect with people with in houses.

Eric Brotman:  I’m careful not to use the word always or never, very often. But I will say it in the never column. Never look at your primary residence as an investment. It’s not it’s a nest, it’s a place to live. If you’re buying real estate as rental property, then you then you can quantify blee measure. Whether this is a cashflow, positive or negative, whether it’s a good investment, it’s never a good investment to own your own home.

Eric Brotman:  Because to your point, the HVAC, the roof, the driveway, the lawn, the whatever, it is a money pit, I don’t care if it’s new construction, or a house from the 1860s that you find somewhere. It’s always a money pit. That doesn’t mean you shouldn’t do it. I own a home. I love my own. It is. It’s appreciated since I bought it and it still has been a loser in terms of dollars and cents. And it always will be

Steve Washuta:  student debt. How did we get here? Go?

Eric Brotman:  We got here, oh boy, I don’t know how political I can get on your show. I’m trying I’m gonna try not to. We got here because College became something that everyone was expected to do.

If you if you go back to the 1950s, which thankfully was before my time, but I’ve studied a little if you go back to the 50s, not everybody finished high school. There were people who finished high school and people who didn’t, they went out and they worked in, in various often blue-collar settings.

Eric Brotman:  Fast forward, the folks then in the 50s, who finished high school sort of had a leg up they had an advantage. And if you fast forward to say the 70s or 80s, where college was becoming more more prevalent. And certain jobs were now becoming more and more white collar more, more computerized, especially the 80s 90s. Now a college degree was considered an entry ticket to a better life.

Eric Brotman:  And so the percentage of folks who went to college which wasn’t super high, those folks were the the doctors and lawyers and accountants and architects. And so there was a reason to do this.

Fast forward to today where a huge percentage of the population goes to school, often not really knowing what they want to study. I would argue that high schools for lots of reasons, but one of them was no child left behind high schools are not pushing. We’re not teaching what we’re used to in high schools.

Eric Brotman:  In fact, if I can dare be funny for a minute, 100 years ago in high schools in this country, we were teaching how to translate Latin into Greek. And now we’re teaching kids not the Tide Pods. So we’ve a lot has happened in a short period of time. But but the college education, it’s really almost grades 13 to 16.

Yeah, and I’m a college graduate, and I’ve been a trustee at a university, and I’m a big fan of higher education, there has to be a reason for it.

Eric Brotman:  And so where we are today, everyone feels like they have to go, which does two things. One, it raises the price, because there’s more demand for the service. So the price goes up, and it’s gone up a lot unfettered. But two, it also reduces the value of the grade because so many people have them. If you’re, if all that demand for undergraduate education in whatever major is there, you have raised the price and reduce the value. And when that pendulum swings too far, it’s not worth going.

Eric Brotman:  And so, you know, I happen to think that learning is more of a lifelong endeavor than it ever was, you know, this idea that you’re going to know everything you need to know by 22 is farce anyway.

You know, if you show me a lawyer who hasn’t been in school in 40 years, and I’ll show you someone. I’m not hiring. so, so so make sure you’re on the cutting edge. That means, going back to school, it means grad school, it means continuing education, it means it means doing things to enrich yourself.

Eric Brotman:  And by the way, the current generation changes jobs every three to five years, and not just jobs industries. If you go to school for accounting, and you get an accounting degree and a big loan. and then you go and you work for an accounting firm for a few years, and you decide you hate accounting, and what you really want to do is be a therapist. It’s a totally different academic pursuit, it requires a whole nother investment in education to shift gears.

Eric Brotman:  Sure. And you’re you really can’t get a return on undergraduate and education the way you could graduate. I disagree. I graduate in the right programs. a master’s degree in certain things make sense, although I think the MBA is almost worthless now. I do. I think it is an almost worthless degree. it’s an excuse to spend two more years and 100 grand to not actually experienced the world.

Eric Brotman:  And there’s other master’s degrees and master’s in education, which are required in most cases by teachers, really is putting a lot of pressure and to end creating a situation where we have fewer good teachers than we could simply because of that academic hurdle. A master’s in social work to me, I don’t understand it, not because social work isn’t great. And we need those people. And I’m so glad people do it. But does it require a graduate degree? And all that all that tuition? I don’t know.

