Podcast

Achieving Financial Independence and Avoiding Lifestyle Creep

2Q20

How to get from HENRY to FIRE.

Read The Transcript

Ryan Sterling of Future You Wealth shares how investors can get on the path toward building long-term wealth by focusing on acquiring appreciating assets, even in times of market volatility. In today’s fast-paced consumer world, it’s easy to become a six-figure earner living paycheck to paycheck. It’s more important than ever to be intentional about how you create wealth, what you value, and to what you aspire by understanding your mindset and motivations. Ryan will share how a HENRY (High Earner Not Rich Yet) can avoid lifestyle creep, how to create friction between impulse and purchase, how to frame the achievement of financial goals in today’s dollars, how to reach FIRE (Financial Independence, Retire Early), and what it takes to build wealth with conscious intention.

Key Insights:

  • Insight into how younger generations think about the traditional investment adviser world.
  • How to adopt an automatic approach to savings and keep your spending in check
  • Will Millennials slow down the spread of mass consumerism?
  • What’s a HENRY and how do you reach FIRE?
  • Buying a home is not the only way to build wealth, and it might not be the best way for you.
  • Don’t compare yourself to where you are today vs. where your parents were at your age.
  • Everyone’s answer to, “What does it mean to be successful or financially independent?” is different.
  • How do you actually get wealthy? Is it earned in a high-paying job or does it come from somewhere else?
  • Find activities that are meaningful and spend your time there to feel a sense of fulfillment, purpose and passion beyond career.
  • What should you do if you have an extra $100K of investible income each year?
  • What should we be doing during this time of market volatility?
  • Ryan’s book, You’re Making Other People Rich, will be out in September.

Guest Bio

Ryan Sterling is the founder of Future You Wealth, a successful wealth manager and sought after holistic wealth coach, speaker, and soon-to-be-published author of “You’re Making Other People Rich.”

Prior to starting Future You Wealth, Ryan had over 15 years of experience working with individuals and families at firms such as AllianceBernstein, Goldman Sachs, BBR Partners, and Capital Group.

Ryan earned a BA in Economics from Carleton College and an MBA with a specialization in Investment Management from Vanderbilt University. He is also a CFA® charter holder and a member of the CFA Society of New York.

Podcast Transcript

Speaker 1:
Welcome to Real Wealth Real Health, the show that empowers you with insights, information and inspiration to achieve your version of financial wellness. Learn how to balance living a full life today with planning for the future. This podcast is brought to you by Alpha Investing, a real estate-centric private capital network that provides exclusive investment opportunities to its members. And now here are your hosts AdaPia d’Errico and Daniel Cocca.

AdaPia d’Errico:
Hello, welcome back to another episode of Real Wealth Real Health. Today, we are having a conversation with Ryan Sterling who is the founder of Future You Wealth. He is a successful wealth manager and a sought-after holistic wealth coach, a speaker and soon-to-be-published author of You’re Making Other People Rich. Prior to starting Future You Wealth, Ryan had over 15 years of experience working with individuals and families at large firms such as AllianceBernstein, Goldman Sachs, BBR partners and Capital Group. Ryan earned his BA in economics from Carleton College and has an MBA with a specialization in investment management from Vanderbilt University. He is also a CFA charterholder and a member of the CFA Society of New York.

AdaPia d’Errico:
We speak about investing, investment management today, staying the course, acronyms like FIRE, financial independence, retire early, HENRYs, high earner, not rich yet. We talked about spending. We talked about the ego. We talk about hobbies. We talk about so much in this episode. As Ryan describes, it comes down to many of us living in this constant state of unrest, as we fill voids with possessions and battle the urge to consume on a regular basis. In his upcoming book, You’re Making Other People Rich, Ryan explores how to use intention to restore your relationship with wealth.

AdaPia d’Errico:
This conversation is a mix of practical and meaningful and is especially thought provoking in these times of volatility, uncertainty and this forced stillness that has many of us reflecting on our values, where we assign meaning in the way we live and what it means to build wealth. Let’s dive into all things, financial foundation and wealth. How about we start by telling the audience a little bit about yourself and your background and what you’re doing today?

Ryan Sterling:
Yeah, for sure. Well, first of all, thanks for having me on. I should mention that even though I’m not necessarily a real estate guest, my clients are invested in real estate and I’m a huge advocate of real estate ownership and I look forward to go and dive in more into that. Just a quick background on me and my experience, I’ve been in the wealth management field going on 16 years now. The bulk of my time in the industry has been working at some of the larger firms in the business. I won’t necessarily name names, but think of your big private banks or large global investment management institutions.

Ryan Sterling:
I would say that the relationship that I have with my clients was what you think about in a traditional wealth management, financial advisory relationship where I would say really the bulk of the time was spent on the investing, so understanding family’s goals, objectives, taking account their risk tolerance, time horizon, etcetera and creating asset allocation and portfolios that were very much aligned with their objectives and goals. There certainly were planning elements associated with it, but really, I would say 70-80% of the engagement was more on the investing and the asset allocation.

Ryan Sterling:
The fee was a percentage of assets under management. When you look in the wealth management space and you look at the assets under management, the ’81 model, fees range anywhere from 1%, sometimes up to 2.5%. I would say that the majority of the clients that I worked with were older and typically retired. People who are in their late 60s to early 80s. One thing I started to notice over the last couple of years in particular was, I’m 38 years old and part of the appeal for having me as part of these various farms was that I’m a younger advisor and I can work with these older clients, but at the same time, I can work with their children who ultimately the idea is that they’re going to be inheriting the wealth.

