“The 5 Essentials of Smart Investing” with Jason Hartman & Alan Donegan

I want to smash the belief that it takes money to make money and help people to make their own income. I want to inspire a movement behind taking control of your own financial destiny. From earning more money to spending less, and then investing the difference, to create long-term financial independence for everyone. Asa […]

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I want to smash the belief that it takes money to make money and help people to make their own income. I want to inspire a movement behind taking control of your own financial destiny. From earning more money to spending less, and then investing the difference, to create long-term financial independence for everyone.

Asa part of my series about the The 5 Essentials of Smart Investing, I had the pleasure of interviewing Alan Donegan, co-founder of the PopUp Business School, which has helped over 4000 people in six countries start their own companies. Alan is a well-known member of the FIRE movement: ‘Financial Independence, Retire Early’. Now aged 40, he never has to work again unless he wants to. Alan gained his financial independence through entrepreneurship, smart investing and by ‘rebelling against traditional advice, in both investing and business’.

Thank you for doing this with us Alan! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

I’ve run my own businesses for many years and have invested my profits into property and other index funds so that now, aged 40, I can live off the returns and don’t have to work again unless I choose to.

My most significant business is PopUp Business School. At our free events, we teach people from all walks of life how to start up a company, even when they have no money. We tell people they don’t need to waste time writing a business plan, they definitely don’t need debt and that they should focus on sales, instead. My approach to investing and finance is very similar to my approach to business; traditional advice is terrible — avoid it at all costs.

When I was a teenager, my family faced bankruptcy. My father’s businesses had collapsed, he had huge debts, and the only thing secured against the loans was the family home. The moment you stand in court and the judge orders your home to be taken away, that is one of the most painful and difficult things you can ever experience.

We were desperate, and my mother, brother and I ended up selling things at open air markets to be able to afford food. We spent 10 years fighting the bank in courts to keep my Mum’s house for her — eventually we were able to settle and keep the home. The judge who ordered our home to be taken was wrong — this taught me a healthy disrespect for authority at a young age. Also, this harsh experience of debt and bankruptcy has sent me on a quest to change the way business and investment is taught.

I worked for other people for a number of years but never really fitted in. Eventually, I became an entrepreneur and ran my own training courses — this evolved into PopUp Business School.

As I learned about building businesses, tax, finance and more, I found the FIRE movement. My wife, Katie, and I, have been to meet-ups all around the world, including one in the Ecuadorian mountains, where we’ve learned from some of the most prominent FIRE bloggers in the world. Now, at ages 34 and 40, we’ve reached our financial independence target and never have to work again if we don’t want to.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

I worked for a well-known technology company and I was sharing a taxi with one of the sales directors. He’d taken the entire sales team for a night of drinking, which ended up in a strip club. I don’t drink and so spent the whole night completely sober, feeling like I was in the wrong place, with the wrong people.

On the trip back to the hotel, I asked this guy why he had taken everyone there. He said that, when he was hiring salespeople, he looked for people who had a real need to earn. They often had big mortgages, expensive tastes, even drugs and gambling habits. He wanted his salespeople to spend big, so they felt the need to earn big.

The sales director’s response shocked me and taught me one of the most important lessons of my career. This was the point when I realised that the world is addicted to spending, as well as how unscrupulous some businesses can be and how they can control you. So, I didn’t last long there. I didn’t fit their mold; they couldn’t control me. Instead, I saved, invested and worked to build a financially independent future.

Are you working on any exciting new projects now? How do you think that will help people?

For years, I have been working on the mission to change the way entrepreneurship is taught around the world. To dispel the myth that it takes money to make money and to empower people to make their own living through something they love.

In 2018, PopUp Business School helped 2500 people around the world across 44 two-week events. I just want to continue to inspire people to take control of their own financial destiny and make their own money to invest. It is only going to get bigger from here on in, and this is what I am working on now.

