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Everyone talks about the different ways to create wealth. But what if some of the financial advice you’ve been following is keeping you broke?
In this episode, Sharran breaks down four brutally honest money truths about 401(k)s, credit cards, hot stocks, crypto, and financial advisors, and challenges some of the conventional advice people receive about money.
The goal is to become financially literate. At least enough to understand your money, question the incentives behind the advice you’re getting, and take personal responsibility for building your wealth.
“Everyone talks about how to get rich. Nobody talks about the brutal truths on how we’re staying poor, we’re staying broke, even though our entire families are working hard.”
~Sharran Srivatsaa
Timestamps:
00:00 – Introduction
00:25 – Why maxing out your 401(k) won’t make you rich
02:14 – Why cutting up your credit cards isn’t a wealth strategy
04:10 – The danger of chasing hot stocks, crypto, and random tips
06:41 – Why financial advisors won’t make you rich
09:28 – Why financial literacy matters even when you have an advisor
10:40 – The real goal: take personal responsibility for your money
Resources:
– The Next Billion by Sharran Srivatsaa
– Board Member: ARC Multifamily Real Estate Investing
– Board Member: The Real Brokerage
Connect with Sharran:
– X
– YouTube
– Threads
Transcript:
[00:00:00] Everyone talks about what you need to do to get rich, but nobody tells you the brutally honest truths that are keeping you broke. Today I’m gonna give you the four brutally honest truths that are gonna guarantee that you never get rich. And I know this because I dumpster dove for food, and in the process, got a chance to build two billion-dollar companies and was a banker at Goldman Sachs.
[00:00:20] And today I wanna give you the four brutally honest truths. So let’s get into it. Here’s brutally honest truth number one, that maxing out your 401(k) is going to make you rich. Have you ever heard of anybody that has ever become rich with maxing out their 401(k)? It has never happened, and the reason is the 401(k) is a system that has three parties at play that is designed to not help you directly.
[00:00:44] The three parties are you, your employer, and the, the, the investment companies. Let me tell you how this actually works. You get a chance as a employer benefit to contribute to your 401(k). You get a forced way to put money away in your savings, and the incentive for that is you get, what, 3% tax advantage that you actually get, gonna get taxed on later.
[00:01:07] And then the employer says, what, that they are going to actually give you a match for that amount. Well, net- net, what happens? Those monies now go into a pool that are in a investment vehicle inside of your 401(k) that you can’t touch for 20, 30, 40 plus years. And as it stays in there for the, uh, that entire time, it is being charged fees.
[00:01:27] And that fees was, fee structure was created for all the investment companies, and they are the ones that make the significant amount of dollars associated with it. This is an entire industry built for you to actually put money away, a little bit at a time every single month. Now, please let me be very clear.
[00:01:45] Maxing out your 401(k) has benefits. It allows you to have some tax advantage growth. It give you some reprieve wh- when you’re in retirement. It actually teaches you the best discipline of knowing that you can put stuff, uh, away today. It gives you the understanding that it gives you a forced savings mechanism today.
[00:02:02] But maxing out your 401(k)is not gonna make you rich. So take a second and think about how you, how the maxing out the 401(k) is not the only path to retirement. Here’s brutal truth number two: cutting up your credit cards is not gonna make you rich We see gurus across the board that say you need to just cut up your credit cards because that is somehow gonna get you to financial freedom.
[00:02:27] I will tell you, there’s nobody that has ever cut up their credit cards and actually been on the Fortune 400 list. That has never happened, not one time. Now, I do agree with this. If, for some reason, you are in credit card debt and you need to follow some kind of baby step plan to get out of that debt, yes, 100%.
[00:02:42] But I will tell you, it is not your fault. It is your problem, though, meaning the reason you got into credit card debt or consumer debt or debt of some kind or, or credit card debt is because no one taught you how to use a credit card. That’s all it is. It’s like we gave you the keys to a brand-new Tesla and just said, “Go ahead and start driving.”