Steve Washuta: Yeah, I almost think that, you know, this could be controversial. But college should be less specific. And what I mean by that is like sort of like a St. John’s just reading the great books and understanding some concepts and ideas.

So that when you do change jobs, which is almost inevitable for some of these people, they have a greater understanding. right, the Plutarch quote your mind is a not a vessel to be filled, but fire to be kindled with a teach people how to think, and why it’s important to think and why it’s important to read.

But then there’s the other end of the spectrum where there’s a whole subset of people who should just be going to technical schools. Absolutely. So and they need to be guided that way, I think there was a cultural thing.

You know, my parents generation who were born in the 50s. It was they were pushing everyone right towards college have to go to college, because for them, college was the difference between success and not. and they assumed that was going to be for their children, they couldn’t forecast properly. But that wasn’t the case, necessarily.

I have five best man at my wedding. Only one of them had to actually go to college. He is currently a lawyer. the rest of them all graduated from college and work currently in jobs that have nothing to do with college. There was a cultural aspect, but but you can correct me if I’m wrong here. I think the one thing you didn’t mention, I’m sure you know, something about this.

At some point, though, the way people were funded via loans to go to college had changed, right? In the 50s, and 60s and 70s, maybe even into the 80s, you were getting private loans, where now when you have government back loans, the prices can obviously go up because of the fact they’re backed by the government. Is that correct?

Eric Brotman:  There’s some truth to that for sure. And the cash was so ample, it was being thrown at people. You’re talking about folks who were allowed at, when they weren’t old enough to have a Budweiser, they were allowed to sign on the dotted line and borrow six figures to get an undergraduate degree.

Eric Brotman:  They might not even qualify for a credit card yet and couldn’t have a beer. They can’t even vote yet. But they can borrow that kind of money and have their parents cosign on it. And to me, all of that free money, kids can’t make that decision. And I know there are exceptions. And so if you’re one of those, one of those exceptions, I apologize in advance. But when I was 18 years old, I was not making good financial decisions. I barely knew which building history was in. You know what I mean?

Eric Brotman:  Like it’s just I don’t understand how we would allow young people to make what could be crippling financial decisions at such a young age and have basically no consequence. And by the way, you can’t declare bankruptcy and get rid of student loan. The government rigged this game in such a way that they’ll give you all the money you want, but you will pay it back and you can’t get out of it any way you, you know, in any way. And now you’re essentially an indentured servant to the government for what could be 30 years after you graduate. That’s not, it’s not.

Steve Washuta: So I have a theory with no evidence, but I’m gonna unpack it here. You can tell me what you think, okay, that person who goes to college, let’s say, it’s Steve, I go to college, I have way too much debt. I graduate in German dance theory, and I have nowhere to use this. I am $120,000 in debt. So what I do is I continue to. let’s say, live my life, I moved to a city, I get a job that is paying me, I don’t know, $40,000 a year,

I am not able to actually pay off my loans, the interest has continued to go up so that I don’t want to get married. Because I don’t actually have the money to start a family or buy a house and live the American dream. So I push I kick that can down the road, maybe I don’t get married until I’m 35 or 40. And I have less debt.

Because of this though, those dynamics. Not having a family early like people did in the 50s and 60s, and 70s actually leads you to not save, because when you have a kid, you obviously want to save for their future. But in addition, I tell the story to people. I thought I was gonna go on vacation with my child. But I was just watching my child in a different city.

You’re not as apt to go take vacations . Do these things and spend this amount of money because it’s just easier to be at home. That has changed now that that people aren’t saving. And it’s sort of like this cycle that all connects with how our finances are used today.

Eric Brotman:  I liken it in the book to the airplane safety lecture. When they say in the event of loss of cabin pressure masks will drop down. Please secure your own mask before you secure it for your child. Which, by the way, thankfully, I’ve never been in that situation. I can only imagine how hard that would be. Because you would you’d give both your kidneys for your kid, right?

Eric Brotman:  But nonetheless, the advice is sound if you don’t help yourself, you can’t help him or her. Because you’re passed out, right? Well, financially speaking, I’ve seen families who nearly bankrupt themselves, to educate their kids. And whether it’s private schools, or whether it’s college, or whether it’s even paying for grad school for these kids.

Eric Brotman:  And at some point, what I say is you’re going to have some really educated kids, which one do you plan to live with. And I’m not joking, because they’re not saving for your tax.

