As engineers, pretty complex problems, whether theoretical in school or real in the field, can become familiar as we go along our careers. However, the somewhat simpler mathematical equation of compounding interest can sometimes be neglected. Today’s episode will show you the crucial importance of budgeting, getting out of debt, saving, and investing for our future.
Chris Cook is a licensed financial adviser with a long and pretty diversified experience in the field, currently working at the Utah-based wealth management firm Diversify, Inc. He began his career working at an insurance division and later transitioned to some well-known brokerage firms among retail investors, such as Charles Schwab and Fidelity Investments. Now, he combines all this background and knowledge to help people from all over the country plan their financial life, whether you need to invest for retirement, save for the kids’ education, etc.
Chris lays out the step-step process we should follow when we’re just getting started, and he also tackles the different types of debts and how we can—and why we should—avoid them. He also provides some cool resources we can use to get a better education on investment as well as some financial planning tools we can use to visualize our long-term plan.
Diversify – https://www.diversify.com / (801) 467-5115
World Financial Group (Previously World Marketing Alliance) – https://www.worldfinancialgroup.com
Charles Schwab – https://www.schwab.com
Fidelity Investments – https://www.fidelity.com
E-Trade – https://us.etrade.com/home
Robinhood – https://robinhood.com
Dave Ramsey’s Website – https://www.ramseysolutions.com
Mint App – https://mint.intuit.com
Financial Peace: New Chapters on Marriage, Singles, Kids and Families, by Dave Ramsey – Click here
The Total Money Makeover: A Proven Plan for Financial Fitness, by Dave Ramsey – Click here
Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!, by Robert Kiyosaki – Click here Link
The Millionaire Next Door: The Surprising Secrets of America's Wealthy, by Thomas J. Stanley and William D. Danko – Click here
The Richest Man in Babylon, by George S. Clason – Click here
The Ultimate Civil PE Review Course – https://civilpereviewcourse.com
The Ultimate Civil FE Review Course – https://civilfereviewcourse.com
Haven’t joined up in our free community? What’s wrong with you? J/K. Ok, just go there and join a group of like-minded civil engineers! – https://ceacommunity.com
Join over 4000 engineers like you and learn the tips and tricks to passing the FE and PE. We even have a free resource for you! – https://civilengineeringacademy.com/join-our-newsletter
Check out our Youtube Channel for more content, live sessions, and much more – https://www.youtube.com/channel/UCPeFLBZ2gk0uO5M9uE2zj0Q
If you need exams, solved problems, or courses, make sure to check out our home base. We can definitely help you on your journey to become a professional engineer. – https://civilengineeringacademy.com
Reach out to Isaac – [email protected]
Transcript of Show
You can download our show notes summary here or get our transcript of the show below!
Isaac Oakeson: All right. Thanks for joining me today, Chris. Welcome to the Civil Engineering Academy podcast. How are you doing?
Chris Cook: I'm doing great. Thanks for having me.
Isaac Oakeson: Hey, I appreciate you jumping on. So, I connected with Chris. Chris is with Diversify Financial and great guy. I wanted to have him jump on the show and kind of talk about some finances today for civil engineers. I know a lot of engineers are starting their careers, or a lot of you are in your careers, and you're working either towards retirement or figuring out savings, and all kinds of other financial instruments that are out there in the world. So I wanted to bring Chris on today because I thought he could enlighten us on some financials for us.
Chris Cook: I'll do my best. Happy to help.
Isaac Oakeson: You're going to do awesome. So Chris, you know, I will probably talk a little bit about you, but I wonder if you could talk a little bit more about your background, what you do for work, things of that nature.
Chris Cook: Yeah. Well, I mean, I'm in my mid forties, and I've been licensed for 23 years. So most of my life. I started off working at an insurance division. It was called World Marketing Alliance. They're now owned by Transamerica. So I got exposure to that side of the business. And you know, a lot of the people who hold themselves out to be investment professionals in our industry are actually insurance agents. And some of them have investment licenses, some of them don't. But that's where I started. That's where I kind of cut my teeth. And then I went to work for Charles Schwab, discount brokerage company down in Phoenix, Arizona, and got exposure to the discount brokerage side. Later moved to Fidelity Investments, which is very similar. You know, another discount brokerage firm out there. You know, millions of people in the US invest through one of those two companies, and they're retail investors opening accounts themselves.
