The Power of 16: How to Secure Financial Security For Yourself

In this episode, Steve Altishin speaks with Speaker and Author of Financial Epiphany, Scott Yamamura, about making personal finance accessible and actionable through simple principles. 

Scott introduces the concept of "the power of 16," explaining how money can multiply over a 40-year career when invested early. He breaks down complex financial concepts like compound interest into relatable terms, comparing financial ability to athletic ability that diminishes over time. 

The conversation covers practical strategies for retirement savings, college planning, debt management, and aligning financial goals with life purpose.

If you would like to speak with one of our attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

To learn more about how Scott can help you, you can view his website at: https://financialepiphany.com/

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

Transcript

Speaker 0  00:00:00

Hi everyone. I'm Steve Altishin, Director of Client Partnerships here at Pacific Cascade Legal, and today we have certified financial coach Scott Yamamura, to talk about the power of 16 and how to secure financial security for yourself and your kids with an easy empowering system. Okay, Scott, that sounds great. I I, in the old days when I was an economics major, I remember a little bit about this, but this is gonna be fascinating, but before we start, can you just sort of talk a little bit about yourself and how you got to be doing this?

Speaker 1  00:00:38

Yeah, absolutely. I work a corporate job. I'm in video communications for Costco Wholesale. So every day I'm helping distill down big messages into just what employees need to hear. And after I got into that, I thought there's this parallel, I think I can take this clear communication and distilling of messages over to personal finance where there's a lot of confusion and intimidation. I went most of my life unaware of, uh, personal finance, just kind of doing it haphazardly, timidly even. And I realized most people are doing the same thing too. We're just not being taught by parents or school or, or elsewhere where you might expect it. So I myself, 10 years ago, studied to become a financial coach, came up with unique ideas that were working for me, and I realized maybe I could add another slice to the pie for that. People who saw the way I taught it, which is simple and creative, would wanna go ahead and serve up that sort of slice for themself and learn it that way. So I spent three years writing a book Financial Epiphany and really organized my thoughts and said, okay, if there's three rules of thumb I can teach, if I can boil it down to that, let me serve this up. And for those who need to hear it that way they can take a bite out of that slice.

Speaker 0  00:01:53

I love it. I love it. The, we had talked about a few things, uh, you know, kind of getting ready for this, and I looked at some of your stuff and, and I love the fact that you try to break down these complex things into something that, you know, real people can understand. And one of the, one of the terms that I remember when we first talked to somebody and, you know, telling us, you know, how we're gonna grow our, our wealth, you know, and they, they said compounding wealth, you know, and just like mean, I was like, I dunno, 20 something. And I mean, it sounded scary because, you know, I, I thought to myself, I don't have any wealth to compound. I mean, how, how do you get someone past that sort of hurdle, not believing they can do it? Yeah,

Speaker 1  00:02:47

Yeah. Compounding wealth or compound interest, it's a banker's term. It's a classic term. It's something that's unfamiliar to a lot of people, I like to say. It's about as comfortable as hugging a cash register. It's, it's cold and got hard edges. And so we need to warm this thing up a bit because we need ownership over our money. This isn't something that we have to keep at arms distance. This isn't something we have to be an imposter to. This is something we can own and hold for ourself. So I took that term compound interest, which Albert Einstein is actually credited on the internet, at least by saying, compound interest is the eighth wonder of the world. Now, to us, that's supposed to mean this thing is so miraculous. This thing is so incredible, so magical that it's, it's just this eighth wonder. It's so wonderful.

Speaker 1  00:03:35

Why don't we own and use this for ourself? But that, that phrase is, is not enough to get us going. We need to still hear it another way. And so, what if we called compound interest, an ability to multiply money instead? And I like that word because ability. That's you. This is ownership over the person. And we each need to take ov ownership over our own personal finances. That's why it's called personal finance. But when we call it an ability, this is much more like a parallel to athletic ability. If we have an ability to multiply money, so we're not accumulating a thing, we're actually utilizing this, this skill that we have. The skill is simply based off of our age. So it's nothing we have to, to earn or do or get certified for based off of our age. We can be assigned a multiplying power.