[00:03:03] No one taught you the rules. No one taught you how to actually charge the car. No one ta- taught you about the performance of the vehicle, and no one taught you the repercussions of going 80 miles an hour in a 20 mile an hour zone. We never got taught the usage of these cards. We just get offers in the mail, and that is why most of us don’t know how to actually use them.
[00:03:21] Again, it is not your fault, but it is your problem. So just cutting up your cards, uh, is not gonna make you rich because just taking away the keys to your car is not gonna stop you from crashing your car. We are in a place where we have to, just like we have to teach people how to drive a car responsibly, we have to teach people how to use credit responsibly.
[00:03:41] And I will tell you, if there’s– If you are in credit card debt, my heart goes out to you. You need to have a plan to get out of that debt. So if you are unsure of how to actually use credit cards as a vehicle to manage your lifestyle spend, spend time learning and getting financial literacy on how to do that.
[00:03:57] But that is baseline financial literacy. It shows you how to use the card. It shows you how to understand how to use overall cash management mechanics. But cutting up your credit cards is never going to make you rich. And here is brutal truth number three, and that is following the hot tip or the hot stock or the hot crypto.
[00:04:17] You know the thing that bothers me the most that happens with financial influencers that, uh, today is that they give you tips on the three ETFs you need to use. Suddenly, you’re going to figure out the three ETFs that some random person on Instagram told you, and you’re going to go buy that in your portfolio?
[00:04:34] How responsible is that? You think that somebody who doesn’t know your situation has come up with this random idea on how you should use some random fund to make yourself rich? Isn’t there some reason that they have an incentive to do that? There are two reasons why they have an incentive to do that.
[00:04:48] One, they’re trying to give you this actionable tip that they know that you’re gonna share and save that gives them more views, and second, there’s a good chance that because they do that, there’s a brand deal that is waiting for them that promotes that you use that ETF The financial services industry is the most profitable industry overall.
[00:05:06] It has so much profit that is willing– it is willing to pay a lot for brand deals up front to get you as the consumer to buy into using an ETF, using a fund, signing for an online banking account, or buying some crypto because the person that is promoting it is… The cost is so low for them to get so much result along the way.
[00:05:26] Looking for a hot tip, looking for a hot stock, looking for a, a hot crypto idea, or actually using a ETF recommendation from anyone on the internet, including me, is a terrible idea. You should never do that because especially if that ETF is somewhat esoteric, especially if someone is giving you stock advice, and then they couch it by putting on some kind of disclaimer saying, “This is not financial advice.
[00:05:49] Do your own research.” Well, why are they doing that? Because they know it’s not financial advice. They know it’s probably not gonna help you. They know it’s probably not suitable for you. Picking the hot stock, picking the hot tip, picking the hot startup. Picking the hot startup is the worst. Your friend, uh, told you that he has a hot deal because it’s a hot startup that is gonna somehow revolutionize the world, and you’re now gonna go invest in that when you know nothing about that industry?
[00:06:11] A hot tip, a hot stock, a hot anything did never, never is going to help you in a sen- sustainable, sensible way. And people do that because they are irresponsible, and they don’t know what else to do, so they want to throw the Hail Mary and say, “Listen, I would much rather get a hot tip or a hot stock because my day-to-day, I don’t have an understanding of how to actually grow my wealth.”
[00:06:31] So brutal truth number three: no hot tip, no hot stock, no random ETF from an influencer is going to make you rich. And here’s brutal truth number four Financial advisors are not gonna make you rich. And I say this because I was a financial advisor. I have taken all the financial advice certification courses out there.
[00:06:54] I’ve had more licenses than your financial advis- as, as advisor does right now. I was a banker at Goldman Sachs and at Credit Suisse. I advised billionaires. I know exactly how this process work, and if there’s anything that you can learn from the billionaires, you will learn this, is that they do the most boring things, and their mandate to me, as their advisor, was not to make the money, was to actually protect the money that they had made.