The only thing in this life you can’t borrow for is financial independence at retirement, you can borrow for anything else you can borrow for real estate or business or education or health care if you had to, you can borrow for anything you cannot borrow for retirement, there are only three sources of money that are the available period when it comes to retirement.

Eric Brotman:  One is people at work, which means you don’t retire, you continue to earn a paycheck. One is money at work, which means your money is making money, which allows you to live a certain way. And the other is charity.

Whether it’s asking your kids or your parents or your neighbor or the church for money. Or whether it’s government handouts. It’s you can’t support yourself. If you’re not working and you don’t have money at work. You’re a charity case, period.

Steve Washuta: The one thing we do know is when we are looking at sort of like economics and forecasting is demographics are basically they are what they are. Everybody who is 30 Today is going to be 50 in 20 years, that’s just a fact. Or they won’t be here anymore. I

Eric Brotman:  was gonna say not everybody, some of them won’t be here, but won’t be here. But yeah.

Steve Washuta: So because with the ability to kind of look at that. And I’m not telling you that. I’m not making you forecast here. Exactly. But yeah, knowing you did an episode on talking on your podcast, a little bit about Social Security. And you don’t have to go sort of in depth here. But if you just stay high level, what problems could we potentially see coming down the road with Social Security?

Eric Brotman:  Well, so security in and of itself, is the largest Ponzi scheme ever created. What I what I mean by that is it requires everyone to keep paying in so other people can can pull out the idea that.

It is your money that you’ve paid into the system and that your employer is matching to the system.

Eric Brotman:  And that you can then collect is not really true. If you had your own Social Security account. which has been floated by various administrations over the years, that would be different.

That would be yes, you’re forced to put some money in and there’s a match, but it’s your money. In this case, what it really is, is Robin Hood. The more you put into the system as a percentage, the less likely you are to get out of it. It is designed horribly.

Eric Brotman:  It was designed at a time when there were a lot more workers for every retiree because people didn’t live that long. And it was designed at a time when 72 was old. So you work from 18 to 65. You work from 18 Because you’re not in college. You’re getting a job, you’re working from 18 to 65 you retire and you’re dead at 72 which means that you work for all was 50 years to to have a seven year retirement pool, which is math that will work all day long. Well, today, people enter the workforce at 2324 25.

Eric Brotman: To your point, they’re 100 grand in the hole. They’re not actually saving anything, despite the fact that getting some social security, they’d like to retire when they’re 55, because they’ve been hurt hearing about the fire movement, and they could live to be 106.

The math won’t work, it can’t work. I do think so security will change. I think it will change to be means tested, which means people over a certain income level will have their benefits reduced in some way or even eliminated.

Eric Brotman:  They’ve already done these kinds of things with Medicare. With Medicare, if you have the nerve to have an income. You have to pay more for your Medicare, you’re literally paying more for something you’ve already paid for. Which is horrifying.

Security was supposed to be it was supposed to be if you look at your paycheck. I don’t know if you’re a W two employee, but if you are you get a paycheck and on your paycheck. It doesn’t say so security, it says OASDI old age and survivor disability income, it was for people who are extremely elderly.

Eric Brotman:  62 is when you can start pulling, I don’t know about you, I’m closer to 62 than I ever imagined I’d be and I don’t feel elderly. So it was designed for the incredibly frail, super elderly population. Now it’s really for almost everybody, and it can’t last. I do think they’ll eliminate the wage base at some point. The wage base for those who don’t know is the fact that you pay Social Security. But only up to a certain amount of income each year.

Eric Brotman:  And then you don’t have to pay anymore because your benefits don’t accrue any more. It’ll be easy politically, to raise or eliminate that base and start collecting more from high-income earners. And I fully expect that that’ll happen. I’m not a fan.

Eric Brotman:  But I fully expect that will happen. I expect some means testing in terms of who actually collects and in the same way that your Medicare premiums might be four and five times what they are for everybody else.

If you have an income, you’re I think gonna wind up getting less of your social security than you would have. Which means you paid the most into it. And as a percentage got the least out of it.

