Season 1, Episode 6: If gold is the answer, what is the question?

Why it feels safer to invest your money in things you can touch, and how that might not be true

It's so tempting to keep our money in things we can touch like cash or gold - we can use them in an emergency so they're safer, right?

Sara says we need to think twice about what "safe" means and details the surprisingly complicated logistics of going all out for gold.

Caitlin has to interrupt recording to manage a rental and Sara points out that an investment account never calls you on a Saturday to complain about the air conditioning.

We talk about how to make that leap of faith from investing in seemingly low risk but tangible things, to the much more abstract stock market, that can actually build our financial future.

This week the one thing Women on the Verge of a Financial Breakthrough can do TODAY to take the first, or next, step towards building a strong financial future involves very simple steps to get a handle on your financial portrait.

Ask us your dumb investing and finance questions on our contact page!

This episode was edited by Jes Rowe. Music by Bad Bad Hats and Devmo.

Transcripts for Episode 6: If gold is the answer, what is the question?

Music intro by Bad Bad Hats

Caitlin Welcome to women on the verge of a financial breakthrough, the podcast where we're going to figure out finance one dumb question at a time. I'm Caitlin Meredith. I'm a mediator and a coach based in the Bay Area, and

Sara I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup.

Caitlin So I first met Sara when she was my teacher in an Investing for Beginners class, and she made everyone go round the room the first night to say why they were there, what they were interested in learning about, and everyone else said something like, I'm about to retire or I got my first job or I'm interested in the stock market. And when it got to me, I just had to tell the truth, which was this was the only day I could get free babysitting and Sara was such a good sport. And then I found, instead of dreading going to class every week, I was looking forward to it. So I made Sara do this podcast with me so that I can keep doing these weekly classes because I feel like this is one of these subject areas. I'll be a beginner forever. So welcome.

Music transition by Bad Bad Hats

Caitlin Sara, are you ready to talk about gold? I love to hear you talk about gold. Yes.

Sara I don't know. I don't know. Honestly, I might be. Hit me. Let's see.

Caitlin What if I want my whole pie chart to be one golden medallion? Yes, I've heard that gold is good and it makes sense. It's shiny. I know what it is. It's been in history forever as a valued thing. So it makes me feel very, you know, secure that when we go to a barter economy with my seashells and my, you know, animal furs that if I have a huge store of gold, I'll be a survivor as an investment adviser. Are you going to give me a thumbs up on my plan?

Sara I mean, is your main goal surviving the end of days? I'm not joking. I'm assuming this is like your hypothetical investor who's like, Listen, when the shit goes down, I am going to survive. How do I ensure my survival when the end of days comes? Is that generally kind of what we're talking about here?

Caitlin Yes. And that like, oh, during the pandemic, the stock market went up and down. You know, all of these intangibles just freak me out. But gold, it's something I can touch. It's heavy. It feels real. And it feels like a much safer bet. You know, this is my one financial future to invest in gold.

Sara Yeah. I mean, the price of gold also goes up and down by quite a bit. So I don't know if you get that much more stability, but a lot of people understand real assets like gold or real estate more than they understand financial assets like stocks and bonds. So if something is going to change a whole bunch in price and you feel more comfortable with the gold, then OK, then maybe gold gets a thumbs up on that. If you want resources for a worst case scenario, then gold is actually a pretty good choice. If really bad things happen, financial assets aren't going to be worth anything because the stock market has probably been, you know, blown up or disintegrated or whatever. No one's going to want your pieces of paper. The companies that you own won't have any customers, right? And so those things will be useless. I mean, that's where it's like, OK, people who invest in gold or guns or bunkers or food storage, right? Like if they are preparing for an outcome that they think is likely, the rest of us probably don't think that outcome is as likely. And so we're not preparing for that. If you put all of your money in gold, you are prepared for one very specific outcome. Maybe two very specific outcomes like end of days, maybe something like hyperinflation, maybe, but you're not prepared for any of the other outcomes.

Caitlin OK, well, why not? Then I just instead of downloading from Schwab after I retire to get some money, I just go to the basement and bring up a coin.