[00:07:17] So the billionaires know for sure that e- even the money that they have made, they give it to the advisors just to help with the, the, with the peace of mind of the protection overall. So if you think your financial advisor is gonna make you wealthy, you are significantly wrong. And I’ll tell you this: imagine that you are hiring a CFO for your company.
[00:07:38] Would you hire a CFO for your company that is fractional, that is also the CFO for 300 other companies? Well, you wouldn’t, right? Because you would not put the financial, uh, uh, structure of your company at stake, at risk when that, that person’s focus is divided amongst 300 to 3,000 other companies. Well, you would not do that for your business, but you would do that for your personal life?
[00:08:02] You would just take your assets and give it to a financial advisor who has 300 to 3,000 clients, and maybe once a quarter or once a year is willing to have a conversation with you about the fees or the annual tax savings? Now, I’m not saying the financial advisor is a bad idea. I think there’s several great financial advisors out there.
[00:08:19] This is not a poopoo at them at all. They have a business model that they run, and their business model runs, you know how? Uh, uh, on assets under management. Do you really think it costs more to manage $3 million of assets versus $2 million of assets? Why should someone get a fee on that? And that was actually the single m- important reason why I actually left my role at Goldman Sachs is because I was, I was, uh, frustrated by the amount of fees that the financial services industry charges consumers over a long period of time.
[00:08:47] Did you know that if you invested a million dollars today and it grew in the S&P 500 over a 20-year period, uh, over 20 years, it would be roughly $6.7 million if you didn’t touch it at all? That’s at a 10% return. Now, take that 10% return and bump it down to 9% for the 1% of fees. Do you know what over that 20-year period what 1% of fees is?
[00:09:07] You would say, “Oh, for a million dollars, it’s probably 10,000, 20,000, 50,000, $100,000.” Well, no. Over a 20-year period, you are paying over a million dollars in just fees You would think for that fees, that advisor should be able to make you rich, but never has an advisor been able to make someone rich. Now, the reason I’m suggesting this is you should have a financial advisor if that is not your full-time job, because it’s probably good to have somebody that is watching over your wealth overall.
[00:09:33] It’s probably good to have someone that is a custodian of your wealth. I am a big fan of financial advisors. I think it is great to have advisors. However, you are being irresponsible to yourself and your family if you are not financially literate to have the conversations necessary with that financial advisor.
[00:09:49] If you’re sitting down at the quarterly review or the annual review and the financial advisor is giving you a report and you don’t know what they’re saying, then you have no idea if they’re guiding your family in the right direction per your needs, per your benefits, per your suitability, per your goals for the future.
[00:10:03] And a financial advisor will not make you rich. Now, at best case, they may be able to protect you from some downturns. They may be able to manage some of your money, maybe give you access to some ideas. But please understand that their business model has them forced to accumulate assets and then serve 300-plus families.
[00:10:20] What is the goal of a financial advisor? The financial advisor’s entire job when they wake up in the morning is what? Asset gathering. Their job is not incentivized to make you rich. Incentivized to protect you. They want more of your clients. They want to do a good job for you, so they put you in stable assets, the stable assets that you need to understand.
[00:10:36] And understanding this is financial literacy. The entire part of what I’m trying to tell you here is that if you don’t understand these four brutal mistakes, if you don’t understand how the 401(k) maxing cannot make you rich, if you don’t understand how just cutting up your credit cards can’t make you rich, if you don’t understand that the hot stock tip is gonna make you rich, if you don’t understand what the role of financial advisor’s job is, the, the, the co- core goal of all of this is to ensure that you take personal responsibility at just having financial literacy.
[00:11:02] You should be able to talk articulately about each of those things and understand that not one of those things is suddenly gonna make you rich. Everyone talks about how to get rich. Nobody talks about the brutal truths on how we’re staying poor, we’re staying broke, even though our entire families are working hard.
[00:11:20] I’ve been there. I was poor. I was dumpster diving for food, and I had a chance to build two billion-dollar companies along the way and be in the belly of the beast and learning all of this, and I felt that it was my responsibility to share these four brutal truths with you