PopUp Business School is expanding globally, with workshops in the UK, USA, New Zealand, Morocco, France and more in 2020. All the workshops are completely free, and we are working to help the people that need it the most to get going.

I also have a blog — — dedicated to helping people learn about financial independence, free themselves from debt and start to invest.

Finally, I’m working on a TV Show to help dispel the myth that it takes money to make money. The belief that ‘the rich get richer and the poor get poorer’ is so prevalent in our culture and I want to smash it and help people take control of their own destiny. What better way to share those messages en masse than through a TV show that helps people to do it?

I took two months off this year to write my first movie script, a romantic dark comedy all about the journey of entrepreneurship. I will be finishing the screen writing and getting on with producing the movie in 2020.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

Traditional institutions make money by offering advice. If people knew more about finance, they could invest for themselves in a low risk way and then these companies would lose a fortune. It is in their interest to spread fear and doubt and to make it complex to invest your own money.

Financial literacy just isn’t taught in school. In fact, the opposite happens, with the credit card companies being allowed to promote their debt services during freshman and orientation and at the start of new semesters at universities around the world.

A financially educated and motivated American is not in the best interest of Wall Street. If we all understood finance, investing and saving, we wouldn’t need a lot of the products that are out there in the marketplace; we wouldn’t be swayed by the marketing and advertising and we would have completely different spending and saving habits. At a certain level, education is to blame. But widespread beliefs, such as: ‘the rich get rich and the poor get poorer’, prevent people from taking control of their own learning and digging themselves out.

If you had the power to make a change, what three things would you recommend to improve these numbers?

Firstly, I want free financial education for all. I have been working towards free Entrepreneurship education for all around the world with PopUp Business School now for seven years and we are really starting to see a change coming from the work we are doing. I believe the same could be done for financial education. So, I’ve started giving away free financial workshops to the people who need it the most. We will be teaching investing, saving and financial independence strategies for free.

Secondly, we need to show there is a simple path to wealth. Large institutions make their money by making things seem complex and justifying the need to buy their services. People have such a desire to cut corners and find the next get rich scheme that they forget to do the basics of making money, spending less and investing sensibly. I want the world to understand there are simple ways to understand how to make money, but they are not quick and easy.

Thirdly, I want to help people to make money doing what they love. Running a business puts individuals in control of their own income. In areas where there isn’t high employment or there aren’t many opportunities, we need to help and inspire people to build their own opportunities and create their own income. I am working on this through PopUp Business School, but there is still so much more to do.

Overall, with simple, concise and free business and financial education, we can create really positive change and empowered individuals.

Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each.

Professionals don’t always know best. The first time I really realised this was stood in court as the judge cracked his gavel down, taking away the family home from my mother, my brother and I. He had ruled against us on a point of law that he got wrong. I knew he was wrong and we eventually overturned it on appeal. But seeing someone in a position of power get something so completely wrong gave me a healthy distrust for authority.

Just because an investment firm tells you it is a slam dunk, doesn’t mean it is. Just because a bank tells you that you can get a great return, doesn’t mean you will. Don’t just trust what the professionals tell you; do your own research and your own learning.

Index investing beats active investing. One recent study showed that 96% of actively managed funds failed to outperform the market average. How does that make sense? The actively managed funds purport to deliver better results, help you increase your returns, promise the pot of gold at the end of the rainbow.

Even Warren Buffet tells his wife that, after he is gone, she is to put all their money into index funds. So why don’t people do it? It performs incredibly well, saves you money and makes you rich over the long term. It’s because they are chasing better returns. Investing is one of the only games where, counter-intuitively, doing less gets you better returns. Stop trading and start indexing and holding.

Dead people make the best investors. The story goes that Fidelity did a study of all the people that had accounts with them to see who got the best returns. What really surprised them was that their investors got worse returns than the market average. What is the only way to get worse than average returns when index investing? Dancing in and out of the market.