Chris Cook: And I worked in various departments at both of those places, usually client-facing. So I worked in an investment division with fidelity. So, you know, folks calling in wanting some help from a financial professional and not just doing it totally on their own. I also worked in their fixed income department there. And so, you know, I've seen that side of the business, the discount brokerage side, where it's mostly people doing stuff on their own. And then for the last 12 years, I've been with an independent, registered advisor called Diversify. We are based here in Utah. And so, for 12 years, I've spent in that independent route. And I've enjoyed that because I get to work with the same clients. They come in, we develop a relationship. I know them, they know me. And we work together
Chris Cook: Whereas when I was at fidelity, for example, I may talk to somebody, they could be anywhere in the United States, and I'm not their advisor. They may call in and get somebody different, you know? They will call in and get somebody different next time. And so, you know, there's not a lot of continuity with that. Not that that's bad. It's just, you know, you just don't get continuity when you're at those discount brokerage firms. So, you know, I've enjoyed where I'm at now and being in the independent route.
Isaac Oakeson: And do you work with clients all over the country still, or is it mainly a Utah-based clientele? Or how does that work?
Chris Cook: I do. I have clients in 37 states.
Isaac Oakeson: Okay.
Chris Cook: Now, we're based here in Utah, so I have a lot of Utah and Idaho clients. But, you know, then I've had clients over the years that have moved to different states or referred me to people from other states. And so it just kind of organically grew into nationwide.
Isaac Oakeson: That makes sense. That's awesome. Well, I think your background is awesome. And with what I have going on here with civil engineers, I work with a lot of civil engineers, what would you say are some steps that they can make to maybe make a solid financial plan for their future as they start their careers, or even if they're in their careers? What are some steps you could consider?
Chris Cook: Yeah. Well, I think the most important thing is just taking the time to build a plan. And I have a lot of civil engineer clients, or just engineers in general. And you're --
Isaac Oakeson: Math nerds.
Chris Cook: Yeah. In general, you guys are a sharp bunch and you analyze, and you plan, and you build. And so, it's just applying all those same things to your financial life. You know, sitting down and making a budget, right? I mean, everything starts off with some type of budget. Now, I've been in the business for 22 years, and so I know that the majority of my clients, they don't budget consistently every month. Some do, but there's a lot of families out there that they just don't. But at the same time, I mean, you have to have a groundwork, and a foundation, and a basis.
Chris Cook: So, if you can create that budget, work on it every month. In the end you'll know that you're doing the right thing if your assets are increasing and your liabilities are decreasing over time. So, you know, start with that budget and then take those next steps of opening up retirement accounts. And well, first of all, being debt free, right? On everything [inaudible]. There's a lot of times mortgage is a big purchase, so we're going to have that. But being debt free, having money set aside in the bank, you know, starting retirement accounts. If you have children, planning for their future at some level, you know? Setting some money aside for their education or future expenses. And yeah.
Isaac Oakeson: That's good advice. Most civil engineers, I imagine, that are working have some sort of 401k. Is it worth looking into -- If an employer is offering a Roth 401k versus just a regular 401k, is that something worth looking into? Is there some benefits to one or the other, depending on age or, or whatnot?
Chris Cook: Yeah. So you have Roth 401ks and you have Roth IRAs. Now, the Roth part just means that it's going to grow tax-free. So you're putting money in that you've paid taxes on. It's going to grow tax free. And as long as you wait until 59 and a half, you're going to draw it out. No penalties, no taxes. Now, a lot of it depends on your income tax status. So many times as an advisor, an investment advisor, I get questions that are layered with investment advice, tax advice, and legal advice. And so, on the Roth side, I mean, I can tell you what I know of that, what I think is best. But I also would say it's probably smart to get a tax advisor involved, the CPA or somebody like that. Or do the research on your own and make sure you know, from a tax perspective, what's best in your circumstance.