Ryan Sterling:
More and more, when I started talking to the children of clients, roughly my age or so, I got the sense that they weren’t necessarily interested in having that old-school relationship with their financial advisor. They’re really questioning the value of paying, let’s call it 1.5% for asset allocation advice when there are now options out there like Wealthfront and Betterment, these robo-advisors or just passive investing and saying that, I’m just making this up but, “A 60/40 portfolio is appropriate. Why not just use 60% in a passive equity fund and 60% and in a municipal bond fund?” I just found it increasingly more challenging over the years to really combat that and to really show value because oftentimes, there wasn’t a lot of value in the asset allocation advice.

Ryan Sterling:
I’m not saying that’s the case for everyone, but I felt that that dynamic needed to be switched instead of having call it 70-80% of the engagement being more asset allocation, investing focused, flipping that around and thinking, “Where can we as advisors add more value to clients?” but also taking into account the changing consumer preferences as it relates to professional services and wealth services and trying to get in front of it. With that, I set the course about two years ago to say, “I think this game is going to change,” and quite frankly, also on the personal side, I was just bored of working inside a big global investment management firm.

Ryan Sterling:
I was at the point where I was making really good money and was very comfortable from a financial standpoint, but I just wasn’t getting a lot of meaning and purpose in it. Again, that combined with the fact that I felt that there was a better way to work with some of these younger clients in particular, that’s where I set the intention and the goal to start my own wealth management firm or to work with clients in a much different capacity. Fast forward then today, I am now the owner and founder of Future You Wealth. We’re independent fee-only wealth manager.

Ryan Sterling:
I still do work with clients on the investing where the fee is a percentage of assets under management, but the fees have come down rather dramatically. I think that’s a trend In the business and I wanted to be ahead of that trend, but at the same time, I have a side of my business called wealth coaching. I’m happy to dive more into this, but the idea of wealth coaching is for the person who may be a high earner, but doesn’t have the liquid capital to manage and is stuck and is trying to take the first step in this wealth building journey and ultimately helping them unlock the tools to do so.

AdaPia d’Errico:
Sorry, I was just taking some notes on all of that. I have so many questions that I wanted to ask.

Ryan Sterling:
How was that? [inaudible 00:08:36].

AdaPia d’Errico:
No, it was great. I really want to dive into some of the things that you talked about. I want to start with a couple things that you said, which are that things are dynamic and more than ever today I would say that the times that we’ve lived in are dynamic and they require a dynamic approach. That combined with changing consumer preferences and technology that streamlines and drives down fees and has also created, let’s say, like an abundance or an overabundance of options. How does one come to understand and discern, if not judge, what’s best for them in uncertain dynamic times when they even might be earning a lot of money but somehow they find themselves at the end of the day or the month living almost paycheck to paycheck, like six-figure earners living paycheck to paycheck?

AdaPia d’Errico:
All that said, how have you seen that play out for your clients in the world beyond the steps that you’ve taken to get ahead of it?

Ryan Sterling:
I think it’s a really good question. One thing I go over with my clients in particular on the coaching side, both sides of the business but really more so on the coaching side, is you’re right, just going back, the typical profile is someone who is a high earner but has fallen victim to a phenomenon called lifestyle creep and it’s every time they get a bonus or anytime they get a raise, that their lifestyle and their living expenses go up commensurate with that increase in wages and sometimes even more, becomes an invitation to get a nicer apartment, buy nicer things, have nicer handbags, go to fancier dinners.

Ryan Sterling:
In today’s world, as you mentioned, everything is so dynamic and information is flowing from so many different areas. One thing that I really spend a lot of time with on the coaching clients is what I call adding back friction and we add back friction to create space. I use the example of, take my clients who are in their 70s who have built wealth. When they were in their prime earning years, you may think about the amount of space and friction that existed between them and spending their money. Go back to 1960 or whatever and you wanted to buy a pair of shoes, that could be a half a day event.

Ryan Sterling:
You’re talking about, “I need a pair of shoes. Okay, I need to get cash from the bank. I’m going to drive to the bank. I’m going to wait in line. I’m actually going to get cash from the teller. Okay, now I’m going to drive to a department store and I got to see what they have in inventory and then I have to try and choose. Maybe they don’t have it. Then, I have to go to another store.” You’re talking about again, buying a pair of shoes could take you six hours or so, whereas today, you can get an alert on your watch, press two buttons and have 10 pairs of shoes delivered to your door a day later. That’s just one example. You think about food and mention clothes. You think about accessories like anything.

Ryan Sterling:
We’re just cluttered with so much noise and we’re hit from every single angle. The friction between us and spending our money is nonexistent today. We spend a lot of time again reintroducing those friction points to add some space and add some intention to spending money. I think part of the answer in this crazy dynamic world that we live in is just creating more simplicity and creating some more space between impulse and response. That’s on the spending side, but then on the saving and investing side, it’s all such as creating more simple rules and boundaries in place to make sure that we’re having just a systematic automated approach to savings, that we’re taking a very simple automated approach to investing. Ultimately, instead of being perfect, let’s just get 90% of the way there and 90% of the way is almost just doing it.

AdaPia d’Errico:
Yeah, it almost feels like the friction when it comes to savings is let me call it ego, but our own ego like the ego of the mind, the ego of the self that just can’t sit still and be with itself. I was thinking when you’re talking about … Sometimes if I’m on Instagram, there’s all these ads and it makes it so easy and you’re like, “Oh, yeah, I like that. I like that.” Then the next thing, you’ve hit like Amazon pay or whatever you’re using, Google pay and there it is.

Ryan Sterling:
It’s fascinating with that, though, when you’re talking about ego, that with money, so take fitness, for example, right? If your self-worth is tied up in how physically fit you are, you can’t really hide from it. People can see it, right? If you walk in a room, you can tell if someone takes care of themselves from a physical standpoint or not. When it comes to money, if money is a proxy for your value in this world and it’s wrapped up in ego, it would be a full thought to walk into a room and have your network statement plastered on your chest, right? How do we do it? It’s in the watches we wear, it’s in the shoes that we have. It’s in the handbags that we accessorize with.