Steve Washuta: And you don’t think they’ll bump the age back. That is too difficult from a logistics standpoint. Because then you’re telling one part of the population, you just missed it by a day, maybe

Eric Brotman:  it I could solve so security in about eight minutes with a yellow pad. If I wasn’t running for office, the problem is, if you’re not running for office, you don’t get a vote. Social Security age should be a lot higher than it is with with some. you know, if it were up to me, and I’m, like I said not running for office.

Eric Brotman:  But Social Security age would be 75 or 80. Because that’s what it was really designed to be. For people in jobs where you literally physically can’t do it beyond a certain age. I could see us having some type of parameters to allow them into the system early.

I mean, it’s different. If you’re pushing paper versus digging ditches, you have a very different physical aspect of your life. And I don’t want airline pilots and 78. You know what I mean? There’s certain careers where it would be better if that didn’t happen, I think in most cases.

Eric Brotman:  So I do think that the age should be much higher, but that there should be some way to collect sooner based on what you’ve done for a living. And that can become a bipartisan or nonpartisan thing.

The problem is, as soon as you mentioned, I’m going to raise the Social Security age, even if it was by a week, you’re dead in the water. Because your political opponents will say they’re coming for your Social Security, you paid for this you deserve and you’re dead.

Eric Brotman:  So until and unless both parties say the system’s either going to disappear, or we’re going to have to fix it, it won’t get fixed. And that won’t happen until it’s the very last minute.

Steve Washuta: And if the system disappeared, you don’t expect the sky to start falling. Right? This this would be a pretty you know this, I assume the first few years would be tough. Given that people can now invest their own money, rather than put it into Social Security. I would think that we would we would recover from this or no. Do you not believe that we?

Eric Brotman:  would never recover from it because there’s an entire there’s an entire swath of the population north of 50%, who rely on this as Almost their only source. The only way, the only way I think to do it. If you’re going to get rid of it is to say anybody turning 21 right now no longer participates. And so that you’re not taking it away from anyone who’s already really paid into it.

Eric Brotman:  Sure. The problem with that is if you don’t have new money coming in. But you have lots of money coming out. It’s not going to work either. So the math is really almost impossible. There are too few working people and too many retirees and the reason that happened isn’t. Because people aren’t working although we know about the quiet quitting thing. It’s not because people aren’t working. It’s because people aren’t dying. It’s 72.

Eric Brotman:  They’re living to 82 and 92 and 102 and 112. And, you know, annuity companies now have changed their age.

For end life insurance companies have changed the age for their mortality tables to be 125 Which sounds absurd. But when they changed it to 150 years ago that sounded absurd to. So I don’t know, am I going to be 117? And wondering where my soul security check is? Will I have collected for 50 years? I doubtful. There aren’t enough personal trainers to get me to 117. But

Steve Washuta: we could try our best. I rather I’d rather fix that problem and try to get you to 117 and fix the Social Security problem

Eric Brotman:  and welfare. I’ll do the Social Security if you get me to 117 How’s that?

Steve Washuta: That was one of your office hour episodes. Another one that you did was talking a little bit about. Which I have to think about a lot now is dealing with your child and finances. How you’re going to teach your child about finances. I think it’s you know, all families learn differently. You know. My wife came from a maybe a household that was a little bit more strict and budgeting with her money.

So she is rather than I am, it’s just interesting how people go through that. And allowance is always a conversation, we have to worry about it. Now, my daughter is only 18 months, but eventually we are gonna have to worry about it. How do you think allowance should be used so that it’s advantageous for the family and the child,

Eric Brotman:  I will tell you how we used it. And I will also tell you my daughter’s 13 and no longer receives it. What I what I really thought was a great plan was great until it wasn’t anymore. Then it didn’t work anymore. And so here’s sort of the way it played out in our house.

Eric Brotman:  Our daughter approached us she was I think eight or nine years old and said, You know, I’d really like to earn an allowance. And I’m glad she used the word earned because I wanted it to be earned not given. And so my wife and I talked about it. We said, Well, let’s find some age appropriate things that our daughter can do around the house to help out to warrant that quid pro quo, if you will. We came up with a few things.

Eric Brotman:  And I said, Alright, I said, I’m gonna give you $5 a week if you do these things. And it was things like emptying the dishwasher, or cleaning your room or simple stuff, putting your clothes away. I’m going to give you $5 a week. But I need you to go to a craft store, we took her to a craft store, she bought three jars. And she labeled those jars and the jars were labeled fun, charity, and long term.