Chris Cook: But you know, the nice thing is, if you're in a relatively low income tax bracket, so let's say a 12% tax bracket, that's a married couple making less than $80,000 a year, a Roth is a clear choice, you know? Putting that money in, not taking the tax deduction now, allowing it to grow tax-free. If you're in a higher tax bracket, and many civil engineers are. I mean, your incomes generally are over $80,000 a year. You know, you get up in the 22 or 24% tax bracket. If you, you know, you make that contribution, you don't get that deduction this year, and in the future, when you draw the money out, there's a chance you would draw it out at a less tax return---less tax rates. So that could be an argument for going into the traditional and not the Roth. But in the end, I will say this, I believe that pretty much everybody should have both kinds of contributions. You should have some Roth, some pre-tax -- I mean, if you want to use a very general rule, 50/50, you know? 50% in Roth, 50% in Pre-tax.
Isaac Oakeson: So if someone is just starting out their career, do you think, I mean, that's kind of a good rule of thumb? Start with that, or maybe do some of their own homework and see if the Roth or the traditional, or stick with that rule of thumb and do 50/50? If someone is just kind of just starting their civil career and all of a sudden they're thrown all these options, they kind of get a little starstruck on what's in front of them. So maybe that's a good rule of thumb to follow. Any thoughts around that?
Chris Cook: Yeah. So like, in a 401k, many plans match. So let's say they're offering, you know, a 4% match. You put in 4%, they match 4%. Well, your 4% you can elect to be Roth 401k the entire part, the entire 4%. The company's matching 4%, but it is pre-tax dollars. Companies always match in pre-tax dollars, even if you're contributing to Roth. So you naturally have your 50/50 mix by doing that.
Isaac Oakeson: There you go. That's good advice. I want to shift a little bit to, I guess, debt. You touched upon that at the beginning. I know debt affects our investing. How does it affect our investing? What advice would you have around that? If people have credit card, they're just getting at school, they have school debt, maybe they're a young family with a kid, and maybe they're even trying to get a house, and homes are just insane right now. So what kind of advice do you have around debt?
Chris Cook: Well, I think the first thing is, let's separate it out into different debt categories, right? We have revolving debts, which are credit cards, right? I can take my balance up to a thousand, pay it off, right? Now we have instalment debts, which are auto loans for the most part, you know? Something where we're going to pay a set amount. You know, a 36-month loan and we're paying a set amount every month. And then you have mortgage debt. And each one of those have different varying degrees of, I guess, impact. So the first thing I'm going to say is, we should certainly try to avoid and/or eliminate revolving debt at any time, right? If we're using credit cards, we're spending money we don't have, and those types of things. And those interest rates are high if you do carry balances, right? If you use it, don't pay it off, and those things go up, you know, 18%--It's not uncommon to see on a credit card. So, you know, if you're cumulating anything 18% and investing and only earning 10%, you're done. Your math was to figure out that that math doesn't work well very often.
Isaac Oakeson: Yeah. So hopefully engineers can figure that one out.
Chris Cook: Yeah. So you know, then the other arguments, sometimes you'll say, "Well, I use a credit card but I pay it off every month". You can do that. But you also spend more money statistically. They've done studies that show that we spend more money when we're using cards rather than cash or debit cards. But you know, I'm not going to get too hung up on that. It's just, don't --- Certainly don't accumulate debts on credit cards.
Isaac Oakeson: Now there's a lot of incentives to use a card too. I mean, every card has a perk. So makes it easier.
Chris Cook: Yeah. Travel miles and all of that. You know, some people do like to use them monthly and pay them off. But in general, I'm going to say this, if you can live your life without using credit cards, you're going to be much better off in the long run.
Isaac Oakeson: That makes sense.
Chris Cook: And then you've got your installment loans, auto loans. So same type of thing, you know? If you can pay cash for a car and be in the habit of saving up and buying your cars with cash, even better. Now mortgage debt, you know, not many of us have $500,000 to go buy a house. So trying to save up, you know, I'd say at least 5%, 10%. But preferably closer to 20% to be able to have a down payment on that mortgage will give you a cushion there. Hopefully help you avoid some PMI, some private mortgage insurance, when you have that 20% down.
