Ep494: Shang Saavedra – Learn About Saving Your Cents to Wealth

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever, stories of loss to keep you winning in our community. We know that to win in investing, you must take risks but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives. Join this mission at my worst investment ever.com By taking the risk reduction quiz I've created from the lessons I've learned from all my guests. It's time to start building wealth the easy way by reducing risk. Fellow risk takers, this is your worst podcast host Andrew Stotz, from a stocks Academy, and I'm here with featured guest, Shaun savant Dre Shang. Are you ready to join our mission to help 1 million people reduce risk in their lives?

Shang Saavedra 00:53
I am so ready.

Andrew Stotz 00:55
All right, let's do it. So let me introduce you to the audience. Shang reached the ability to be work optional. By the time she was 31 years old, by focusing on increasing her income, lowering her expenses, and investing all her savings. During the day Shang is a corporate working mother and at night, she creates content around investing, personal finance and mindset on her blog, saved my sense.com and her Instagram at saved my sense, she has a heart for teaching Americans how to retire with dignity, with a focus on mental health, behavioral psychology, and an attitude of doing things. scared she lives with her husband, child and two cats in New York City, Chung take a minute and filling further tidbits about your life.

Shang Saavedra 01:48
Hi, everyone, thank you so much for having me on the show, Andrew. Something that people don't really know about me is that I've led a very international childhood. So I was born in China. And in my early school years, I lived in Switzerland, the Netherlands, before moving to the United States. And so I went through three language changes before I had reached the age of 10 years old. And on top of that, I was diagnosed with cleft palate and cleft lip when I was a baby, meaning that I was born with the roof of my mouth split into two, which made it very difficult for me to speak properly. So not only did I have to go through language changes, I also had to receive speech therapy as a teenager, because my teachers complained that they could not hear me talk in class, I am very grateful I received that speech therapy. And that has really allowed me to be very clear in my communication to everybody today on the podcast,

Andrew Stotz 02:53
you probably all should go through some speech therapy, you know, like, like enunciation, and the way that we convey, you know, and so it's an interesting story, and thanks for sharing that journey. I know, a friend of mine, he speaks, reads and writes about 20 languages. And, you know, and he's never lived in China, but he's absolutely fluent. I asked him I had a speech, I gave it back to Beijing University for six hours a seminar. And I asked him, Hey, you speak Chinese, right? So yeah, he's, he's half Australian and half Indian. And I said, Well, you want to come and interpret from my speech for six hours? He said, Yeah, let's do it. So we flew to China. I had one of my Chinese friends there, sit down with us. And we went through, and he caught up on some vocab. And then for six hours, that guy delivered an amazing interpretation. And what, so he's a genius. He's a polyglot, but the one thing I learned is that the importance of our mouth or lips, our tongue, and the position of those things are what really makes the sounds and so you know that that's a critical thing. One question. How many languages do you speak now? did most of those fade out when you laugh like Dutch? Or did you keep those? Or how did that go?

Shang Saavedra 04:07
Yeah, there are not many native speakers of Swiss German or Dutch here in the United States. So my primary language is English, followed by a elementary fluency in Mandarin Chinese. I learned French and Latin in high school, but most of that has been forgotten at this point.

Andrew Stotz 04:26
Yeah, it's hard to find Latin people to talk to. They seem to not exist anymore. The Latin Nope. Fantastic. And one last question before we move into the big question. And that is, if somebody goes to your website, say my sense.com or your Instagram, what are they going to get? Like, what is it unique about your perspective on you know, on the topics that you know, is what they're going to receive? Maybe you can give them a little taste of that.

Shang Saavedra 04:58
Yeah, Personal Finance is often written about as a set of numbers or just understanding how math works. But that's not how we behave. In the years leading up to when I was 31, I had to drastically reduce my expenses in order to accelerate my ability to reach work optional. And I was a very quantitative, very analytic person. Yet I also struggled with paring back my expenses. And that's when I realized mental health, behavioral psychology had every as much to do with personal finance, as the math that was behind it, perhaps even more so. And so drawing from the studies of psychology done by greats, like Viktor Frankl, and also pause the mindset, like Caroline leaf, and Carol Dweck, I realized that our brains are programmed to be on automatic behavior loops. And in order to break through and change behavior, when it came to personal finance, you had to catch on to the loop that's in your brain and deprogram it. And that was the insight that I found out as I was changing my own behavior, and that habit loop and breaking the habit loop is what influences a lot of the content that I put into save my sense, I don't directly talk about the habit loop, because it takes a while to explain, and Instagram is very short form. But behavioral psychology is the base of my content.