Ryan Sterling:
It’s one of those things where we can fake it more with money. It’s one of those things where you’re scrolling through social media and you see someone just got a promotion and they’re showing off their new watch or whatever it may be. It’s really easy to say, “Okay, I need to match that because they can’t be better than me,” or you get that jealousy, you get that envy. It’s really hard then to fight back against the urge to say, “I need to match that because I need to show my cohort that I’m just as successful as they are.”

AdaPia d’Errico:
Because you’re working a lot with a younger clients, maybe we dive into the Millennials a little bit. Do you find that is a psychological mechanism that they’re caught up in? The reason I asked it and I’m going to add on to this is I think about the so-called depression generation and they were a savings generation. I’m Italian. My family is Italian. I lived there for a long time and they save. Consumer debt wasn’t even really a thing until the early 2000s. You have a generation that knows how to save and I was brought up knowing how to save and I do and I have done and I continue to do, and then, it’s contrasted with this lifestyle here, a culture, a society that’s built on spending.

AdaPia d’Errico:
Do you think that, in any way, what’s going on today may lead us to becoming a little more of a savings generation or will we always be battling this internal friction of, “I need to show that I am wealthy”?

Ryan Sterling:
It’s a really good question and I am optimistic that some of this mass consumerism is going to be put to rest and I’m already seeing it with my clients. Now granted, the clients that come to me are ready to take the next step and are ready to take accountability and really want to take money and savings seriously. In a weird way, though, I almost see it worse with the younger Generation X than I do with the Millennials. I mean the younger Generation Xs, like the people who were born in the late ’70s or so. I almost feel like they are the most prone to overconsumption. I think part of that was the consumerism that started in the in the ’80s and then the just massive explosion in credit card use.

Ryan Sterling:
Then growing up with that and then having that collide with the fact that these frictions that I mentioned before are completely eliminated, it’s one of those things where I almost feel like in that cohort, I see the more of the things and the stuff helping them show their worth to their friends and society versus the Millennials. In part, I think the Millennials who graduated college post-2008, they came into a really difficult economy where opportunities were somewhat limited. I think they were forced into nontraditional areas and nontraditional jobs that actually provide a lot more purpose than again maybe some previous generations, again I’ll go back to Generation X, where it was it was aspirational to be an investment banker or to be a corporate attorney.

Ryan Sterling:
Not to say that that’s still not aspirational, but I felt that that was very much the norm and very much expected. Now, that’s not the case anymore where investment banks are having a much harder time recruiting younger talents in part because people just aren’t interested and the paycheck is not really providing a compelling reason anymore. I think back to the early or even the mid ’90s or even when I graduated from school in the early 2000s and it was the idea of being an investment banker was something that everyone was talking about. No one was talking about entrepreneurship, but that has completely changed now where everybody wants to be an entrepreneur and it’s really hard again for some of these traditional career paths to find talent.

Daniel Cocca:
It sounds like my life story.

Ryan Sterling:
Mine too.

Daniel Cocca:
I grew up to parents who did not go to college, but were so focused on educating their children. I became a corporate lawyer. My younger brother is a doctor. He’s just getting started in his career, but I spent six years at a big law firm before I realized like, “Hey, this really isn’t my aspiration, right? This is what I thought I was supposed to be doing and my own personal happiness is really a product of something more than the job and how much money I make. I was definitely a guy with my net worth stapled on my chest for a bit in the form of nice things, but yeah, things change.

Daniel Cocca:
Then, I followed that entrepreneurship wave, specifically in New York post-2012, Bloomberg really did a lot to push the entrepreneurial environment in New York City, whether it’s just grassroots startup, things being all over the place or Cornell and Technion in Israel forming and creating this huge campus and Google having their massive office in Chelsea. All of a sudden it seemed like everyone wanted to be an entrepreneur and that was the cool thing to do. I followed that path versus a lawyer and then went off [inaudible 00:19:57] a long the way of saying and people are really heavily influenced by what everyone else is doing in society.

Daniel Cocca:
What you’re doing, I think is particularly valuable, giving those folks direction because not everyone has no parents or mentors that are telling them how to navigate this new world that exists.

Ryan Sterling:
No doubt, it’s interesting. I very much put that profile as well and just talking about generations and their relationship with money and career, etcetera. I was very much on that path. I was very much tied into my role as a senior vice president and the amount of money that I was making. It’s interesting, I had a really amazing experience two years ago, which very much collided with my intention to start this new firm. Go back early in my career, I remember I had one of those moments where you’re going to the printer and I was picking up a print job and this was when I was like a young junior associate.

Ryan Sterling:
I inadvertently picked up someone else’s print job, which happened to be the W2 of this guy who was like 37 years old and was in a more senior position. I saw how much money he made. I remember looking at that and my eyes popping out of my head. I said, “Wow, when I get there, I will have made it.” It was just like, “I cannot wait until I get there.” I remember two years ago, my birthday is at the end of the year and I was having one of those moments of reflection. I just all of a sudden, just like, “Wait, I’m just curious, how much money am I going to make this year?” I pulled out the ADP and my pay stub and all that stuff and it dawned on me that like I was going to hit that number, that 10 years earlier was like my “I made it number.”

Ryan Sterling:
I looked and I was like I was bored out of my mind, I really didn’t have the savings I thought I would have when I was making that amount of money. It was really just an eye opening experience where I was at an inflection point where I looked at the people who are 10 years older than me. It’s funny like in these corporate settings, you’re very much encouraged by management to overspend. It’s like, “Hey, so and so down the hall just bought $1.5 million condo. Don’t you want your kids to go to private school someday? So and so just bought XYZ car and look at the watch that this person got when they got the raise.” They want you to overspend to keep you in that cycle.