Chris Cook: So mortgage debt is one that we usually can live with at some level, but we're going to suggest that you're trying to pay it off within 15 years, whether you do a 15-year mortgage or whether you do a 30-year mortgage and just put it on a 15-year schedule to pay it off. Faster we can be paid off, less money we owe other people, more money we have for ourselves to either invest or consume and have some fun.
Isaac Oakeson: That's great advice.
Chris Cook: One last thing I would say is student loan debt. I mean, that is kind of a fourth debt, you could probably throw it in one of those other categories. But I always separate it because student loan debt is its own animal. It's the only debt that you cannot bankruptcy on. All the other debts, if we were dumb enough to accumulate an amount so much that we are [inaudible] and can't pay it back, we can go throw ourselves at the mercy of the court, have it lied down, start over, and do it differently the next time. You can't do that with student loan debt. Student loan debt, if you die, it goes away, or you pay it off.
Isaac Oakeson: Oh, man. I knew it was bad. I didn't know it was that bad. That's pretty crazy.
Chris Cook: Yeah. So I mean, you get in certain professions where, you know, they may have to take student loans. So my advice again is always avoid it if you can. Don't do it. If you don't have, try and pay for school as you go along. But if you're done, you're in your career, you have some student loan --- I hear too many times people say, "Well, that interest rate is really low. I'm going to take time and pay it off". It's not about the interest rate with that type of debt. It's about eliminating it as fast as possible so that if you ever find yourself in a situation where your income drops, lose a job, become disabled, and your income changes and your situation changes, that student loan debt is gone. And just behind you.
Isaac Oakeson: That makes sense. I know we have a lot of people, part of our audience that are in school or even out of school with student loan debt. I mean, I, myself, I remember the last two semesters I did take a student loan, but as soon as I got a job, you know, I was throwing every bonus that I had at the student loan debt just to get that thing knocked out. So it definitely makes sense to eliminate that as fast as you can. I'm curious if there's any tools that are out there that people could go around and play with. Is there something you recommend along those lines that people could maybe help them with a financial plan, help them see them get out of debt, or things like that?
Chris Cook: Yeah. I mean, I've kind of stuck to the Dave Ramsey world, to be honest with you. There's lots of other tools. All of the discount brokerage firms, Fidelity, Charles Schwab, E-Trade, Robinhood, I think. I don't know about Robinhood. But anyways, most of them have a financial planning tool that you can go on yourself, plug in all your information and do that type of stuff. Dave Ramsey's website, which is what I'm most familiar with, you know, they've got planning tools in there, investment calculators, and you can put your information in. There's also the, you know, Mint, the apps. They're also a website, mint.com. Those types of things where you can go in, you can enter all of your checking account, investment information, assets, and follow kind of your plan there. You know, as an advisor, we have our own tools. We have tools that we make available to our clients, tools that we use for financial planning and for social security planning, or, you know, any of that. So, you know, we use it all the time.
Isaac Oakeson: So along those lines, is there some good places that we could get some better education on investment? I mean, is there books, resources? Sounds like all these websites also we can dive into. Is there any particular that have floated to the top of your mind to help out?
Chris Cook: Sure. I mean, I'll throw a few ideas out there. I'll say this, I've done this for 23 years. So I don't think anybody's right about everything, you know? You're going to find -- You know, for example, I mentioned Dave Ramsey, right? Dave Ramsey is a radio talk show host. He preaches to the masses about, you know, some very simple financial basics to get out of debt, having emergency reserves, invest for retirement, save for kids, pay off your mortgage. And he's got a lot of great books, you know? Financial Peace is a good one that lays a very solid foundation. I would read that one if you're out of debt and you have your emergency reserve. Total Money Makeover is another one of Dave Ramsey's books, where if you're in debt, if you have any debt but your mortgage, read that book. That's the book that's going to light a fire under you to get that deck on and then get into those next phases of your financial life of saving and investing.
Isaac Oakeson: Perfect.