Speaker 1  00:04:27

And just like athletics, it's a skill that we have. We all have a natural ability to multiply money, and it diminishes with time. Just like athletics. We're not gonna be in our prime forever. But when we recognize that parallel, that that multiplying money slash investing slash compound interest is an ability we have, it's much more friendly. And then we're much more open to being coached about it, just like an athlete would, a coach can tell us, you've got this ability, you need to steward this thing, don't squander it. Go out there and start scoring some points.

Speaker 0  00:05:00

Yeah. I I, I also remember being taught, you know, by our parents to save money, you know, start saving money and, you know, keep saving money until you have enough to buy a house or a car or, or something. But, you know, this whole save money thing mm-hmm <affirmative>. But I don't think I've ever been taught how to save money. What does save money? Even me.

Speaker 1  00:05:28

Yeah, yeah, exactly. There's a lot of, uh, very general phrases out there. My father used to tell me, invest in your 401k plan. There's free money. And then it stopped there. But how are we supposed to take action if there's nothing quantifiable? And that's exactly what I set out to do. I myself, I needed numbers. I needed, if I was to measure something, I want a ruler. And so that's what I set out to do, is to create a ruler with the inch mark on it, with the, with the entire, uh, foot mark as well. So people knew what was happening. People need to know what is an input. Like if I was to put this much money in into retirement, yeah, I know it's a good thing. I believe it. I don't, I don't distrust that. What's it gonna turn into? And that, that needed to be described for everybody.

Speaker 1  00:06:15

It needed to be described for me to get over the hump. And once people do get over that hump, they actually can be empowered to act confidently because they know what's happening. If I do this, then this happens. It's no longer this, this huge, uh, mystery. And many people believe a myth also, and, and believe in you have an ability gets you over this myth. The myth is I'll wait till later. I'll wait till I'm older, savvier making more money, get a raise, get a promotion. That's what I'll learn about money. But it's the exact opposite. You don't wanna wait, because just like we said with athletics, do you want to wait to start playing football in your fifties? Do you wanna wait to learn how to be a boxer till you're 60 <laugh>? You know, all these things. We know you wanna start early when you're in your prime. And money follows the same parallel. So that's really why I'm describing it that way. So, 'cause people get athletics and then they can understand the same as for finances. I Oh, I love that. Yeah. Mm-hmm <affirmative>.

Speaker 0  00:07:12

Thank you. I love that you, you write about something that I just thought was fascinating. It's empowering yourself with the three financial epiphanies. Mm-hmm <affirmative>. Being a big Catholic, I, I gravitated to that word and I'm thinking, okay, what are they gonna be? And mm-hmm <affirmative>. Can you kind of talk about that, you know, maybe how you came to, to find those epiphanies or have those epiphanies and what they really mean and how they can help people.

Speaker 1  00:07:44

Yeah. And I love to show the artwork here to the book. As you can see, a financial book can look black and white and, and have small type and charts and <laugh> that that's not how everybody likes to think or wants to think. It doesn't feel very inviting. And so it starts with what do people need to hear? And if 78% of people are living paycheck to paycheck, if 77% of us are in debt, and if on financial literacy tests on the basics, we're scoring low, we don't need all the complexity. We don't need to be overwhelmed with all the choices. We actually just need to hear the simplest things in order to do, take the right steps, which are also very simple. That's it. So that's why I like to describe things via rules of thumb. So what do you first need to do to describe these rules of thumb?

Speaker 1  00:08:38

Well, money is all over the place. It's, uh, constantly moving and roving variables. We feel like we need a calculator or a professional for every step of the way. But how do we get this ownership ourself first to get started before we see a professional and feel confident, well, you gotta make money freeze. And so I go with the, the most common scenario, instead of every scenario, we gotta make money freeze. So what's the average age to start a career at 22 right after college? Could be 21, could be 23, but what if we were to freeze it at 22? Then we could move on and, and, and figure out these rules of thumb. How long is the average duration of a career? 40 years could be 39, could be 41, but when you freeze it at 40, the average, you can figure out a whole lot.