Ryan Sterling:
Then that inflection point, I looked at the lives of people who were 10 years above me. I said, “I don’t want that. That doesn’t interest me anymore.” I thought that it always would and it just didn’t. Again, that was really what set me on this path to say, “I want to go off on my own.”

AdaPia d’Errico:
Wow. So interesting that at these 10-year marks or hurdles that at your first 10 years, you were like, “I want this,” and then at your next 10 years when you got that, you said, “I don’t want what’s next.” You made this decision to change what’s next for you and go into entrepreneurship and like you and Dan, I fit the bill too with my path. I’ve really applied so much intention and meaning and purpose. Those are three really big words for me and you’ve used them a lot. I would love to dive into a couple things, two acronyms actually, because I think that we’ve touched on them here and there.

AdaPia d’Errico:
The first one is HENRY, so high earner, not rich yet, which is such an interesting category of people, these six-figure or above, that seem to be living paycheck to paycheck. I’m curious to know how you’re advising them to spend and invest. Then the other acronym, it’s a very big one in our community, our network, which is FIRE, financial independence, retire early, a lot of that tied to entrepreneurship and investing and saving. Let’s start with the HENRY definition, what you’re seeing and how you’re advising your clients that are in that situation?

Ryan Sterling:
For sure. This is in the classic definition of someone who’s one of my coaching clients and people who are earning six-plus figures and they might be in their mid-30s and they don’t have the liquid capital to go to a traditional advisor yet. I think there’s also a lot of unrest that comes with that of, “How am I making this amount of money? I feel like I’m nowhere near what my parents were at this age.” Part of that is where we stand right now and this is going to tie into real estate is when you look at what a $250,000 income in certain places like New York and LA and some other expensive areas that also happen to come with high incomes, we’ve had very low inflation over the last 30 years with the exception of passive price inflation, and particularly you see it on the real estate front, especially for single family homes.

Ryan Sterling:
When you think about someone again in New York or LA who makes $250,000, there’s such an anxiety around, “I can’t buy a home. That’s how I need to build wealth. What’s wrong with me? How do I get started?” There’s that and then there’s the whole spending thing that we talked about before. One myth that I tried to debunk is that number one, buying a home is the path to riches. I’m a fan of homeownership, but it is not the only way to build wealth. It’s not even the best way to build wealth. I think what a lot of these clients, these HENRY clients don’t realize is the path to building wealth over time is owning appreciating assets.

Ryan Sterling:
Let me describe what I mean there. So often we are acquiring depreciating assets. The way you can define a depreciating asset is something that you buy where if you were to try to sell it a year later, it would be worth less or even the day later it would be worth less. Clothes are depreciating asset. Cars are depreciating asset. Again, just the way our society is structured, we’re very much conditioned to acquire these depreciating assets that provide this short-term dose of excitement but eventually wear off.

Ryan Sterling:
The way to acquire wealth is to acquire appreciating assets, assets that you own that tend to go up over time. Real estate is an appreciating asset. Stocks are an appreciating asset. I think the big misconception is, “I need more money in order to acquire appreciating assets,” and that’s just not true. You can get invested in the stock market with as little as $100. You can buy an S&P 500 index fund at exchange traded fund and you can be an owner of the 500 largest companies in the US. When I started to frame it like that to say that don’t have these excuses of, “Well, I need more money to acquire these appreciating assets,” you can do it now. You can buy liquid REITs and you can own interest in real estate. You can own interest in stocks.

Ryan Sterling:
For someone who’s young, fixed income isn’t necessarily attractive, especially with these deals right now, but you get the point where it’s helping to empower these HENRY clients to say, “Even though there’s been asset price inflation in terms of buying your personal residence, don’t be locked and loaded and thinking that that is the single path to wealth because it’s not.” It very well could be within your purview in the next couple of years, but don’t stop that from allowing you to get started today.

Daniel Cocca:
When it comes to these HENRYs, what are the hurdles that you see are the biggest hurdle you see in terms of getting this message across, right? Is it that people just don’t have the tools, they don’t understand how it works? Is it they understand they shouldn’t be spending at the volumes they are, but they really just don’t care because they want to be doing it? If you’re trying to get your point across, what are the things that stop you from doing that with your clients?

Ryan Sterling:
I talk about, especially on the coaching side that the problem I solve in the world is actually unrest and that people are coming to me in just the state of, “Something’s wrong. I’m making this money, but I’m not moving forward. Why is this? Part of the exercise in solving this unrest is getting people on a path to being okay starting from where they are and detaching from what they should be doing, what they should be consuming, where they should be going, detaching from the ego, the expectations that we discussed before because a lot of it, mentioning people and they talk about their parents a lot where it’s, “Gosh, I’m 35 years old and my parents had a house and three kids at this point.”

Ryan Sterling:
That was a totally different time, right? We need to start from where you are now. We can’t worry about that and detach from those expectations of where you think you should be. A huge part of building wealth within these coaching clients is first just helping people get comfortable with where they’re starting from and commit to turning the page. It’s really breaking out of this cycle that’s causing unrest in the first place, but it’s really a process of detaching and detaching from the shows and detaching from these expectations and detaching from where your ego is telling you about your worth.

Ryan Sterling:
That needs to happen before we can talk about your 401k and investing. We spend part of the initial engagement is I have an opening questionnaire that helps people to find wealth on their terms, help people to find success, ultimately help them reconnect to hobbies that they used to enjoy doing that have completely gone away that really aren’t expensive to reengage in, but then also a part of it is actually putting everything on a piece of paper and actually looking at it, staring at it, getting comfortable with it, and then again, committing to turn the page and move forward.

AdaPia d’Errico:
This is so much up my alley. I always talk about I’m digging the soul out from under my ego. It’s like just finding meaning and purpose and just getting away from all these preprogrammed ideas about what it means to be successful and wealthy and so few of us really sit with it hard. It’s hard sometimes to go inside and look and face and ask yourself questions that you maybe never thought you were allowed to ask yourself.

