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Julien and Kiersten Saunders
Julien & Kiersten Saunders

In 2012, Julien and Kiersten Saunders were swimming in debt. Flash forward to 2018, and the couple had paid off $200,000.

In their new book Cashing Out: Win The Wealth Game By Walking Away, released Tuesday, the couple explains how they did it — and how others can, too.

The Saunders, a Black couple, say they wrote this book because most personal finance books don't fully reflect the lived experience Black Americans face.

"They naively assume that doing better is purely a function of knowing better while disregarding the complexities, cultural or social elements that shape our decision making," they told Money.

In "Cashing Out," the Saunders address spending, saving, earning, investing and more, all while maintaining a focus on the personal side of money through the lens of the Black American experience, as they've done for years via their Rich and Regular blog, podcast and YouTube series.

Read on for an excerpt on their rules for investing.

Being armed with the true cost of investing and the power of low-cost index funds is like being officially knighted into a growing invisible army of savvy, like-minded investors around the world. You have your clear marching orders and a shiny new protective shield to prevent the enemy from infiltrating your pockets. But it wouldn’t hurt to have some encouraging words taped to the inside of your shield to help keep you focused in the event of a surprise attack. Here are some rules on investing to help you along the way.

1. Fees are a four-letter f-word

The magic of compounding interest works in both directions. It can be either a mighty force that pushes you forward or a parachute on your back making it all but impossible to sprint. It’s easy to see a single-digit percentage, and assume it’s a minuscule amount. But in reality, we should think of it this way:

For a $10,000 investment, over forty years, assuming a standard 7 percent rate of return, a:

  • 1.0 percent fee equals one-third of the total value (expensive)
  • 2.0 percent fee equals just over half of the total value (ridiculously expensive)
  • 0.5 percent fee equals about 17 percent of the total value (affordable)
  • 0.1 percent fee equals about 4 percent of the total value (ideal)

2. Your money can work harder than you can

We’ve all been taught the value of an education and the importance of a strong work ethic. The combination of both and following a strong moral code are supposedly the core ingredients for a good and successful life. Unfortunately, the data suggests, it’s simply not enough. According to a 2018 Pew Research Center study, “After adjusting for inflation, ... today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then.” This means that despite advances in productivity, the average American is only slightly better off than they were almost forty years ago.

Conversely, over that same period of time, between 1980 and 2020, a $10,000 investment in a simple S&P 500 index fund would have grown into almost three-quarters of a million dollars requiring no work at all. So, while it’s admirable and virtuous to pride ourselves on our abilities to work hard, the potential value of our labor is unfulfilled when income isn’t converted to investments. It’s fine to work for money, but it’s far better to have your money work for you.

Courtesy of Julien & Kiersten Saunders

3. Don’t believe the hype

There have been a handful of notable stock market crashes (bear markets) in modern history. There’s the 1929 Great Depression, the 1987 crash known as Black Monday, the bursting of the dot-com bubble in 2000, and the financial crisis of 2008. After each of these crashes, the financial media pounces on the story, stoking fear and whipping the general public into a frenzy with concerns about our country or global markets falling apart.

Then, without fail, things start to bounce back, and the financial media celebrates the remarkable achievements of the public and private sectors for bringing us all back to the prosperity we’ve come to know and love. All is fine in the world and we can get back to fancy vacations, luxury cars, and fancy homes. It would be irresponsible for us to say you should completely ignore it, but you should know it’s all hype. Just as your entire life can’t be defined by your best and worst days, the value of your investments isn’t determined by them either. Your job is to simply hold on for the ride and try your best to enjoy the view between the peaks and valleys. Don’t pat yourself on the back when things go remarkably well, and don’t shoot yourself in the foot when things are going poorly.

4. Take calculated risks

As you accumulate more wealth, you’re in a better position to take on more risk. This means investment opportunities such as cryptocurrencies, IPOs, and individual stock holdings can and should occupy a greater percentage of your total wealth. As we explained in chapter 3, once your income has fulfilled its purpose of providing flexibility, a good rule of thumb is to begin allocating 5 percent of your net worth to invest in emerging or riskier asset classes. This approach to diversification can accelerate you into financial independence sooner, and from there you have the option to reallocate even further.

Cashing Out is out now. You can buy it on Amazon here.

Excerpted from CASHING OUT: Win the Wealth Game by Walking Away by Julien and Kiersten Saunders with permission of Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © Julien and Kiersten Saunders, 2022.

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