Speaker 1  00:09:23

And the last thing we need to freeze, the last variable is the rate of return. How much money, how much money can money

earn? So when we put money in, say a retirement account, what can we expect it to earn? Well, I choose 7.2% as the rate of return because not only is it in the window of what is achievable, but it actually leads to the simplest math ever. And that's what we're trying to do here, is we're trying to escape complexity, which then people freeze, get analysis, paralysis and do nothing with, or you teach with simple and then people can take action. So when you make money freeze with those three steps, starting a career at age 22, working 40 years, earning a 7.2% rate of return, now we compile the three epiphanies on top of that. And I love that word epiphanies as well. I, uh, chose that word because I want people to have a mental miracle with their money. And this is all about empowerment and fun and, and creativity and confidence over your money. And we have to describe it as such. But yeah, so that's the, that's the groundwork. I call it the simple framework. When you freeze those three things, then we can build upon that with the three epiphanies.

Speaker 0  00:10:37

So your, your, your first epiphany I thought was really interesting. It was just sort of about, again, doubling your, your, your ability to make money. Yeah. Mm-hmm <affirmative>. But I saw you in a, in another video, relate this to what you called the gratification, delayed gratification and the marshmallow experience or experiment. Oh, yeah. Okay. Can you talk about that?

Speaker 1  00:11:08

Yeah, absolutely. So the Stanford marshmallow experiment was, uh, several decades ago, but we had these young children sitting in front of a counter and they were asked to, to wait in front of this single marshmallow. The experimenter, the conductor of this experiment would leave the room for a certain amount of minutes if the child ate the marshmallow, that's all they got. But if they waited and did not eat the marshmallow, they would be rewarded with a second one. So that's delayed gratification. And I thought to myself, what child would be satisfied with settling for the second marshmallow? Children would immediately, I think in my mind, say, can't do this again. Can two marshmallows multiply into four? Leave the room, leave the room <laugh>, and, and two marshmallows, uh, doubles to four. And then why wouldn't they ask again? Wait, I get it. I get the pattern here.

Speaker 1  00:12:00

This is working, this is doubling. Leave again. Four marshmallows turns into eight, and then once again, eight marshmallows turns into 16. And I would think looking at a child that just figured out the system here, actually money, it parallels money. Money does the same thing. That money doubles every 10 years under these circumstances. We just said, using that 7.2% rate of return, the easiest math ever. That doubling is the, one of the simplest concepts around when it comes to numbers, 10 years, one of the, the simplest numbers to add, subtract, divide, and multiply by. And when you put those into the same epiphany that money can double every 10 years, a single investment, not, not where you're adding over those 10 years at all. You just put in a thousand dollars once and you know that 10 years later it can turn into 2000. That is a simple concept. It's a building block that you can use with understanding money for the rest of your life, because what is it? It's math and it's not gonna change. So that's, that's the first epiphany. Yep.

Speaker 0  00:13:05

It, it's, it's, uh, just like, you know, we were sort of taught it just, it's, it's an easy math that people can understand and yeah, you, your epiphany number two, I remember back from my old days in, in, in college the power of 16. How does that fit in?

Speaker 1  00:13:25

Yeah, exactly. So when we say that money can double every 10 years, we know we can't stop there. That's the inch mark on the ruler. We know that we wanna measure more than the inch. And so we have to extrapolate, we just said that people work an average of 40 years. So let's figure that out. And we just said it with the marshmallows that if money can double every 10 years, it's going from, in a single investment of 1,010 years later, doubling to 2010 years later, doubling to four eight, and then 16,000. So when you remove the middle, you say, okay, if I start a career and put in a thousand as the ability to multiply to 16,000, now we know the input. Now we know the output. And that is important. We've put some numbers on this, we've quantified it. But here's the thing is that people like me, a money nerd who don't mind delayed gratification, we're okay with waiting 40 years for the results.

Speaker 1  00:14:22

But how about everybody else? Okay, so some of my family, friends, colleagues, uh, they want things immediately

immediate gratification. And that's the world that we live in. Yeah. Our culture is teaching us to want things right now. And so how do we take this delayed gratification and turn it to something more immediate? We flip things around. So instead of saying, we're gonna wait 40 years for this money to accumulate and multiply by 16 times, we talked about an ability, right? So we flip it around, and now we have the power of 16. We have this ability of multiplying money by 16 times when we start our career, and when we put a number on this, now it finally makes sense. Okay, so I'm quantifying this, this is not some big mystery. Save early. Okay, that's good advice. Okay. Take advantage of compound interest. That's good advice.