Ryan Sterling:
Totally.

AdaPia d’Errico:
I think it’s amazing that that’s just like the baseline, what you do, because we’re the ones in our own way, 100% of the time. There’s nothing outside of us that’s in our way. We’re in our own way. What I’m hearing what you’re doing is you’re helping people also find that part of them inside of themselves that they need to anchor to then go and build and succeed externally. I love that. With that, let’s talk about this fire. Let’s talk about how we get from this meaning and purpose which should pervade everything that we do. This idea of retiring early, being financially independent and then for how long?

Ryan Sterling:
Totally.

AdaPia d’Errico:
Lifespan and changing, the way work is changing as well, especially when things get back to what will be a new normal, I think work is going to be different too.

Ryan Sterling:
Yeah, no question. Really, I love the FIRE movement and I see myself as a FIRE adjacent person. Like someone actually described me once as a FIRE advocate for someone who doesn’t want though to live in the woods and live off the land, I think FIRE to certain points. I think financial independence, I’m 100% on board with that. I think it’s the retire early that I take some exception with and I think we need to redefine. First off, so many of the big proponents of the FIRE movement and the leaders of the FIRE movement are making pretty good money being the spokespeople for this. Some of these bloggers and influencers etcetera, they’re making well into the six figures, sometimes even seven figures, promoting this message.

Ryan Sterling:
I think you have to understand who it’s coming from and the life that they’ve created for themselves. I don’t know that it’s retire early. I think It’s financial independence and embrace entrepreneurship is more, I think, along the lines of what the FIRE movement is about. Understanding what your skills are or what your talents are, your hobbies, your passions, and having that lead to a path to making money as opposed to, going someplace that you really don’t enjoy going to and don’t value just in exchange for a paycheck.

Ryan Sterling:
I think that’s how I want to redefine it, where it’s not retiring early. It’s ultimately embracing a new way of working and it boils down to using your intellectual capital and to derive income. It’s very much like we were talking about this before we started recording in a way like I feel like I’m living the FIRE lifestyle even though I’m still working and I’m hustling to get clients and I’m definitely working for my clients and working really hard, but I love what I do. I’ve been able to craft this life around what I enjoy doing, around what I’m talented and doing.

Ryan Sterling:
The reality of it is like, “What’s the alternative?” Sitting on a beach, I’m going to get bored in two weeks, right? I don’t want to just live in the woods and spend $10,000 a year. No doubt, I took a pay cut leaving in the confines of a corporate structure to come do what I’m doing now. This was not without taking a risk and was not without being scary, but in a way, I feel like I embraced early retirement, but I’m still working and I’m still earning an income. It’s just through a different means.

Daniel Cocca:
Let me ask you this question. You work in two different worlds now, so to speak. When you look at your truly wealthy clients, however you define that, what’s usually the source of the welfare? Is there a common theme on how did those people make their money? Did they earn it? Did they inherit it? For people who are out there at their desk job, trying to become wealthy, is that something that they can actually aspire to? What is it that you’re seeing in practice?

Ryan Sterling:
All right, I could talk for years on this. This is part of the fun thing about being a wealth advisor. I’ve seen so many different family dynamics and I’ve worked with people who have $20 million liquid and they live in a scarcity mindset as if everyone has more and what they have is not enough. I’ve seen people who have a couple hundred thousand and they’re like the wealthiest people in the world. With that, let’s just talk about wealth in terms of actual dollars. I can say that the clients that I’ve worked with that have call it north of $50 million fall into one of two categories.

Ryan Sterling:
They’re either entrepreneurs, and oftentimes, it’s in areas that you would never imagine. I’m making this up. This is not a real example. They have like a paint can company where they’re the number one paint can manufacturer and it’s in a random town in New Jersey and they sell it for $60 million, right? Just things that you never would have even thought of and they sell it and they’re able to extract out liquidity, but I would say most often the $50 million plus people that started the business is not always the most obvious things that you’re thinking of.

Ryan Sterling:
The number two in terms of $50 million plus are people that inherited their money and they just come from just massively wealthy families. It gets watered down through the generations, but that said, I have worked with a number of families who were it’s generational wealth and you’re talking about grandparent or great grandparent was a founder of one of the large fortune 500 companies that still exist today. They’re the heirs of that. I would say that if you’re looking to get massively wealthy in terms of just maximizing dollars and again you want to be in that $50 million plus cohort, being an attorney or an investment banker is not the way to get there.

Ryan Sterling:
It just makes me think, I don’t want to say too much, but there was one family that I worked with where it’s the classic case of grandfather created the wealth, definitely a billion dollar family. Generation two really didn’t work and they’re spending money like crazy, but living a very cushy, affluent life. The trouble though is generation three and generation three is going to inherit a fair amount of money, but you’re talking about the [inaudible 00:38:00] inheriting $1-2 million dollars, but the problem is they’ve grown accustomed to living a billion dollar lifestyle.

Ryan Sterling:
I was talking to one of these kids who was dead set on being an investment banker in order to live the private jet lifestyle. I tried to tell them that, “If you look where the origin of this wealth is, it’s not because your grandfather was an attorney or investment banker. It’s because he had an interest, a hobby, a passion and he used those skills to start a company that ultimately became a multibillion dollar company.” I think that’s what a lot of people miss when it comes to money and wealth. Oftentimes, the actual money is just a byproduct of doing something that you really love.

Ryan Sterling:
I would say that any of these entrepreneurs that I’ve met, who have sold their businesses for $100+ million, when you talk when you talk to them and you see the excitement in their eyes, it’s never about the money. They always go back and talking about the early days of building the company. It was really just the wealth was in the building of the company and then the money was just a byproduct of it.

