By Liz Blood
A conversation about money with broker James Freeman
I met James Freeman on vacation earlier this summer in a beachside Mexican hotel pool. He told me about growing up with a hardworking mother who didn’t save and how he learned about IRAs later than anyone should. We continued our conversation this month.
James’s name has been changed for this interview. He works for one of the largest bank and brokerage firms in the U.S., which happens to also have strict regulations on public relations and communications. Non-compliance with the company’s media policy could be grounds for his termination.
Liz: Tell me a little bit about your history with money.
James: There wasn’t really too much saving going on in my household [growing up]. Money came in and it went out. I don’t know if my mom just wasn’t educated on it, or if we just spent what came in because that’s all she knew, but yeah. I didn’t really learn about saving until I was older.
Liz: What’s your personal philosophy about money?
James: No small questions here. [Laughs] I don’t know if I’ve ever thought about that question so specifically. I mean, I guess I save quite a bit, but I also like to spend it and enjoy it now. I’m big on paying my future self, but I definitely pay my now self also.
My mom’s retired now and she doesn’t, again, have any savings. She’s still working … it’s kind of still the same thing—coming in, going out—and that is not something that I’m interested in. I save quite a bit for down the line.
Liz: Do you view money positively or negatively?
James: Definitely a positive. Definitely a positive. Money’s how we’re able to go to Mexico. I like money. I think money is a good thing, you know. We kind of live in a world where it’s necessary.
Liz: How did you get into the work you do?
James: A mentor of mine worked in investment banking. I was a bio major, pre-med for a couple years, then I took a break and took a few years off and my mentor—I was thinking about going back for engineering at one point and I thought music at one point and he said, “Well, you’re not going to get paid with a music degree.” I guess he knew I was always kind of fascinated with money. I knew that’s what he did and it sounded interesting enough so that’s exactly what I did.
Liz: How were you always fascinated by money?
James: Just success and what people with money could do. I went to an international school [growing up] and had friends that were from very wealthy families. That fascinated me. I found out about making money and kind of the potential to make money and then just kind of everything around it fascinated me. Still fascinates me, I guess.
Liz: Does money stir any emotions in you?
James: Not really, I mean, you know, just thinking about not having much money growing up. But I wouldn’t even say that’s necessarily like a fear that I have, I just have more interest in making it a little bit and then saving. Saving is something that—I didn’t know how much power saving had until I was older. But no, not necessarily in any direction. I think money is a good thing.
Liz: How does money factor into your personal relationships?
James: I wouldn’t say my mother was willy-nilly with money but I definitely, I guess, adopted that portion also, so that’s also a part beyond the saving.
Liz: What do you mean?
James: By that I mean I will buy friends drinks and things like that and that’s not something that I’m too concerned about. Obviously, unless it gets out of hand. [Laughs] But it’s not something that I guess I care about too much. It’s also about that matter of paying yourself now.
I work 60 hours a week, my wife doesn’t work currently, so we share everything and that’s, it’s working out for now.
Liz: You two just had a baby—is that a big financial change or challenge?
James: Nope, not really. It just taught me to throw more money in my [Health Savings Account]. More saving. You get to put money—pre-tax money—in the HSA and you then get to use that on qualified health expenses and avoid taxes on it.
So there’s tax benefit to saving money and putting it in an HSA and spending on health costs with that money. But yeah, that’s probably the biggest financial thing I learned. Kids, they’re not that expensive. I mean diapers are like 30–40 bucks a month. He eats bananas, eggs—things we have in the house anyway, so in terms of out-of-pocket spending on him, it’s probably 50–100 bucks a month—not too bad. Obviously, we’re saving for his education, which is probably a little more stressful but I’m not really terribly concerned with that right now.
Liz: Do you budget?
James: Yes. I have a spreadsheet that I look at quite frequently.
There are a bunch of buckets that money [goes into] before I ever see it. Like savings, retirement—and then once all those things come out, all of the little pre-tax stuff, then I split my money up a few different ways. The budget tracks all of that.
I just put [my wife] on my phone plan. She was on her mom’s forever. I threw that expense in the budget for like a month or two before actually changing the plans, just seeing how new expenses or losing an expense—how that affects everything. It’s a living budget. It’s also just an Excel spreadsheet.
All the cells feed into each other’s formulas so I change one cell and it will change it for everything. So if one thing increases or decreases it’ll spit out what to expect. Then pods like planning for Mexico—I get to throw that big bulk expenditure in there and see how it affects the coming months.
Liz: How do you save for retirement?
James: 401K. I have IRA’s, as well. Those are kind of specifically for retirement.