Chris Cook: But you know, Dave Ramsey comes from a place of "Let's use a little or no debt and eliminate debt". And it's just good, solid, long-term advice. Now, you start getting out into other things, for example, you know, Robert Kiyosaki. A lot of people have heard of Rich Dad, Poor Dad. And you know, good book, a lot of good principles. He's going to teach a principle about using debt at some level to leverage and build more. Basically, if you can take money at a certain interest rate and earn more on that over time, there's arbitrage there, and you're using other people's money, OPM. Other people's money to build your net worth. Now, the only time where I think that is somewhat wise is maybe if you're doing some real estate investing, right?
Chris Cook: If I have my home and I want to buy another home that's a rental, and I don't have enough to buy that rental property, I may have to use some of the bank's money to go buy that. So in a rental case, in the case of a rental, I always want to have 20% down. 20% down, no PMI. Then I might use -- You know, take a loan, which is the bank's money. Today you get that at, I don't know, 4-4.5%. Hopefully a real estate investment can earn you 8-10%. So you know, that's kind of a principle that's taught by Robert Kiyosaki. But I bring that up because if you call Dave Ramsey, Dave is going to tell you never to do that. We never do that at any level.
Isaac Oakeson: That's very true.
Chris Cook: But if you call Robert Kiyosaki --
Isaac Oakeson: He's got to stick to his guns. But I guess everyone does it a little differently.
Chris Cook: Yeah. So, Robert Kiyosaki, he's -- You know, you call him, he's going to say, "Yeah, use debt prudently", whatever the word, you know? Or what you think prudently is. So you've got those two. Then you've got new books out there. You know, just the standard ones. What is it? The Millionaire Next Door.
Isaac Oakeson: Good financial solid education.
Chris Cook: Richest man in Babylon.
Isaac Oakeson: Okay. I love them.
Chris Cook: I'll say one last thing. You do get books out there in the insurance world, right? So sometimes the insurance world teaches us -- It's called LEAP, lifetime economic acceleration process, where they're teaching you how to use permanent life insurance policies to build your net worth, right? It's completely opposite of what I teach. I've read their books because I want to know what the other side is saying and doing. I also worked in that industry at the beginning of my career, so I know it very well. Now, the reason I'm bringing that up is because, don't buy everything you read, hook, line, and seeker, you know? Read it, determine for yourself whether you think it's appropriate, talk to people with differing views, and then come up with your own financial path, and find somebody to work with who shares those same values. Because if you're going to buy term life insurance and invest your money in retirement plans in the stock market, you're not going to gel well with a life insurance agent who keeps telling you that's the roadway to go and that you need to own whole life and universal life insurance.
Isaac Oakeson: That makes sense.
Chris Cook: Every time you meet with him, he's just going to tell you why you're doing things wrong and want to switch. The same is true of the opposite. If you do want to use life insurance products and you meet with somebody like me, I'm going to tell you every time we meet why you shouldn't be doing that, you know?
Isaac Oakeson: Makes sense. Find someone that aligns with your values and then the financial path you want to take. That makes sense. What would you consider is -- Maybe for civil engineers starting, what would be the easiest way for them to start investing? What would be the hardest thing to maybe dive into? What are some advice around that?
Chris Cook: Well, in my opinion, easiest way to invest is build it into the monthly budget. So, you know, if you're debt free and you have your emergency reserve set aside, and it's time to start setting money aside for retirement. First, if you work for a company that has a 401k plan, especially one the matches, sign up for that. Let them pull out from your paycheck. Super easy. Second, you could open up individual retirement accounts, either traditional IRAs that are pre-tax or Roth IRAs that are after-tax. And a lot of the investment firms, you just link your checking account, you choose a date each month, say the 1st, and you make your contribution. Like, roth IRAs, you can contribute $500 a month to max out the $6,000 contribution every year. So you set it up, make it automatic. You can change those with any company at any time.
Chris Cook: If you have a month that you're not going to have it, call them and skip that month. But, you know, try and set it up to be automatic. Now, that's an easy way to get started. But also I'm going to say this, you've heard from financial advisors like myself that investing for the long term is generally the best way to go. Statistically, you put your money in, let the stock market do what it's going to do, going up, going down---we have more up years than we have down years---and over time, historically, a stock mutual fund or stocks in general return 8%-12%. Now, I say that because of simplification, right? When people are not doing that or trying to time the market, when to get in, when to get out, for whatever, it's what they're hearing, who they're listening to. To me, that's such a hard way to invest, right? Trying to predict the future, guess the future, worry about the future, and you'll drive yourself nuts doing that.