AdaPia d’Errico:
That whole generational wealth coming down the pipeline, to me, it brings us back to the whole like working savings, they sold the company, they made their money from their “work.” A lot of entrepreneurs when they do sell, they don’t stop working either. This idea of retirement, like you said earlier, it needs to be redefined and I think it is being redefined by the way a lot of people live. It’s not necessarily redefined in consensus, media or articles or even the way maybe people are taught in schools. It’s just such a different way of living when you do what you love and it allows you to live a lifestyle that you also that you also love.

Ryan Sterling:
I have an example of that, a client that sold a business for north of $60 million. He was 78 years old. As part of the agreement, he was he was going to be a salesperson for the company for the next couple of years. He wanted that put in there. He wanted to continue working, sold the business $60 million, comes into the account clears and the very next day, he’s back in the office at 5:00AM. That’s what he loved doing, right? Again, he was happy to have liquidity and it was more just because he wanted to take care of his kids, but for him, it didn’t really matter.

Ryan Sterling:
He’s a type of guy that’s going to be going in as long as you can. That’s where he gets his purpose from. I think that’s, again, what a lot of people miss. I can just give you just one other case really fast that someone I’ve worked with. The president of a midsized law firm, I’d just leave it at that, had $20 million liquid, made a decent living, hated his job. He was a super creative person and actually a really good guy, but he was just attached to the money and what it meant for his work. Here’s the thing, his clients were the founders of … It was outside of New York. I won’t say the region. His cohort was basically the wealthiest people in that region.

Ryan Sterling:
Even though we had $20 million, the people he was around on a daily basis had billions. He’s the type that he hated his job. It wasn’t like, “Oh, I had a tough day.” He genuinely hated his job. He was 58 years old. It was one of those things where he wanted to retire. He wanted to spend more time with his family. His son was a Division I college tennis player and he wanted to travel around and watch his son play tennis. I remember talking to him and be like, “You can do this now, but you don’t have to wait.”

Ryan Sterling:
He wouldn’t do it because he needed enough money for a private plane. He was attached to this idea that a private plane would finally put him in this cohort of being successful. He talked about, “I’m probably going to need $70-80 million to get there.” We talked about that like, “When you’re there, the problem is it’s going to be exciting for maybe a year if even, but then the thing is you’re probably going to have the worst private jet out of everyone in the hangar.” It’s like one of those things were it just never stops.

Ryan Sterling:
That’s why I used that example because when I think about, again, money and wealth, this was someone who had a lot of money, but not a lot of wealth and no control over their time. They allowed their ego to run right over them to the point where ultimately, they’re going to waste away a lot of really solid years because of this attachment that means absolutely nothing.

Daniel Cocca:
Circling back to reality and I say that somewhat jokingly but not really to most of the folks out there who know are not entrepreneurs, they’re physicians, they’re lawyers, they’re bankers, they’re making a lot of money, they fall into that HENRY category, so to speak, but they want to be wealthy. In whatever way they define wealthy, they want to be wealthy. Is your advice, “Go out and start your own company”? Now, that’s a challenge for a lot of people of course and risks that come with it and the non-sexy side of entrepreneurship that we don’t always talk about when we entrepreneurs tout the benefits of entrepreneurship is that most companies fail.

Daniel Cocca:
It’s a roller coaster, tons of stress, uncertainty, unpredictable, really got to be in it for the long haul, but you rely on this underlying belief that smart, high energy and ambitious people will move to the top. If you’re that person who’s collecting W2 from their employer, how do you think about wealth or how does your approach to creating wealth over the long term, being able to live a comfortable life, as you get at or near those retirement years? How does that differ from the truly wealthy people out there?

Ryan Sterling:
It’s a really important question. By no means am I saying entrepreneurship is the only path to true wealth, happiness and meaning. I have a number of clients that work in traditional fields that while they don’t necessarily love their job, they like it enough and they’re just trying to find other areas of that meaning, purpose and excitement. I’ll just give you a quick case study. A client of mine who’s an accountant and is not going to change being an account. He’s an accountant for life and actually likes being an accountant, I should say actually. There’s a lot of people like being an accountant.

Ryan Sterling:
He likes being an accountant, but the thing is he found himself in that lifestyle trap of every time he got promoted, he spent more money and it was always things and toys and a new car, whatever the new gadget is. Part of it we talked about reconnecting him to his hobbies and what he really liked doing. This is a guy who really likes the arts. We ultimately talked about like, “You don’t need to quit your job and try to make it on Broadway or make it in Hollywood. You can join a community theater company. You can just get involved somehow or reconnect it to your old hobby.”

Ryan Sterling:
Long story short, he was able to do that and be a part of a community play. It was just an extracurricular. It didn’t require any money. He’s still doing his job as an accountant, but it’s getting away from just consumption and reconnecting to something that he was really excited to do as a kid. I guess not realizing that he can continue to do those things as an adult.

AdaPia d’Errico:
I’ve gotten into baking and gardening, especially under these shelter in place. I got to work from home, Daniel and I, separately. Of course, we work from home. My life is not that much different than it was pre-pandemic and pre-shelter at home, but because I have more mental space in a way because I can’t even think about, “Oh, maybe I should go over here or maybe I should schedule this lunch with somebody or maybe I should do this.” The only thing I can do, especially when my mind wants to go haywire is ground. I ground into physical things like growing a vegetable garden or baking.

AdaPia d’Errico:
I feel like from that perspective I’m a little bit of a retired grandma because I’m doing all these things, but they bring me a lot of calm and clarity and also like these little bits of joy of just like doing something. I think about that, the accountant that’s doing the community theater. I’m not sitting here thinking, “Oh, maybe I should monetize my black bean brownies and my celery sprouts,” because that’s another thing we tend to do, right? “Oh, you love doing something? Well, you should make something of that. You should monetize it. You should make a course out of it,” whatever.