Liz: Do you save outside of what’s for retirement?
James: Yeah, I put everything in a brokerage account. If I wanted to trade stocks with it I can. If I just want to buy a CD I could do that and just get interest. But it’s a brokerage account.
Liz: Do you pick your stocks or do you let your company do it?
James: I don’t like trading too much to be completely honest. So for my own account, it’s mostly just index funds … an index fund that tracks with the S&P 500 is building pretty much on everything that is in the S&P. You can buy into that fund and just track what the S&P is doing. That makes more sense to me because buying and trading stocks is just, there’s a lot of research and there’s a lot that goes into it that I personally for myself I’m not too into. Some of my co-workers find it exhilarating. Personally I think it’s just a lot of work on top of work.
Liz: Tell me what it means to be a broker.
James: We help clients with their portfolios, help them place trades, help them trade in their accounts. Kind of means a multitude of things, a lot of it’s pretty broad. There are three buckets of people. There are people that trade stocks and mutual funds who don’t need much, except maybe a little research help. Then there are clients who have managed accounts and they also don’t really need too much assistance, their accounts being handled by a portfolio manager. Then there are people that kind of need a little more help, understanding what their portfolio is, what a diversified portfolio is and what it means. I help them figure out that whole process.
Liz: Who do you work with mostly?
James: First and third, first and third. [buckets]
Liz: How do you get paid?
James: I’m personally salaried in my current role, I’m a salaried employee. [My company] is very much on the conservative side of compensation—they don’t want me, and I guess anyone in my current role, really looking to run up charges. So, no commissions. I’m not billing hours.
Liz: What is your ideal money situation?
James: Right now?
Liz: Yeah. Ideally, how would money be behaving in your life?
James: It would increase and my expenses would decrease. That would be ideal.
Liz: Is that something you plan to make happen?
James: Indeed it is, yeah. I’m looking for ways to make more money. I like working at [my company] so I think there’s a lot of opportunity to grow there and make more money, try to pay off debt, and minimize the things we have like cable. You know, do I need cable? I do, it turns out. There’s some things I cannot live without but if I can minimize the things that we’re throwing money at that would be great.
Liz: What kind of debt do you carry?
James: We’ve got debt on the house, on the car.
Liz: Pretty normal stuff.
Liz: When we were in Mexico you mentioned to me how you like to work with young people.
James: Yeah, I love just having the conversation with people that are interested in getting a little more deep into their financial side, saving for retirement. Just kind of enlightening people about what two fewer beers a night could do for their savings for their retirement. That look in their eye when they realize “If I just max out my IRA for 40 years you mean I could save a couple million bucks?” And people get really excited about that. I don’t think enough of us think about down the line.
Liz: Why do you think so many people don’t know about those kinds of saving options?
James: Poor education around personal financial planning. I think that’s generational because my parents weren’t really educated about it then they couldn’t pass it on to us and we’re not educated on it. I mean my son is going to know how to save from the get-go because I was able to learn.
[My company] and companies like [it] will do outreach programs to schools. We just hosted a stock picking challenge for students, things like that, like more seminars, more outreach to schools if the schools themselves aren’t going to do it. I think if it were something that were taught to us, if it was like a part of curriculum like algebra or geometry where I’m guessing probably less than half of us are using it in our day to day lives … whereas financial planning is every day and we don’t have a class based on it. It’s crazy.
Liz: If you were to meet a young person carrying some debt and trying to figure out their financial life and plan for the future, what would you suggest they do?
James: Create a financial plan. Just create a financial plan. I forget what the actual statistic is, but people that actually have a written financial plan—not just one that exists in their mind—are x amount more times more likely to build wealth. So take a snapshot of everything in your life right now—the debt, how much you’re making, what you have in savings, and create a plan of short-term, intermediate-term, and long-term goals that you have and enact it.
I’m trying to transition into more of an advisory role so I can proactively get more and more people to pay attention. Younger people more than anything. They have so much more power and time. So much potential. I just want to reach anyone that’s willing to learn more than anything.
Liz: Totally. It’s interesting talking to people about this. Everybody has different ideas and philosophies and feelings about money.
James: What’s the consensus?
Liz: So far everybody who I’ve talked to really likes money. I’ve always felt personally like I didn’t like it because it stresses me out but yes, most of the people I’ve talked to so far have really liked it and think it creates opportunities for them to do the stuff they want to do.
James: Totally. I think [my wife’s] more in that bucket of it’s-more-stressful-than-anything-else, but that works really well for us because I really like [money].
We will be back next week with our third interview.