TMBA 334: Here's How We Plan to 'Manage' Our Money

TMBA334: Here’s How We Plan to ‘Manage’ Our Money post image

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In a recent episode, Dan and Ian spoke with Joe Wirbick about options for managing and investing the money they received from selling their business.

That show elicited interesting and passionate responses from listeners, so we decided to do a follow-up.

This week, you’ll hear some specific feedback from our friend Laura Roeder, amongst others, as well as Dan and Ian’s feelings on – and strategies for – managing their own money, influenced by the many different views they’re heard  on the subject.


Listen to this week’s show and learn:

  • Some opinions from our listeners about our “How Do You Manage Your Money?” episode. (2:15)
  • Why Ian is going to buy a home, even though he doesn’t think it’s a particularly strong investment. (6:03)
  • Why you should be seeking autonomy in your investments and in your life. (15:26)
  • What Dan believes is the most under-appreciated investment strategy. (16:09)
  • Why we believe so many people are passionate about this topic. (26:45)

Share your thoughts:

Do you:

  • Agree or disagree with something we discussed?
  • Have questions that we didn’t answer in the episode?
  • Want to share an idea for a future episode of TMBA?

Just leave a voicemail for us in the box below or a comment on this post. We listen and read every message and might use it in an upcoming episode.

Our producer, Jane, would also love to hear from you at

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Thanks for listening to our show! We’ll be back next Thursday morning 8AM EST.


Dan & Ian

Published on 04.28.16
  • Totally understand the investment strategy Dan’s decided to pursue (which I won’t spoil…well, much;) I think a good name for it is Taleb’s name: Optionality. When people talk about “making your money work for you” they’re undervaluing optionality. Yes, optionality isn’t free. But it’s often discounted because it’s so misunderstood. Agree with Joe Hot Money Magnotti 100%:)

  • Ben Drew

    Great podcast – fun to hear that Ian is jumping into home ownership.

    I’d like to share my story/perspective as it’s something I haven’t heard in the own vs. rent argument.

    My wife and I bought and live in a 2-family home. We occupy the 2nd and 3rd floors of a 3-story house and rent out a 1-bedroom apartment on the first floor. While we’re not living payment-free, the rental income covers about 40% of our monthly housing expenses. What comes from our own pockets is equivalent to what we’d pay if we rented – but we’re still building equity in an appreciating (theoretically) asset.

    We don’t plan on moving anytime soon, but I love that being able to rent out the apartment we currently live in gives us an option beyond selling.

    I should also mention for anyone afraid of being a landlord, our strategy has been to price the rental at about 20% below market cost. Yes, we’re leaving $$ on the table, but we also get a larger pool of tenants to choose from. Our current tenant knows she’s getting a deal making her less likely to gripe about minor issues that someone paying full price might complain about.

  • yep that’s a good name for it !!! I think it’s actually a really difficult concept to grok, one thought experiment I’ll do occassionally is to imagine my life 5 years ago and how different it was an how many unexpected things happened, looking forward it’s so much easier to assume things will remain the same.

  • That’s excellent Ben I love that idea! I was on a tour of Barcelona a few weeks back and many of the homes in the city were designed so that the owners could rent out floors 2-4+ and cash flow their investment in the home itself. In many cities in Asia family homes have a retail space on the street level for the same reason. Makes a ton of sense to me! (In the US we just have friendly banks I suppose?)

  • D.R. Fideler

    We have a small retail space in our home in Sarajevo. It’s occupied by a very small grocery store and they pay us enough rent on an annual basis to cover all our utilities at least two times over.

  • Nice!!!

  • Good stuff, glad to hear the back and forth — the debate helps think critically about this stuff. One thing that wasn’t mentioned is that there are models where the investment manager only makes money if you make money, and it is to simply charge a percentage of gains only — and a fee of 0 if the value decreases. A friend who runs a hedge fund does this, and charges 20% of the net, but makes 0 in down years. In the example mentioned on the show, this would mean that a 400k -> 500k change would make you 80k and the fund 20k. But a change of 500k -> 400k would net the fund nothing. In industry terminology, this would be a 0% management fee and a 20% incentive fee.

    This seems to cover the basics:

    In my mind, this goes a long way to solving the incentive problem, especially if the fund manager has much of their own net worth invested in their fund.