Andrew Stotz 06:30
That's interesting. And I think, you know, your focus on behavior, I totally agree, you know, the numbers are simple. And in some ways, they're very, they don't change, you know, compounding interest, or whatever that would be. But the behavior is where we really need to get in control, I remember reading a book called your money or your life when I was, I don't know, 20 years old. And it really showed me that I'm trading my energy every day for money. And then all of a sudden, if you then go and look at buying a TV, and you're saying, I'm paying for this with my energy, this is going to be two hours or five hours or 20 hours of my energy, am I really going to trade that for this TV, and all of a sudden, that really helped me to reduce the cost of my life, you know, and I tried to teach people to be frugal, I love the word frugal, which means, you know, really to reduce the cost extremely. And one last thing I would say is that when I teach about investing, for beginners, I always say, you won't get rich in the stock market until you change the way you think about it. Most people go into the stock market thinking they're going to create wealth, but I try to tell them, you should focus on growing wealth. Because if you think you're going to create wealth, it's probably not going to happen in the stock market. But entrepreneurs create wealth. But then if we say, Rich Dad Poor Dad type of advice, well, wait a minute, only point zero 1% of people in this world are really suited to be entrepreneurs, let's say. So it's bad advice to tell everybody Hey, you should be an entrepreneur, when we know that 99% of them probably shouldn't be an entrepreneur. So what's left? How do you build your wealth? Ah, the last thing is, you got an income of $10,000 a month, and you spend 6000, you just created wealth of 4000, you got an ATM or a cash machine that you can invest. So that's the mind learning over the last five years really been focusing on how you know how to think about creating wealth through your salary. And I think you've just demonstrated from your story about that. So that's awesome. Great. So now it's time to share your worst investment ever. And since no one goes into their worst investment thinking will be tell us a bit about the circumstances leading up to it, then tell us your story.

Shang Saavedra 08:42
Yep. This was in my mid 20s. I had just graduated from business school, I joined a tech startup in San Francisco. And I had been very successful in my salary negotiations. And I had a very nice and plump six figure salary going in. By that time, I already had a six figure net worth. And most of that was invested in the stock market. And I'd often wonder to myself, Am I missing out on something? Am I not thinking about something else that can accelerate my growth or protect me from tax liabilities? Because I had started a business by that point. And I've grown very sensitive to large tax bills as a result, through my tax preparer, I asked him, Do you have a financial advisor that you could recommend for me? He said, Yeah, I call up this guy. And I got on the phone with this person who claimed to be a financial wealth advisor. And he picked up on the fact that I said, you know, I'd really like to avoid income tax as much as possible or reduce my income tax liability. What ended up happening was that he sold me a whole life insurance policy and at the time The illustrations that he gave claimed, you know, returns on this policy in the six to 7%, that should have rang a bell in my head, it didn't. And he wanted to underwrite a policy for me with a premium of $24,000 a year because he knew how much I'd made, how much net worth I already had, he figured, well, you can put $24,000 A year into this policy. When I saw the price tag, I, I did pause for a few days, and I ran it by my then boyfriend. Now my husband, who's also extremely analytic, very smart, he went to the same business school as I did. And he said, This just doesn't smell right. And $24,000 is a lot. He felt that I shouldn't do it at all. But I had already felt like I invested so much time into this dialogue with this financial advisor who turned out to be an insurance salesperson, I ended up reducing the premium to about a $5,000 a year premium with the option of buying up more shares to the $8,000 mark. And I signed and started this whole life insurance policy. And it was only when I started reading more into the whole life insurance policy. And a year later starting to see the financial statements coming down from the insurance policy when I realized the growth rates that this salesperson had illustrated to me were unrealistic. And that in reality, the value of this policy is likely growing close to inflation, because it is likely propped up by insurance company investing in bonds and bond like instruments as I found out, that's typically how insurance companies manage their assets. Thankfully, the five to $8,000 premium wasn't a ton of money relative to how much I invest today. But at that time, it was the very first investing mistake I've ever made. And I felt so shameful about a person who was so highly educated as I did, I went to Harvard, I went to University of Chicago, I can run my numbers. And so I ended up with this pretty awful investment that thankfully, I'm not losing money on it. But it's not exciting me at all. And there wasn't an easy way to get out of it either. So I still have the policy today, I have a strategy for drawing it down via a low against a policy in the future. But it is absolutely my worst investment.