Speaker 1  00:15:15

When we state it as quantifiable, you have a power of 16, you can multiply money by 16 times. Now, that's your ability. You need to take advantage of this thing now. And now we finally put a number on it. You can, you, it makes sense to you and you can calculate this thing out. So that's the second epiphany, is that we have that power of 16 when we start our careers in our early twenties. And one more thing is that with athletics, say NFL football players and Olympic ice skaters and gymnasts, other sports that really require a lot of agility and, and power and strength. We're at our, our optimum in our early twenties. And the same goes for money.

Speaker 0  00:16:00

We're a family law firm. We did a lot of, uh, you know, issues evolving. The kids rather, even if from a divorce or from any other situation where, you know, you're, you gotta start thinking about your kids and of course college. And you talked about how you can this same concept mm-hmm <affirmative>. You can, I, I kind of go back in time if you know, go put it backwards, not when you're 22. What if, what if you put it back to when you were zero? Yeah. What if, you know, you, you, you started age zero and start putting money for that child. How does that one,

Speaker 1  00:16:40

Right? Yeah, exactly. No, I love that example. It's probably my number one example of how to apply this. So if money can double every 10 years, and that's our financial epiphany, number one, then we could start potentially a 5 29 college savings plan, which has tax advantages and this market growth of 7.2% as achievable under this sort of savings plan. Instead of paying what college costs. Now the, the average amount that is being borrowed via student loan is about $40,000. So if you pay for college where you're going, that $40,000 is, is the cost if you pay as you go. But what if you were to save 10 years earlier? Well, we just said money doubles every 10 years, so you only have to save half. So instead of $40,000, 10 years earlier, save half 20,000, that 20,000 we said can double over 10 years. It turns into what you need when your child is going to college.

Speaker 1  00:17:42

But if you were really getting this concept earlier, 10 years earlier, so 20 years before your child goes to college, you only need to save half of a half a quarter. That would be $10,000 in this instance. So if you were clever enough and knew this principle early enough, you could set aside $10,000 and a 5 29 college savings plan and allow it to double into 20 over 10 years and double into 40 10 more years later. And so what you get here is the same education could be paid with $10,000 if saved early versus $50,000 if a student loan plus interest is paid on it after for the very same education. And just to point it out for me, I did not understand this concept when my child was born. He's 16 now, but I did understand when he was age seven. And so we put money away when he was seven.

Speaker 1  00:18:40

We stopped at age nine, and my wife said, why are we stopping? Don't we need to keep saving till he goes? And I said, no, just watch. It's gonna double. So we stopped and she had to trust me for it didn't take 10 years if money doubles faster than 10 years, good for you. <laugh>. And the market has been good lately. So when the money did double, she certainly belie became a believer. And you know, what she did is she went to gun go after that and he said, let's money put money over here. Let's plant money over there. Let's plant money over there. And some of it was she wanted to be for my son. I said, whoa, whoa, whoa. We want him to work one day. We don't want him to just <laugh> simply have us fund his life, so let's, let's balance this out. But when she understood it could double like that, and she witnessed it, you become a real believer after that.

Speaker 0  00:19:25

Yeah. Oh, and, and you know, what you just said made me think, you know, the, everything you've talked about is, you

know, so far has been like a one time thing, like a static, you know, put this in, but oh my God, what if you were to put in that amount of money or some, some amount of money every year, they would compound too, wouldn't they?

Speaker 1  00:19:55

Yeah. You got it. The reason why I stick with static is because if you were to tell somebody, Hey, take out 15% of your pay this paycheck, and then two weeks later take out 15% more, and then the next week, 15% more, do that for a year and put all that into your 401k plan. Well, we have suddenly departed from understanding this. We don't get it after that first installment. We just, you've lost us. This thing is moving and changing. The market's going up and down. We're continually putting money in. So I like to once again, simplify things and only look at a single investment, because that is what we can understand. And the interesting thing is, even though I'm a financial coach 10 years later, after first studying this, I still use these principles because I can do it in my head and when I want to, I can then sit down with a financial advisor or a calculator and figure out the rest.