  • thanks for that Noah appreciate the heads up and the link, I hadn’t heard of that particular model but it makes a lot of sense.

  • Evaldas Miliauskas

    Thank you for satisfying the curiosity of the listeners! I do think that real estate can work out as a good investment. Even Mr. Mustache has mentioned this, by buying some broken home fixing it up and then selling/renting it out depending on the your preferences. For example I’m living here in Malta, the landlord has one house which he rents out fully and lives off only from the rents. The couple of drawbacks I see is that you kind of get stuck with it the long run, sure you could have someone else manage it, but would still be additional overhead and its hard to liquidate unless there is a big market for your area. Now looking into real estate as appreciating value can be lucrative if you think of Hong Kong in the 1990s or San Francisco in the 2000s, but as with all investments there is always a risk.

    Now I like Dan’s point of view by not doing anything. There is actually another billionaire that suggest the same thing, Jim Rogers advice to paraphrase: “only invest in something you are know very well about, otherwise money sitting in a bank is a lot less risky then loosing it in the market” and I think that is Warren’s Buffet success formula, as he doesn’t loose money year over year.

    Lastly (a bit overkill) risking 10% would go with another phrase I picked up: “why risk 100% capital for 10% return, when you can risk 10% of it for 100% return” Doug Casey. Now of course you could loose those 10% x10 times if you’re not careful, but there is some merit to that seeking high growth can be a workable strategy (at least if you know what you are doing).

    Will be interested in follow-up updates!

  • I love this conversation about money over the past few weeks.

    I’m super interested in the idea of investing in a small startup like you mentioned. Something ultra-small, not some silicon valley startup with millions in funding.

    Part of the academic approach to investing I follow favors tilting a “market snapshot” portfolio towards small cap companies and value companies. Historically, you can capture a return premium for a given amount of risk or volatility.

    But even this small-cap-tilt does not *really* invest in small companies like we are talking about. That’s one of the major problems that investment houses have is systematically investing in small companies. I think DFA (Dimensional Fund Advisors) does a better job of this than Vanguard but it’s a huge issue. When you have funds with hundreds of millions of dollars, or more, how can they invest in small or micro companies?

    I’d love to hear your thoughts a process or system for entrepreneurs to invest in tiny companies in areas they are familiar with.

  • Oliver Oberdorf

    Best gem/idea of the show: paying 1% for an adviser who can help you ride out the drawdowns.

    Fidelity once did a major study of client accounts to see what characteristic defined their top performing accounts. In the end, the best accounts were found to be ones where the owner forgot they even had one.

  • kfk86

    Hey, I’ll need to listen to this podcast soon then! One thing that is bothering me lately is the pile of cash I have sitting in my bank account doing absolutely 0 returns per year. I believe this is a huge problem of my generation and that a lot of people would jump in on a decent investment advisor if there were decent ones around (in Euro, in USD I believe there is lots already).

    Then, if you look at buying websites… you can replace a 3,000 net monthly income (which is considered very good already in Munich) with an investment between 60,000-100,000 (depends on multiples and etc.). This is incredible, especially as in western countries that amount is attainable in a 5 to 10 years time frame with a normal job if you don’t throw money out of the window (doing things like renting at above 20% of your net salary, for example).

    So, the best use of cash for people that don’t want commit to a location is probably buying websites. Unfortunately, spending a high % of your savings on a business you have never practiced on is very risky (though I argue less risky than some other “safe” investments). The answer to that is building a “fund” with other people/friends so to mitigate risks (start small with say 10,000 and build up from there over months once you acquire knowledge/experience).

    Unfortunately, such investor groups are not easy to come by. Ideally, one would have a group of people with diversified skillsets (SEO, finance, programming, etc.) buying websites together.

  • this is what the Empire Flippers have been experimenting with, it’s worth checking out their work.

  • haha sounds about right :)

  • Me too! Agree this is a problem and could even be more of one in the future as the stock market seems to be capturing less of the ‘market’ in general. Will be actively looking for opportunities down this route.

  • yeah that last paragraph resonates with me hugely: exposing all of your life savings for incremental increases seems like a game perpetuated by the financial industry and sold to us by our elders as ‘TRUTH OF THE UNIVERSE’ but I don’t buy it. Whoever is selling the financial vehicles or services are the ones winning there. I’d rather risk 10% in something volatile.

  • kfk86

    I have been checking out empireflippers and their podcast, but I did not find anything like this, any chances you have some links in particular?