Sara Yeah, I mean, you don't know what that coin is going to be worth when you bring it up, right? I think there is this underlying assumption that the price of gold always goes up. It doesn't. It goes up and down. Like other things, there are long periods of time where gold is not. You can't actually pay for things in gold, right? You bring your gold coin up and then you need to turn it into dollars in the world that we live in today. Right, right. So if there are these very specific outcomes, these very specific futures where we don't transact in dollars and we do in fact barter, then perhaps your gold will be perfect, right? Because you can barter for food and gasoline and other resources. But if we're still up here aboveground using dollars, you have to take your coin and turn it into dollars in order to buy anything from anyone else. So in those outcomes, like you don't, there's no way to tell 30 years from now. I mean, this is true with with stocks to some extent, right? Price of gold doesn't grow over long periods of time, has not in the past grown as much as financial assets. Okay, so you would end up with less money when you converted your gold back into dollars in the future.

Caitlin So if I have insider knowledge that the universe, as we know it will implode within the next, you know, 10 to 20 years a full gold menu for my financial portfolio, totally in order. However, if for some reason the world does not end in the next 10 to 20 years, and instead I just find myself in this same environment and paying my same gas and wanting, you know, a time share in Boca or whatever it's going to be. I will have lost out on potentially a much larger increase on my investment return on my investments that I made in the stock market instead of in the gold plates underneath my house.

Sara Yeah, there's a very, very good chance of that happening.

Caitlin OK. So I believe you also once said that my house would not structurally hold all of the gold that I would need to retire.

Sara Yeah, I mean, you were talking about a gold medallion, right? So I kind of assumed that if all of your wealth was in a medallion, that's not that well, I'm

Caitlin thinking about pirates, like how they keep gold. I don't have any personal experience.

Sara Well, I don't know how much gold you're talking about here, right? But if it's a significant amount of gold, you need a place to store it, right? So if you were like Sara, I'm going to 100 percent physical gold. My next question will, after all the questions that I asked before about, like, are you preparing for the end of days, OK, and whatever you're preparing for? But my next question would be like, Caitlin, where are you going to keep the gold? Where do you keep the physical gold so you keep it in your house? That seems very risky. Do you keep it in a bank? Well, what happens during the end of days? Banks aren't going to survive, either. Right? But I think as a physical gold investor, that's a really important question. Where do you keep the gold? It's heavy. People can steal it from you very easily, right? They just barge in and steal all your gold. So this is where I would start getting concerned about, like your physical safety. Depending on how much gold you had, I'm not talking about like maybe one bar of gold could be hidden in your house adequately, right?

Caitlin Yeah. And then you move and you've hidden so well, 10 years

Sara later, right? You don't want to lose it. There's a lot of issues that pop up with the physical gold play. You just have to think through all of those things. And that's an additional cost of owning gold, right? Like all of the expenses that go into preparing your house to be, I don't know, safe enough to store all of your gold. I mean, so that's why most people don't invest in physical gold. It's cumbersome if you really want it to be in gold because you thought gold as an asset class was going to do better than stocks or bonds or cash over the long run. You could invest in what sometimes people call paper gold. There are exchange traded funds that basically allow you to buy little pieces of gold in the physical. Gold is maybe stored in a warehouse in New York, like with proper security and proper audits. And you buy a piece of paper that you know it's like your claim on a tiny piece of gold in this vault somewhere else. And so if you're just thinking like, Oh, gold will do better than stocks, maybe you would just want to buy this paper gold instead of actually going out and buying physical gold.

Caitlin So that's if you want to invest in it as a concept, just like stocks are a concept rather than having the physical gold. But if you're investing in gold as a concept that you have a sheriff, it's not a good end of days plan because you won't have access to the security guards won't be around and you won't get in with your double triple authentication anymore.

Sara Exactly. Exactly.