Speaker 1  00:20:49

But if I can get there most of the way on my own, that's enough to take action. Now, certainly we want people to invest every paycheck regularly, automatically. And so paycheck, uh, deductions and so is what we want take people to take advantage of because if we, if we do that, that power is, is that multiplying power is it's working. Compound interest is working, but what we've done is we've first understood it at its very base Yeah. So that we can take that action. Yeah. Because if we don't, if we don't understand it, guess what, most people don't see that action at all or timidly like I did.

Speaker 0  00:21:30

Yep. I I interrupted you on your epiphanies and you do have a third epiphany. And, and I kind of was going through this and, and came up thinking, okay, this is where the devil is in the details, and it's, it just, you know, it makes sense, doesn't it, to start early.

Speaker 1  00:21:55

Yeah, absolutely. Right. Financial epiphany number three has to do with how our multiplying power with money diminishes. So you have to add this one in. So if our, if we start our careers with the multiplying power of 16, we've said with money, what's happening 10 years later? Well, our multiplying power is diminishing by half, 10 years later in our early thirties, we have the multiplying power of eight. Wow. We just lost half our multiplying power. Yeah. Really. Well, what, what happens 10 years later? Well, in our early forties, it's dropped from the power of eight to the power of four of the multiplying power of four. And in our early fifties, it's the multiplying power of two. Then in our sixties, we just said the average duration of the career is 40 years. So hopefully we're, we're celebrating and on a beach somewhere enjoying the fruits of our labor.

Speaker 1  00:22:47

But what we're getting here is this diminishing multiplying power by half. We've quantified this, and just like with athletic, athletic ability, we understand we're not gonna be in our prime with athletics our whole life. We understand our bodies are changing and things will diminish. And the same goes for the average person, the common day worker with multiplying money. And when we understand this, something called loss aversion is taking place here. So for those of us that aren't excited, by multiplying money by 16 times, when we realize that we are losing an ability to multiply money, loss aversion is two to three times more powerful. So when you lose something, the same thing, say gain a thousand dollars, lose a thousand dollars, losing that a thousand dollars has two to three times more of an impact on us. Yeah. So we're taking advantage of loss aversion here, and we're utilizing it to get us to act. Now, this creates a sense of urgency. This is two to three times more powerful than gaining. Okay. When we describe the same thing in terms of a loss, now we're more likely to act. It's more powerful and it, it, it tugs on our human psychology and utilizes human nature how we like to avoid losing, to actually get out there and take that action. So there we go. Loss aversion is the concept that comes into play with financial epiphany number three, which is that our multiplying power halves every 10 years.

Speaker 0  00:24:17

Yeah. Gosh, we, we've almost blown through a half hour, but I wanna go through one thing and you know, because you now you've got people jazzed, now you've got them to understand, hold it, I can multiply my money, I know how to multiply. Yeah. And, but the first step, what do I, I mean, you know, what do I do? Really? It, it's, yeah. The old, you know, kind of, you know, take one step in front of the other. Where do I take that step? How do I start? Absolutely.

Speaker 1  00:24:51

Yeah. So going back to the financial epiphanies, I tell people, find out your multiplying power. That's the first step. So say someone is 22 and they have the power of 16. All right? Really figure that out. And the example I like to say is, if you worked a week of work and got paid for that week, that's what you signed up for. But if you worked a week of work and suddenly got paid double by your boss, good job, double pay, you'd be excited. That is the power of two there. That's what that feels like. But what if you were to work that same week of work with the multiplying power of 16, it's like working that week and getting paid for four months. That's the sort of leverage that we have here when we start our careers, the power of 16. And it's incredible when it's described that way.

Speaker 1  00:25:38

And when you go through these ages, these various ages, stages, and wages of life, and you figure out your multiplying power and what it really means, now you, you gotta take action. And the first thing I like to get people into is a 401k retirement plan if your employer provides that. And if not, then the next thing would be an individual retirement account started at a discount brokerage firm like Charles Schwab, fidelity or Vanguard. And then another way of investing is in those same sorts of brokerage firms, if you've maxed out your retirement accounts, you can start a regular, regular brokerage account and invest in something like the s and p 500 index fund, which is investing in the top 500 companies in the us. Many of us work at those companies, believe in them, trust in them that they're advancing and, and doing their best with their products and services. And so those are common places to put your money to get that growth that we're talking about here.