AdaPia d’Errico:
There’s always this element of adding something that in some ways dilutes the meaning of it. I love that example of your client doing something that is meaningful to him and doesn’t have to become another chore or task or even job.

Ryan Sterling:
Here’s thing, just that act of getting involved in a hobby and reconnected to something that he really brings a lot of joy and passion, he’s not consuming in other areas because he’s no longer filling that void with stuff.

Daniel Cocca:
Well, for what it’s worth, AdaPia, your vegan brownies are delicious. You definitely could have a have a future there. Ryan, as some practical advice, let’s say, I’m a physician, for example, and after I pay for all my bills, my mortgage, I have money, emergency funds tucked away. Maybe I’ve got $100,000 a year that’s kind of my investable capital, so to speak. What do I do with it?

Ryan Sterling:
Look, if it’s $100,000 of money that’s earmarked to be invested, you don’t need it anytime, it’s truly excess capital, that’s where it’s going back to owning appreciating assets. The two main appreciating assets that I’ll talk about are stocks and liquid real estate. I’m not talking about owning just a rental property that may be something you want to do, but also, I caution against that and I think that’s oftentimes something that’s promoted or something that people think they should be doing, but missing the fact that you’re not going to get rich owning one rental property and there’s all a lot that goes into it.

Ryan Sterling:
Going back to the whole thing about owning appreciating assets, there are two different flavors of appreciating assets. There’s appreciating assets that have what I call a negative cost of carry and appreciating assets that have a positive cost of carry. Now, what does that mean? A negative cost of carry effectively means you have to pay to own the assets. A rental property or your residential real estate, while it appreciates over time, you also have to pay to own the asset. The roof needs to be repaired, you’re paying for it. House needs a paint job, you’re paying for it. Furnace breaks down, you’re paying for it, okay?

Ryan Sterling:
It costs money to own it versus appreciating assets that have a positive cost to carry. That’s stocks for example. You buy a diversified portfolio of stocks. You invest $50,000 in it. You’re not going to get a capital call to put more money into stocks. You pay for in terms of maybe the company is not managing expenses appropriately and needs new property, plant equipment, etcetera, maybe the stock goes down, but ultimately, you get the point of you’re not getting a call in the middle of the night saying that you need to do something with it, right? It’s truly passive.

Ryan Sterling:
For a physician or someone who has access capital, I think the portfolio of stocks and liquid real estates, and liquid real estate being either REITs and/or crowdfunding platforms, I really think is the way to go and what I do for my clients. When you think about risk, because that’s the pushback people have like, “Oh, I don’t think a lot of risk,” it’s important though to also think about that risk comes in two different flavors. There’s the risk of losing money and that’s what we mostly think about when it comes to risk. That’s where I put money in the stock market, and three days later, it’s gone down and I feel like I lost money.

Ryan Sterling:
There’s also another risk out there and a risk that most of us don’t think about. That’s the risk of missing out. The way to think about the risk that you’re most exposed to all depends on the duration of the funds. For example, if I’m going to buy a house in the next year and I have a down payment fund, that money is exposed to the risk of losing money because I know I need those funds, and if I put in the stock market and stock market goes down, I’m going to have less of money. I’m going to have a smaller amount for a down payment and it might compromise the type of home that I want to get.

Ryan Sterling:
The longer your duration, the longer you go out, retirement for example, if you’re someone who’s in your 40s and you plan on retiring in 30 years, the riskiest thing you can do is actually not getting aggressive with your money because you’re going to miss out over the long term and you’re going to be in a compromised position compared to someone that actually took some risk and acquire these appreciating assets at a younger age. It’s a long winded way of saying, “Acquire appreciating assets that don’t require you to pay for them and hold them for a very long time.

AdaPia d’Errico:
That’s great advice. I like the distinctions that you’re making on the appreciating depreciating and also the two types of risk. That’s really great. It actually makes me think about, I was actually on your LinkedIn page for your company, and four months ago, you published a post and the image on the post is this flyer and it says, “Please stay on the path,” or rather, it’s probably a trail marker. It says, “Please stay on the path,” and I thought that’s more relevant than ever today

Ryan Sterling:
Totally.

AdaPia d’Errico:
Isn’t it?

Ryan Sterling:
No doubt. So many people are coming to me about this market volatility. There are two things that I’m seeing right now. Number one, just at a much deeper level when you think about this 30-plus percent sell off that we’ve had in the market, stocks over the long term return around 8-10%. It doesn’t go up 8-10% every year, but over the long term, that’s been the general trend which basically means your money is doubling every seven to 10 years. That said, nothing comes for free. When you look at this volatility that we’ve experienced recently, the way that I’m framing this to my clients and to myself is, “This is the price of admission to have exposure to an asset class that returns 8-10% over the long term. You get rewarded with superior returns because of your ability to withstand this volatility in the short term.”

Ryan Sterling:
I’ve even gone as far to say like it would be greedy not to expect this as a long-term stock market investor because why should you be given the opportunity to compound at 8-10% without going through these difficult periods, right? This is the price of admission. When I’m talking about staying on the path, it’s when we put the plan in place to begin with. We know this is going to happen, but we position portfolios and I would advise anybody to position themselves in a place where they always have six months to a year of living expenses in cash or high yield savings.

Ryan Sterling:
By doing that, you’re able to buffer yourself from stock market volatility. Right now, all of my clients are required to have at least six months, sometimes up to two years depending on where they are in life of living expenses in cash, the same time any known liability. For example, I have a client that’s in the process of buying a house. They signed up with my firm back in November. I made them have their down payment fund in cash. Why? Because I didn’t want the stock market going through a volatile period at the time they needed it. Lo and behold, they found their dream house recently, right?