The best investors turned out to be the ones that had put money into an index and forgotten that they had the accounts, or the people that had died! Index investing is one of the only things that, the more you try and get better results by timing the market, the worse results you get on average. Put your money into the index fund and forget about it. Let it grow and wake up, decades later, wealthy.

Avoid lifestyle inflation. You have graduated college, gone and got a job and started to earn money. You have money for the first time, so what should you spend it on? A new car? You first home? You start to spend. You get promoted at work, start to grow a family, buy a bigger house and spend more money. You start to try to keep up with the Jones’s, who bought a new car. The average person’s lifestyle spend inflates with every increase in income.

If you want average results, do what everyone else is doing. If you want exceptional results, do something exceptional. Instead of immediately planning how to spend the next pay rise on more stuff, think about how you can invest it, instead. Save, and invest!

Buy assets not liabilities. When someone wins money on a radio show, what is the first question that the radio show host asks after they have won? ‘What are you going to spend it on?’ The questions assume that you are going to take the $10,000 you have won and spend it all on a new laptop or holiday. We are trained to spend the money, instead of buying an asset.

If my wife ever wins on one of these radio shows, I can’t wait for the host to ask her: ‘what are you going to spend the money on? Holiday? Clothes?’ Katie would respond: ‘I am going to invest it into a vanguard index fund.’

Stop buying more stuff. Stop buying liabilities and buy things that can give you a financial return, like index funds, property or businesses. Stop buying liabilities and start buying assets.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards, who helped get you to where you are? Can you share a story about that?

There are so many. So very many. You don’t get from the hot mess I was as a teenager to a successful adult without a huge amount of help from some very gracious people. One, in particular, stands out in the finance world.

After my wife and I found out about financial independence, we flew to Ecuador to go on the FI Chautauqua. There, we met Mr Money Mustache, The Mad Fientist and JL Collins. I had read the book: ‘Simple Path to Wealth’ by JL Collins before I arrived but, when we sat down with him and he graciously spent three hours going through our personal finances and helping us make decisions about our future, he changed our world.

His simple investing advice, and the clarity with which he helped us understand it, was amazing, and he totally changed the course of our lives.

At that time, we were riddled with doubt over what to do. The British people had just voted for Brexit, Trump was on the edge of getting voted in and we were sat in a primarily cash position. We had missed out on some of the strongest bull markets over the last year because of our fear and doubt. JL took that doubt and turned it into confidence, in a simple index fund strategy that we still use to this day.

I went from being scared off investing by a huge loss following advice from my father when I was 19 years old, and swearing not to invest in the stock market, to complete confidence and going all in after talking to JL. He changed our lives.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

Your success in life is directly linked to the number of awkward conversations you can handle.

There are countless examples from my youth, where I avoided the tough conversation because I just couldn’t handle the uncomfortableness — I still hide my eyes at the cringe in some TV shows — and it came back and bit me in the ass.

As I have aged, I have gone from avoiding discomfort to actively being excited to handle the toughest situations. I know that if I dive in and have the tough conversation about the problem, as quickly as possible, it always saves me time, energy and misunderstanding.

At PopUp Business School, we had a new member of staff. He was young and full of energy, but I noticed, over the first few months, that things weren’t getting done. After one of our events, in the evening, the new member of staff and I went for curry. As we sat there, I brought up that things were getting left undone and I was unhappy — we had the tough conversation. I remember, his face saddened, he went quiet and he just stared at the table. This was an incredibly uncomfortable moment.

We stayed at the restaurant chatting for hours and I offered to help him in any way I could. We worked together on fixing some of the problems and he came back strong. I am so glad I was able to deal with that discomfort and have that conversation because now, that same member of staff runs workshops for us, is growing our business and is a complete star at PopUp.

Your success in life is directly linked to the number of awkward conversations you can handle.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

I want to smash the belief that it takes money to make money and help people to make their own income. I want to inspire a movement behind taking control of your own financial destiny. From earning more money to spending less, and then investing the difference, to create long-term financial independence for everyone.

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