Speaker 0  00:26:38

Yeah. Yeah. It's, it's, they're, they're, like you said, they're well known. They're easy to do, uh, especially like a 401k, you just say, okay, you're gonna take X amount out. I never see it, and that means I don't pay taxes on it right away, or depending on how you want to do it. But it's like, I, I don't see it going away. I don't spend it, so I don't worry about it. And it makes it easy. What about, you know, what if someone says, well, God, I got so much debt. Do I need to get rid of my debt first? Or, or what do I do?

Speaker 1  00:27:14

Yeah, absolutely. Uh, you can put retirement savings on hold and focus because a small percentage of, of, of <laugh> folks in the United States can juggle. And so when you're trying to do debt and you're trying to do retirement savings and you're trying to save for kids college, you're making very incremental progress. And so what we like to say is put the retirement savings on pause. If you got credit cards to pay off and car loans and student loans, attack the smallest one first. Just get rid of that thing. If it's a credit card, eliminate it. Use that extra money you now have because you're not paying interest on that credit card and pay off the next credit card. And now even more money on hand. Use that to pay off your car loan and then eventually the student loan, and then eventually the house. And if people are wondering where you get that money in the first place, the start is extra hours over time.

Speaker 1  00:28:06

Add a gig on the side, sell some things, quit some subscriptions, go at it like you're an athlete that wants to play a sport and you're being held back by bad grades. You can't play, you can't play the sport because you're, you're getting an F in math. Well get your grades up and then play because this is your time. You have an ability that diminishes over time. And like a coach would say to an athlete that's squandering their opportunity, they would say, get those grades up, study hard, ace those exams, and let's get you on that field because you're made for this. Yeah,

Speaker 0  00:28:41

Yeah. I, I, and I love where you, you bring it all back to your life, your own life. What do you want out of life? And, and aligning, you know, maybe those financial goals with that.

Speaker 1  00:28:59

Absolutely. I feel like we're all put on this planet for a reason. So what I like to say is, if you could learn how to multiply money, now you've got a better place to address your money than debt. So instead of deciding to buy this thing and overspend you put it towards multiplying. And when you put it towards multiplying, you can take care of yourself and your

family, and then you can move it onto this, this greater good, which is funding your purpose. I want to get people to funding your purpose, and that means having an inventory of cash laying around to say, I wanna help out this, uh, family member or friend or neighbor. I want to help out this nonprofit organization. And that's where I like to say that instant gratification lasts a day, but financial wellness is gratifying every day. Yeah. And with that, when you've got that money saved up and you can put it towards the reason why you're on this planet, that is much better than buying something. And it, it wearing out in our mind and us having to buy something the next day and the next day and the next day to have this instant gratification when you have those resources sitting there to pull from every day. That's true gratification. Yep.

Speaker 0  00:30:10

Yep. I love that. Wow. Unfortunately, we are running out of time, but before we, we go before, also before someone listening, someone watching this, if they wanna get ahold of you, can you let it, let us know how they can do that?

Speaker 1  00:30:27

Yeah. The website to go to is financial epiphany.com. The book that I wrote is available from there, this talk and other talks are available on that site. There's a free download on how to get started with a retirement account or how to get out of debt, and also on the contact page. That's how you get directly ahold of me. And I, uh, read every email and respond to everybody. I'm here to help. That's my purpose. This is my passion project. I want to help people walk that same path. I was able to, to feel empowered with money and, uh, fund your purpose.

Speaker 0  00:31:03

Yeah. I, I just, I love that. Thank you. Thank you so much for being here, you know, to talk about this. Yeah. The power of 16. It's, it's not a nebulous thing out there. It's a real thing, and it's easy to access it and to start it. And I, I just love the way you talk about it in a way that, that makes it simple to understand and, and meaningful and it's one way. So I really like that a lot. So thank you for joining us today.

Speaker 1  00:31:32

Thanks, Steve. Good to be here.