Ryan Sterling:
By having the known liability and cash and having six months up to two years of living expenses in cash, you’re able to ride out these storms and you’re not forced to sell into stock market volatility, and ultimately, if you’re not forced into it and if you can stay on the path, you’re rewarded over time.

AdaPia d’Errico:
I think you’re also rewarded just mentally like psychosomatically. So much of what you’ve talked about with us, to me, it always comes back to a personal, not just mindset, I think it’s more than mindset because I think it’s very much about psychology and your emotional state and prepping yourself because what you’re saying, to me, it’s almost a psychological cost and weathering the storm when we have lately downturns lately. By lately I mean like the past 10 years, 12 years because these downturns are huge and big. Every time, they just seem to be more unthinkable.

AdaPia d’Errico:
Hopefully, that doesn’t become a trend where every 10 to 12 years, we have some giant black swan event, but what I gathered from what you said that made a lot of sense to me is you have to be psychologically prepared for what may come.

Ryan Sterling:
I say in my adult life, I’ve had three once in a lifetime events, in 911, the financial crisis and now we have a global pandemic. These things just happen.

AdaPia d’Errico:
I was thinking the same exact thing the other day. I thought 911, 2008 was it hedge fund when that happened. I’d like to actually end on something I think is really exciting and really upbeat, everything we’ve talked about is so interesting, I know we could talk for hours about all of this, is you have a book coming out which has been delayed because of the pandemic. I would love to hear about the book and when it is going to be coming out and how people can even sign up to get a copy of it or preorder it.

Ryan Sterling:
Thank you. In a way, it’s actually a blessing that it’s delayed in part because I started this business back at the end of last year and it’s been really busy getting the business up and running, that one thing I’ve neglected is actually setting up the infrastructure to release and launch this book. Well, the publisher has been really helpful. I haven’t actually had the time and space to do it and this is actually providing me the time and space to actually do some of this prework that I needed to do in anticipation of the launch. Now where we are is that we’re looking at more or less a September release date. That’s still being negotiated right now. Yeah, I’m super excited for it.

Ryan Sterling:
It’s called You’re Making Other People Rich. It’s definitely a book about wealth management and building wealth, but it’s very much along the lines of what we spoke about today in the sense of, and this comes from the personal experience and what I’m seeing from my clients is that so much of the process building wealth isn’t the mechanics of it. Buying an S&P 500 index fund is really not that hard. Getting exposure to real estate isn’t actually that hard. What’s hard is the mental work of fighting back against the urge to consume, being able to set your own boundaries, being able to create that friction between the impulse to consume and actually doing it, but then going through the whole process of detaching.

Ryan Sterling:
In a way, it’s a book that I wish I would have read myself 10 years ago when I thought that a certain income threshold was going to solve all because it didn’t. I learned the hard way that even though I’m a technical person and I have all the right credentials and I’m in the business, personally, I wasn’t where I needed to be. It wasn’t because of lack of technical knowledge. It was because I didn’t have the right boundaries and the right mindset and I was too attached to [inaudible 01:00:00] and what money meant about my own worth.

Ryan Sterling:
It took for me to go through this process and I break it down between awareness, accountability and action. The section of awareness is really about being aware of the triggers that are causing you to consume in an unintentional manner. Once you have the awareness, then you need the accountability. You actually get to look at yourself and you need to find what you want in your life. You need to understand what your values are, bring those to the surface and then detach from these areas that really weren’t serving you ultimately in order to define what wealth means because wealth is so much more than about money. It’s about relationships. It’s about time and how we spend our time. It’s about our health. It’s about our experiences. You can’t get there until you’re willing to take accountability.

Ryan Sterling:
Then, the last piece is action. Then, that’s actually then mechanically how you define what you need for retirement, how to make sure you’re on a sustainable path to ultimately retire someday, whatever that means, introduction to the various asset classes and how they can be combined in order to reach your goals and objectives. It’s definitely a book about the mindfulness and intention around wealth, but also the mechanics of it as well.

AdaPia d’Errico:
I love it. I’m really excited for you. I’m so glad you wrote this book and I’m really looking forward to reading it. One of the things when you talk about wealth that I’ve learned and I’m sure is inherent in you as well as gratitude …

Ryan Sterling:
No doubt.

AdaPia d’Errico:
… and how much that has brought me a greater understanding around wealth as well.

Ryan Sterling:
No doubt. Living in an abundant mindset versus a scarcity mindset actually has very little to do with the amount of money you have and it’s 100% more about the mindset in your relationship to it. There’s no question about it and that’s actually in the book. If this message, If you’re digging it, if it’s resonating, I would say right now if you go to my website, just fill out a contact form and you’ll be on my distribution list. All you really have to do is just put in your email and you’ll be on my distribution list. I’ll be releasing details about preordering, etcetera, probably sometime in the summer.

AdaPia d’Errico:
Awesome. Well, on that note, thank you. Thank you so much. We’ve really enjoyed the conversation, learning from you and or your time today as well. Really, appreciate it.

Ryan Sterling:
Thank you, guys. This has been awesome. When the book comes out, we’ll do this again.

AdaPia d’Errico:
Absolutely. I would love to.

Ryan Sterling:
For sure.

Daniel Cocca:
Ryan, this has been excellent.

AdaPia d’Errico:
Thanks for tuning in to Real Wealth Real Health. We hope that you’ve enjoyed today’s episode and found it both informative and insightful. We welcome all your questions and your feedback about today’s episode and especially, we welcome your questions about specific topics that you would like us to cover. Shoot us an email at [email protected] If you have a moment, we’d really appreciate ratings and reviews as it helps us grow our online community and our interactions with you. We’ll also be linking to a number of relevant articles on topics that we might have touched on during our conversations. Some of them are broad. Some of them are technical, but we’re always aiming to provide information that helps you better understand the mechanics of building this healthy financial foundation, especially if you’re looking to do this with real estate.