Eric Brotman:  And so every week, I gave her five $1 bills, I said the deal is you have to put one in charity, you have to put one in long term. And you can put the other three anywhere you want. And it became a lesson and for several years, this worked really, really well. Where I would see in the beginning, all the money went to fun. And then she realized she had fun money, she wasn’t getting really needed. She wasn’t using it.

Eric Brotman:  So she started putting more into long term reward to charity. At the end of each year, the first year I took her to the bank, I introduced her to the branch manager, we made a deposit created an account for her made her deposit which I matched. Because there was some benefit to understanding the match concept, you’ve grown this because she was only getting a penny of interest. On the little account.

Eric Brotman:  We also went online and we found a couple of charities that were things that spoke to her one was related to kids sick kids, and one was related to animals made perfect sense. I made a donation in both our names match the donation, and also like a company match type of thing. Sure that she was getting correspondence saying thank you for your help, this made a difference and so forth.

Eric Brotman:  So she was learning philanthropy, she was learning savings. And she was having fun money. The reason this plan ultimately failed, first of all, is because as you get into middle school, and you don’t know this with an 18 month old, but when you get into middle school. The rigors of your day and the length of your day and the amount of homework and the amount of extracurricular in the amount of stuff means there’s gonna be a lot you’re not doing around the house.

Eric Brotman:  And it’s sort of it sort of took a backseat. And then you get in that conversation of you know, you didn’t put your clothes away this week. So no allowance and you actually can do more harm than good. So we just stopped it entirely. She, she wants for nothing. We’re blessed in so many ways she wants for nothing. But she also knows that she has this bank account that she could use if she wanted to. And she got a couple of gifts over the holidays this past year.

Eric Brotman:  And she asked me to put the money in her bank, which I did, which I thought was great. They were amazon gift cards. And rather than spending money on something she didn’t want, I bought them from her. And she put the money in the bank. So I thought there was a good lesson there. So I would say allowance should be earned not given. And I would say you have to know your kid. I mean, some kids will be excited about it and say dad for an extra 10 bucks. I’ll mow the lawn.

Eric Brotman:  And some kids are gonna say well, I don’t feel like doing that. And you’ll have to decide. I mean, you’ve got some time. But I think learning philanthropy, learning the value of $1.

I mean, we went to dinner last week, two weeks ago. and she saw the cost of dinner for three and was shocked. I said to her I said I’m shocked to y’all. Well right now it’s especially crazy but I said look. I said I want you to find something to do for your life.

Eric Brotman:  That makes you incredibly happy. I hope it also pays you well because you like to go out to dinner and you like to do these things and you won’t be able to do these things.

Unless you find something to do that you both enjoy and will help you make a living. I think that resonated, we’ll see I mean it right now she’s into the arts, if she goes into the arts. She will have lots of fun, but not make a lot of money.

Eric Brotman:  And that ultimately, that’s okay, too. I want her to be happy more than I want anything else in the world. But I’m hoping that she will learn some of those lessons. That if you want some of the finer things, you must work for them. They don’t just fall in your lap.

Steve Washuta: Eric, this has been fantastic information. Let my audience know where they can find you, your book, your podcasts and any other places you’re at.

Eric Brotman:  Yeah, the book and podcasts are at Brotman media.com. They’re called don’t retire graduate. You can find us on Spotify or Apple podcasts or any of the various podcast platforms. Our financial planning business is at BFGF a.com. We are BFG financial advisors, so be fgfa.com.

Eric Brotman:  And we’d love to talk to you there’s a lot of information on our website, there are some free white papers, information on how to pay less in taxes, how to how to involve financial wellness into your corporate plan if you own a company, and what financial planning is and sort of how to hire somebody. So it’s, yeah, there’s a lot of information. I hope your audience will check it out.

Steve Washuta: And the book is great. We didn’t discuss even half of it today. So don’t feel as if we went over everything. I guess it has been Eric Brotman. Eric, thank you for joining the chosen podcast.

Eric Brotman:  Steve has been a ton of fun and I look forward to keeping in touch. Awesome.

Steve Washuta: Thanks for joining us on the Trulyfit podcast. Please subscribe, rate, and review on your listening platform. Feel free to email us as we’d love to hear from you.

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Thanks again!

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