Caitlin OK, I am so interested in this. Them that seems so hard for me and I'm assuming other people to get over, which is the things that we can touch versus the just abstract concepts. I mean, to a certain extent, few of us use cash anymore. Some money has become an abstract concept. We have money that is in our banking account and then slowly goes away because it's in our credit card account and we don't touch most of our money anymore. So maybe we're getting more used to it, but I really owning no gold or any precious metal. I get the appeal or real estate. I want to buy a house. I want to buy a horse. I don't know something I can touch and you have to deal with us all the time. I'm so curious if there's a leap that people just make and then they're OK, or if it's a constant negotiation between how people feel secure and vested in things. That's essentially some number system that if you got banked on your head and woke up on a desert island would not exist. Whereas if you woke up on a desert island with, you know, a piece of gold or your house or something, it would exist. So and I have to assume that women are, you know, we are socialized to really gravitate towards the real thing we can touch with our hands. So how do you think through that schism?

Sara One of the things I like to talk about with people who have that mindset is if physical assets, real assets with this idea of touching something to me, like owning assets in that way is it's a relatively inefficient. Does that make sense? Say more like if we go back to the gold, you think it's as simple as buying a piece of gold that you can touch? But like, how are you going to keep that gold safe? There's this whole other realm of issues that comes up that you have to deal with. Same thing with real estate. You own real estate. There's this whole group of issues you have to put in time and effort to deal with. Right. Are you going to choose renters? Are you going to replace the roof? Are you going to call the. Plumber, or when the toilet is clogged, right, there's this extra time and effort that go into real assets for most people, and if you don't want to deal with the time associated with that, you have to hire someone to do it right like someone has to take care of this stuff in the real world.

Caitlin A property management company or a bank to hold your gold or whatever. OK.

Sara Write the expenses of property taxes on your real estate every year. Write like in Austin. That's like, you know, the huge thing that's now is property tax season, right? Everybody's flipping out with something like financial assets like stocks and bonds. If you acknowledge that the price of those things is going to change, you can just let it sit there and not put any additional effort into managing this or looking at it or doing anything. You can just have an S&P 500 index fund in your Schwab account or whatever, and then just let it do its thing and you don't have to put any extra effort in. It is truly passive. Right. People are always looking for passive income and passive investments, and then they put together this portfolio of real estate where it's like, not passive, aren't you? I mean, you are just on your phone with Airbnb managing your Airbnb in Austin, right?

Caitlin Full time job, huh?

Sara I mean, it's so cool that it's efficient enough that you can do it from California, but I just saw you put in effort to it, right? You know, and kind of the brainpower that goes into it, right?

Caitlin Whereas with my retirement account, a log in a couple of times a year or whatever when I'm doing it out of drive, but I don't have to worry that a tree fell on my index fund.

Sara Right, right. But yet at the same time, we're here, you know, doing a podcast about what our index funds, right? Like, what are these things that we're investing in? So you have had to take this leap of faith basically to be like, OK, I get the real estate, I get the property. It's straightforward. The goal is straightforward. The stock's not so much, not so straightforward, right? So I think people avoid them for some period of time because if you don't know about it, right and it's not intuitive and we don't learn this in school, you have to get up a learning curve. And a lot of people will wait until they get up the learning curve before they invest in something. And that's just a tricky thing to do.

Caitlin And it seems like some crazy invented system that's just totally imaginary.

Sara Yeah. I mean, someone invented capitalism, right?

Caitlin Right. And so that it's like they're all playing this board game. And why would you want to put money on this whole fake thing? It's hard to connect the corn that I'm eating for my dinner with something happening in the stock market. I know intellectually there is, but it's so the stock market isn't actually as intangible as we think, but it's invisible in a way that we don't connect with our everyday lives, though they're totally connected, right?

Sara They absolutely are every, every company that touches that piece of corn from the equipment that the farmer used to plant it to the trucking company that took it to the bread place, to the bread company that ground up the corn and made the bread. And then it got shipped to the supermarket and then you went to the supermarket. And all of those steps are companies right? And all those companies in America have owners, right? Have shareholders like they might be private companies or they might be publicly traded companies that you know we can own. But all of those companies exist to fill a role in the economy that we've built here. So if you just think like, oh, the stock market, yeah, can seem like very vague or very distant. But if you think about I mean, if you just went through and and looked around or tried to keep track of every company you came in contact with every day based on just whatever you're doing in life right now, like whatever you're consuming. I mean, there would be dozens scores, hundreds. I don't know of companies like the end company. You'd like the last company you interacted with before you bought that thing or consume that thing, but then think about all of the other companies in the supply chain, right from creation, ideation to consumption. I mean, it's just a lot of companies. That's what the stock market is. It's those companies that do exist in the world, right? The stocks represent a company that exists and has employees and has products and has services. So if you can tie it back to that, I think it makes it a little bit easier to understand.