  • @kfk86:disqus – the idea of creating a fund or investment group to purchase income generating websites is interesting. Connect with me on Twitter (@camcollins) to discuss.

  • As usual I am one podcast behind @TropicalMBA:disqus but I want to comment on Ian’s statement (I think he said it twice) that real estate hasn’t gone down in the long run and “always” goes back up when it does. If you have a VERY long time horizon then sure it “always” goes back up but…

    Ian…have you forgotten about 2008? As I told 75 people at our DC meetup in Berlin in 2013, I owned a home that in 2006 was appraised at $2.0M. In 2010, that same property was valued (based on Zillow’s “Zestimate”) at $1.0M. Zillow’s estimates are notoriously wrong in many instances but even if the margin of error is 20%, that’s still an 800k paper loss if I were forced to sell in 2010.

    In 2010, I was carrying a massive amount of debt. In an all out Dave Ramsey style assault, my wife and I sold off a number of assets to wipe our debt clean. After selling a couple of condos, a boat and the home mentioned herein, we purchased a new home (of less value) for cash in 2015.

    You can see from the attached Zillow chart how the value of our home fluctuated in a 10-year period. Thankfully we made out well for ourselves because we purchased the home in 1997 but if I would have bought this house in 2006, I’d still be 400k in the hole based on today’s valuations. Furthermore, Simon Black is predicting that the next real estate bubble is right around the corner…(

  • Hi Ian and Dan,

    maybe both of you are right.
    My best friend once told me the story of his grandfathers advice to split up savings:
    1/3 cash
    1/3 stocks
    1/3 property

    I like this idea, as you split the risk across different assets.
    For growth purposes and passive management, I rely on World Index ETFs. This minimizes the risk of one currency, US-Dollar and Euro, as well.


  • My friends and I were talking about the upcoming bust this past weekend… I def don’t think current levels are sustainable, but its more a gut feel than anything for me. My friend is in the real estate investment industry and thinks, as a whole, maybe the market is 8-14% overvalued at the moment.

    (fyi I worked at zillow from 2005-2010)

  • Josh Petretti

    Drew – I think a lot of people feel like you do right now, but many are ignoring some of the underlying data. Most people FEEL like the market is going to tank simply because prices have gone up so quickly. What they forget about however is that inventory in most of these markets is ridiculously low, like historically low at the same time that deman is so high. In many hot markets right now there is less than 2 weeks of inventory!!! This is made worse with a huge influx of people re-urbanizing and a long stagnation in building from 2008 until the last few years which left us with very little inventory. It’s a much different picture than the years leading up to 2007/2008.
    That said, I do think we will see a correction, especially if we keep building at the rate we are. I think many places (Denver, Austin, Portland, etc) are still great buys over the long haul, especially when you buy IN the city, but short term we may be in for a little roller coaster ride. I am starting to get scared of some of the lending I’m seeing today which reminds me of what was going on back in the early 2000’s. Whenever you have people able to only put 3.5% down in a hot market, that concerns me. As Dan and Ian stated, it’s much easier to get a loan with a job, but with only 3.5% down they have no skin in the game and will bail immediately if they lose that job or the market tanks temporarily.

  • Josh Petretti

    Just curious, where do you all think we are going to live if real estate is no longer a good investment? As more and more people move back into cities and more and more people decide to rent either because it’s too expensive or because they think it’s not a good investment, somebody HAS to own that real estate they’re renting and you can only build so much in a city.
    I definitely get the gut instinct that housing is getting so out of whack on pricing again that it might dip in the near future, but I just don’t see it being possible that buying the right real estate in the right locations doesn’t smash it over the next 20-30 years. I might wait for a dip in the next few years to make your purchases, but this sentiment that real estate is no longer a good investment just doesn’t make sense.
    Don’t forget, when done right you’re also leveraging your money greatly and you’re getting (today at least) tax benefits that very few other investments are going to give which has an exponential effect on everything else you do as well (especially for business owners). When people say “real estate only averages 4-5% per year” they are leaving out the leverage and tax beneficial aspects of real estate. Not only that, as cities grow and more people rent, somebody’s gotta be that landlord.