Isaac Oakeson: I mean, there's a lot of new ways to invest now. I'm seeing a lot of websites pop up where you can invest in companies or, you know, you're throwing your -- It's almost crowdfunding for investments now. It seems like a new way to invest. Maybe it's the new generation's way of doing things. I don't know. But I can see where -- It's like, you know, you can invest in stuff and people want to make money quickly or try to, but it's very unpredictable from what I've seen.
Chris Cook: Yeah. And a lot of times I tell my clients, you can separate the two. I'm not saying you can't do it at all. But your money that is retirement, that's meant to build your net worth over time, it, in my opinion, should be in a long-term plan, not being timed. But if you have some money outside of your retirement accounts and you want to scratch that itch of "I want to buy this stock and see what it does", "I want to buy this cryptocurrency and see what it does", "I want to participate in this crowdfunding website", you know? You can do all that with a portion of your money and see how you do. I mean, I also have a client comes in and says "I did this". Did really well. Sometimes our clients come in and say "I tried this. It didn't work. I lost a chunk", or whatever. But anyway, I think you can do both at some level, but the majority of yoru investing, in my opinion, should be just buy and hold, long-term. That's the simple way to do it. Not a lot of stress.
Isaac Oakeson: I love that. Well, Chris, our time's wrapping up. I want to know just a few more things about you. Why did you choose the field that you are in?
Chris Cook: Well, the two reasons -- I mean, I found myself in my free time talking about this stuff anyways. So if I was at a family function or with friends, I mean, it eventually just led to conversations about investing and money because it interests me. So I thought, why don't I try to make some money out of it as a career and as a job. But I also -- It's just I enjoy being in a business or in a field where I feel like I'm helping people. I don't think you can say that about every job. I think your guys' job is that you guys provide a lot of value to society and what you do and what you guys plan and engineer, do those types of things. Anyway, there's just some level of satisfaction knowing that you're contributing to the better of society. And I feel like mine industry, financial planning, I really get to sit down and make a difference for people.
Isaac Oakeson: That's awesome. Well, as we wrap up Chris, is there any last thoughts that you have that you'd like to share with the audience? And also what's the best way for people if they wanted to reach out and connect with you or the company? How they would do that?
Chris Cook: Yeah. Well, as far as any last thoughts, just jump in and start doing it. Kind of like we started it off. Just build that plan, read good things. I would say this, I do believe you're better off working with an advisor over the long run. I know there's a cost to it. Most advisors are going to charge you 1% per year. And sometimes we get too hung up with articles on the internet talking about "Just do it on your own and use index funds". Hey, it's a good, low-cost way to go. But remember that investing, it's not just math. There's an art to investing. And a good financial advisor can help you marry the art of investing along with the mathematics and the numbers of investing, and hopefully help you build your net worth over time in a better way than what you could do by just doing it on your own.
Chris Cook: So obviously I'm biased in my opinion. I'm a financial advisor. But if it's not me, I would highly advise looking for somebody else and getting some advice. So our firm is Diversify. We are based in Utah. We can work with anybody across the US through zoom or over the phone. Our phone number (801) 467-5115. You can Google us. Just diversify.com. You can find us there. And I would love to -- We have lots of advisors here. You can call in and we can get you paired up with one of the many. They'll do a great job for you. And would love to work with anybody. I've enjoyed working with you and Alex. And it's been a lot of years, and it's been great.
Isaac Oakeson: Well, I appreciate you jumping on. Yeah. We connected a long time ago. I just thought it'd be fun to talk about finances with everybody and you definitely have shared a lot of value. I have taken my -- If my car breaks down, I'm going to a mechanic. And same thing with my finances. So I'm going to, you know, a financial planner like you guys, when things break down. So I appreciate you jumping on, sharing some great advice with us, and we'll have to do it again sometime.
Chris Cook: Yeah! It was fun. Thanks for having me.
Isaac Oakeson: Thank you. See you.
Chris Cook: Thanks, Isaac. Bye.
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