Caitlin Yeah, we're in its midst all the time. So even if we're not actively investing, we are. We're participating. Absolutely.

Music transition by Bad Bad Hats

Caitlin OK, let's talk about a step. A woman on the verge today can take to take care of her financial future and move it forward and thinking about the just the baseline things and the one I thought of was the first time I came to your office. I had no idea what I could talk to you about, so I just did a printout of everything, all my student loans and my mortgage and my bank accounts, and anything I could think of that sort of told my financial story and printed them all out and put them on your desk and said, Here this financial story. Yes, here's here's my life with a dollar sign. What next? And you were able to convert that information to a picture of what my pie chart looked like in terms of diversified portfolio in terms of balance between debt and income, etc. So I was thinking as a step, a woman on the verge today could take wood just to know what is the snapshot of her financial life. What are the different categories you can think of? Maybe the print I did were perfect, but just off the top of your head, what's that list of you should know this number, this number? And maybe you won't do anything with those numbers today. You'll just know where they are and when you're feeling a degree more brave, you dig into what they actually mean.

Sara Yes. So for our meetings, the meeting that we had the two main categories to get a handle on are your assets, the value of your assets and the balance of your debts. So if most of your financial picture fits into those two categories, the other two categories that are also important are your income. So that's usually like your W-2, right, or your tax return from last year or a pay stub and your expenses, which if you have a budget, you would know how much you spend each month if you don't have any idea how much you spend. Maybe we'll put a pin in that and come back to it another day because it's a good thing to do for

Caitlin another first step, OK?

Sara But the assets and debts section, you can do so much with that information, and I am always surprised that people just don't ever add up those two categories, like until they're about to come in my office, right? And then we'll add everything up and they're like, Oh, I didn't know I had so many assets, and then they feel really good about it, right? Like, they just have never taken the time to just add up all of the assets. So the easiest way to do this is to just print out like a summary page of all of your accounts, right? So checking accounts, savings accounts, retirement accounts, any account that's at a financial institution that has a positive dollar value on it, just print those babies out, line them up, put them in a pile and then go through and add up the value of all the balances, like take all the balances, add them up. Those are your assets. Oh, you'd want to throw your like the fair market value of your house in there. Okay. Right. Your house is an asset. Exclude your cars. No one cares. Exclude like your furnishings. Not that, but your house. And if you have other properties than your other properties and all of your financial accounts, add all that up.

Caitlin OK. I want to think about the woman who does this, who hasn't been doing it for a specific reason, which is the debts are going to be more than the asset. Yes. And for me, I'm thinking it's just having the number helps, even if it's the scariest thing. And we'll talk in later episodes about what first steps can be from there. But just you can't even start on a plan without knowing what you're dealing with.

Sara I think so, too. I mean, I think that the numbers are what they are. I don't see how they're any less bad if you don't know what they are, right? Like, if they're bad, they're going to be bad weather. You know what the number is or you don't know what the number is and you are not doing yourself any favors by not knowing what the number is. Yeah, yeah. But I can see how it's scary. But if you just again go through all your student loans, all your credit cards, and I'm not talking about like the next step of like nit picking through all of them to find all of this other information. Add up all the balances come up with a number. That's the debts that you owe and then how you look at a balance sheet as you look at the value of all of your assets and then you look at the value of all of your debts, you subtract your debts from your assets and that's called your net worth. It is really common, especially early in life or if you've gone through something traumatic or something, just a really hard time, it's common to have a negative net worth that is not the end of the world.

Caitlin Student loans alone. I can really see that.