  • Josh Petretti

    Assuming Ian bought something in Austin proper and is in it for the longhaul, I think in 10 years he will be VERY happy he did. Austin is a hugely growing market that is getting close to what the San Francisco bay area was like 20-30 years ago. Trust me, the people that bought well located real estate there back then are much, much better off today. As more and more tech companies leave the bay for Austin, Denver, and Portland, and as more and more people move back into the big cities, there is only so much real estate in a city.
    Also don’t forget all the other benefits about buying real estate: leverage, tax benefits, ability to rent, ability to 3x your long term rental income with Airbnb (in the right locations), the ability to have someone else paying off your asset. When people only look at appreciation and compare it to stocks, you are leaving out so many factors. In a true dollar for dollar return after taxes, housing typically crushes the market. People ignore this when they say “the housing market only went up 4% a year and the stock market averaged 7%” or something similar. It’s a totally different picture when you look at what you actually put in and what you actually get out of it when all is said and done. I think you’ll come out juuuuuust fine Ian, assuming you don’t freak out and sell in 2 years if the market temporarily takes a dump.

  • Awesome episode.

    Loved hearing what you guys are doing with your money.

    Here’s how I’m currently splitting my net worth:

    10% emergency fund
    17% opportunity fund (real estate, startup capital, etc.)
    22% Roth IRA
    47% Index Funds
    4% misc.
    100% debt free

    I’m a little high on stock investments (69%) because the market has been good the last few years so it’s overinflated in relation to how much cash I’ve actually put into it.

    That’s not necessarily a bad thing either: (

    I used to hoard cash (emergency fund was 40% net worth) but think that was more of a fear reaction (post-recession stress syndrome) than an opportunity play. That’s why I created a separate fund that I will dedicate to finding good opportunities to invest in over the next few years.

    Hard to predict the future when real estate markets are shifting to major metros (that could have already peaked) and small cities disappear overnight. (Self-driving cars could also make prime real-estate worthless because commute times will eviscerate).

    Lastly, we’ve never gone through a historical period where the fortune 100 changes so much/America is no longer the key player. Because of that, not sure how much we can depend on 7% ROI index funds over the next few decades.

    Might just take the Elon approach and say fuck it. Nothing is guaranteed but my balls and invest everything back into moon shots.

  • Brian

    Great episode, fun stuff — totally agree that this is a topic that gets people riled and doesn’t have enough smart people talking about it with frankness. No offense, you guys aren’t experts here, but talking about money/asset management with an open mind and a willingness to ruffle a few feathers is worth something these days.

    Dan, you can get a financial “expert” to convince you not to sell during the down times for a lot less than 1% of AUM. Since you expressly stated that you’re trying to learn more about it, why not hire a fiduciary advisor (“fee-only”) for some therapy or education when you feel you want it? You get all the expertise and fewer conflicts of interest and only pay when you need it.

    Or, just acknowledge that any money you put into index funds is money you should be ok with leaving alone for 10-15 years (the only time horizon over which you’re guaranteed to win). Investing in index funds with the expectation that you might need to sell in less than 10 years is usually a mistake.

  • yeah totally agree it doesn’t need to cost that much, and i agree as well on the index funds. that money i put in there is my “i’ll be a good boy for 20 years” fund :)

  • interesting thanks for sharing that!

  • I agree with this reasoning Josh, bossman also did a lot of worst-case thinking but in the US city battles for mobile populations it seems like Austin is going to be a good long term play.

  • makes sense to me and any way we can both be right ! :D

  • thanks for sharing this @camcollins:disqus we did discuss this possibility quite a bit as it could very well be the case that Austin home prices are a bit of a bubble ATM… I think what Ian came to was that he would be willing to weather an adjustment like this for the longer term opportunity to be in the market.

  • Yeah I think ultimately bossman is betting on the long-term ‘brand’ and ability of Austin to bring in new high-ticket residents in the coming decades. That said, he might just have wanted a nice shop to work on his cars :P

  • (Late to the answer party but….) Agreed, I bought a place in Austin 2 years ago and the value of our house has gone up about 5-10K. Also the rent prices have increased in the cities surrounding Austin as well, so I think bossman made the right call. Having a base camp for operations is pretty convenient too when you are traveling all over the place. Plus lets face it, he needs a place for all his toys…. ;-)

  • and a lot of toys he has!

  • Mick van Wijk

    Anyone who wants to invest with a fiduciary, fund, etc. Go read Tony Robbins Money Master The Game.

    Best book on investing available today.

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