Andrew Stotz 12:39
Ah, interesting. And I have, you know, a lot that I'm thinking about, but I just curious, how would you describe your lessons that you learned from this?

Shang Saavedra 12:51
Number one, really do the diligence on the motivations of any advisors that you take on? Yep. Now, let's say number two really scrutinize any figures and illustrations that you're ever given, especially with somewhat unbelievable growth rates?

Andrew Stotz 13:15
Hmm, yep. Um, maybe I'll share a couple things that it made me think about, you know, the first thing is, I always say that, you got to understand it. When anybody moves in the financial industry, there's a fee. And if you cause them to move, then you're paying that fee, whether you can see that fee, or whether it's somehow bundled in some way or another. Such as you know, a person just seeming like they're giving you a Oh, talk to my friend who's an advisor, the accountant, it's recommending the friend is probably getting a fee. Yep, the guy the insurance guys gonna make so the higher that he can get that premium, the more fee he's getting. And everybody's earning a fee. Now, on the first way of looking at that, we may think, Oh, that's terrible. But we were willing, you have financial people have to be paid. Just like every industry, we have to be paid. But I think the lesson that I take away from it is that you have a right to know exactly what everybody who is being paid, and what amount. And I like to really share that with the listeners to say right now. Contact the people that you are working with, where you don't really understand how much you're paying, who's getting paid, who's getting a cut. You have a right to ask and the financial professional has an obligation to explain it to you, in simple, easy to understand language. And if they don't, that's not your problem. I can't really understand this. No, no, it's their problem. And you need to put it to them. So that's a second. thing that I, you know, that I'm thinking about. And then the other thing, insurance is a craze in Asia. Insurance Agents are just selling insurance like crazy. But I think that what I tried to do is tell people to just think, kind of think about it, right? First of all, you know, stock market returns going to be something like eight to 12%, let's just say 10. Let's say you can get 10% return in the stock market, or insurance companies investing the money that you give them in the stock market. No, that's too risky. They're investing in mainly in bonds, maybe they could put 5% of all of your money in the stock, but generally, it's going to be bonds. Alright, so what if bonds return? Well, let's just say, let's just say 4%, capital appreciation, the interest, all that, let's just say 4%. That's what they're going to earn. Now you think they're gonna do, they're gonna charge you any fees along the way, of course. So let's reduce that 4%. By some fees, let's just say, when all is said and done, they're gonna take 2% of that 4% per year. Now you're down to 2%. That's the return on, you know, that you're going to get on a life insurance policy. Now, there may be ways that you could complicate it and get more and all that, but I just try to get people to think about that 10 and kind of going down. So those are my thoughts, you know, what, what are your thoughts and what can really, you know, help the audience understand, particularly knowing the craze that's going on and selling insurance in Asia?

Shang Saavedra 16:29
Absolutely. Part of the reason why I think I was also blindsided by this is the lack of transparency in the insurance industry. To this day, the advice that I now give to everyone is be able to explain your investment to your teenage self. If your teenage self cannot understand it, then don't invest in it. All my investments up to that time when I was in my mid 20s. And now onwards, I was able to explain why I decided to deploy this capital, why this particular asset allocation, why I felt this risk was worth it, and why I think this is going to grow and allow in profits, I could not clearly explain that with regards to the whole life policy. And that was my grave mistake in that I went into an only half understanding it. I owe my husband a great deal for pausing and saying maybe you shouldn't put in all $24,000 a year. So I'm glad he helped push me down that premium, it definitely upset the insurance salesperson and I said, Let's rewrite this policy with a lower premium. But yeah, you got to be able to explain it.

Andrew Stotz 17:41
Got it. So based on what you learned from this story, and what you continue to learn what one action would you recommend our listeners take to avoid suffering the same fate?

Shang Saavedra 17:52
Only by Term life insurance?

Andrew Stotz 17:55
What can you just explain that just so that the listener that is looking at home versus term? Why do you say that?