Sara Yeah, absolutely. And yeah, you might have a negative net worth for a long time. The idea is when you start putting this plan. And in motion, your plan is to get less negative and then to get to break even and then to get to a positive net worth. Right. And you can work on both sides of the equation. I think we'll probably talk about this in future podcasts, but I'm not talking about like getting rid of all of your debt first before you start working on the asset side. You know, hopefully over time, your assets are getting bigger because you're becoming a more savvy investor and your debts are going down because you're paying those off over time and the math is getting better and you're getting closer and closer to breakeven and then closer and closer to a positive net worth. So those are the directions you want to be going

Caitlin and you can't start before you know,

Sara right? You just can't, you know, for any of us who've been in a desperate situation, did we dig ourselves out of that desperate situation by not knowing what we were doing or what we were up against or what we were trying to dig out of? Like, No, you can't even start that process until you know what you're dealing with, right? You're not just going to magically wake up one morning and be like, Oh, I made all of the changes that I needed to in order to get myself out of debt. It's a mindful course of action that you have to put in place, and there are lots of other people around you who are doing it too, right? So you can like, form your little gang of debt busters who are working on that at the same time, hopefully that you're building the asset side of your balance sheet, too.

Caitlin I was going to say just even telling a friend without even going into specifics, Hey, I'm about to do this really scary thing. I'm going to look at my numbers and just know them for the first time, and I just wanted to let someone know that I'm doing that right now. And just to give yourself permission to get a little extra support to and not to just have the shame, but take advantage of a close connection you have that would make you feel better just when you're doing it. Someone knows what's going on with you.

Sara How many people do you think you know who have done that, who have, like, dug themselves out of a pretty serious hole?

Caitlin I'm not sure because I think often it's something we don't talk about. There's so much shame about that that, you know, someone will mention offhand. Sometimes my clients how much they owe on their credit card, and I have to kind of hold back a gasp that's not helpful. And think about, OK, wow, a you went through something really big to need, you know, money that you didn't have. And B, you're looking at something really big here, but I feel like I don't. You don't always hear about it because there's a lot of shame about it.

Sara Yeah, there really is. I mean, because I think I know a good number of people who've shared that and Australians investing group like, you know, we'll have people who said like, Oh, hey, I just paid off all of my credit cards or I just paid off the last piece of my student loans, or I'm on track to pay them off over this period of time, right where they've really done the work. I feel like the pride that I hear and those women's voices just being like, Hey, like, I am doing this or I did do this is really remarkable and touching. I mean, there are a gazillion reasons that people end up in a lot of debt, right? And it doesn't mean you're a bad person. That doesn't mean that you did something wrong, and it doesn't mean that it's not something you can't get out of, right? But the first step in, like figuring and sorting all of this out is knowing what that balance is, right? Like, OK, what are we trying to do here, people? This is your number, and then they're just your numbers, right and right. Luckily with investing, your numbers are all temporary anyway. Your assets are going to go up and down, hopefully up over time.

Caitlin And next time. Stay tuned, because we're going to talk about if you need a financial adviser, how to choose a financial adviser and how to make sure a financial adviser doesn't steal from you.

Sara Should be fun.

Caitlin You're a financial adviser.

Sara I am.

Caitlin Bye, guys.

Music transition by Bad Bad Hats

Sara Hey, do you have any dumb questions about finance or investing? Send them to us at our website womenontheverge.com.

Caitlin Hey, so many thank you's to Kelly West, a woman on the verge in her own right who took the amazing photos for her album, art and website helped with our website design, music, audio editing, cheerleading, mental health, everything. Emily Klein, surrogate, our stylist that did our hair and makeup for our photos from Lucy Skyrocket. Lauren Gross and Taylor Gross, who helped us with our graphic design

Sara and our music is by Bad Bad Hats and Devmo.

Caitlin This episode was edited by Jes Rowe.

If your partner is making you ask for money, giving you an allowance, taking your money or not letting you know about or have access to family income. This could be economic abuse.

Sara Learn more at thehotline.org or call one 800 799 safe.

Caitlin So Sara Because you're a financial professional, we have to read a disclaimer for this podcast.

Sara I would actually really love it if you could read the disclaimer and your best legal voice. Oh my

Caitlin God, the legal voice. OK, doing it. This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Music outro by Devmo

Devmo The first thing you notice is that I'm covered in gold
The flick of the wrist it could turn a hot bitch cold
To get what you want in life girl you gotta be bold
Now Imma die rich