Shang Saavedra 18:02
Yep. For the most part, I don't assume that most people would be able to reach my level of wealth in such a short amount of time. But most of us have someone who depends on our salary throughout our lifetime, whether it be a spouse, partner, a child, a disabled family member, an older family member, etc. In the worst case scenario, that you die unexpectedly, and those dependents are relying on that income. Term life insurance, according to my calculations, is a very reasonable policy, price wise for you to put some money into each year to provide for the people who depend on you.

Andrew Stotz 18:44
Great, great advice. I know when I was born, my dad bought a life insurance policy, you know, and actually, I've been paying it since then. It's $100 a year I paid.

Shang Saavedra 18:57
Oh, and it's still very cheap.

Andrew Stotz 19:00
Yeah, well, it was done in 1965. So you know, it was a long time ago, but I paid it you know, all these years, but I think that the payouts something like $15,000, which is enough to you know, ship my body somewhere probably. What is one resource that you've created or that you've used that could benefit our business?

Shang Saavedra 19:21
Yep. The marquee course that I teach is called the safe my retirement masterclass. This is because I found that you're put into the workforce in the United States and immediately are bombarded with language like 401k Ira, taxable brokerage, and as someone who's never really been exposed to this kind of terminology growing up, you get really confused and what I found is that people get scared and don't end up doing anything when it comes to saving for retirement. And so the save my retirement masterclass has two goals. One, demystify and teach you the basics of retiring in the United States. Without making you feel dumb. I make the concept as clear as day. And my second goal is, it's a crash course is about two hours of videos. And then I'm going to push you as your teacher to take one next step. Even if you don't feel ready, I'm going to push you to just take one step, I have a model that I often share, it's called do it scared, but do it anyway, you're going to take the step, you're going to do it scared, but you're going to take one step towards investing into your future. And that's what I'm, what I'm all about is doing things scared,

Andrew Stotz 20:41
beautiful. And how do people find that course? Yep,

Shang Saavedra 20:45
it's advertised both on my Instagram and my website, but I publish most of the content, and I preview parts of the colors on my Instagram. Save my sense.

Andrew Stotz 20:56
Got it. So ladies and gentlemen, go there, you can get a taste of it. And then if you like what you see and hear, get into that course, I love the idea of, you know, getting people to do things when they're scared. I think that's actually a great motto in life, not just in financial. I think if we, if we simplify what you've just said, you know, you said you simplify it. If we also reduce those steps to be kind of baby steps, like some people think, but I've got $100,000 I got to figure out what to do. Well, wait a minute, first thing you got to do is open up an account. And you can open an account with $3,000 Why not do that first and try to step ahead, you know, so I think having someone like you advising people was, you know, fantastic. So, alright, last question. What's your number one goal for the next 12 months?

Shang Saavedra 21:43
No, it's funny, I got a little scared of making goals because the COVID but, uh, I just stepped into a new corporate role. I'm super excited about it. So I think over the next 12 months, I just really look forward to making as many new connections at my new company and doing the best that I can there.

Andrew Stotz 22:04
And that's an optional corporate role, right? It is

Shang Saavedra 22:10
my job, I enjoy working. And so I like to keep my mind busy.

Andrew Stotz 22:14
I think that that's one thing that I would tell the listen to is that financial freedom doesn't mean that you don't work. Financial freedom means that you don't have to work. So that's where you said, you know, in the beginning that, you know, work optional. And that's awesome. Because work can be a great I mean, if you're not under pressure, you know, to generate that wealth, then you can really, really focus on the work that you love, so that you're an inspiration. Thank you, oh, listeners, there you have it another story of loss to keep you winning. Join our mission and start building wealth the easy way by reducing risk. Start by going to my worst investment ever.com And take that risk reduction quiz. As we conclude, Shawn, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. I know it's not Harvard, but hey, it's good enough for today. Do you have any parting words for our audience?

Shang Saavedra 23:22
Do it scared but do it anyway.

Andrew Stotz 23:25
Beautiful and that's a wrap on another great story to help us create, grow and protect our wealth. Remember, ladies and gentlemen, this podcast is about one guest. One story. One mission to help 1 million people reduce risk in their lives fellow risk takers. This is your worst podcast hose Andrew Stotz saying. I'll see you on the upside.