BIO: Shang Saavedra reached the ability to be work-optional by the time she was 31 years old by focusing on increasing her income, lowering her expenses, and investing all her savings.
STORY: Shang was ill-advised to buy a life insurance policy with the promise of getting 6-7% returns. She trusted the financial advisor without doing any research on the policy. The policy is barely making any returns.
LEARNING: Do due diligence on the motivations of any financial advisors that you take on. Scrutinize any figures and illustrations that you get.
"You should be able to explain your investment to your teenage self. If your teenage self cannot understand it, then don't invest in it."
Shang Saavedra
Guest profile
Shang Saavedra reached the ability to be work-optional by the time she was 31 years old by focusing on increasing her income, lowering her expenses, and investing all her savings. During the day, Shang is a corporate working mother, and at night, she creates content around investing, personal finance, and mindset, on her blog savemycents.com and Instagram @savemycents.
She has a heart for teaching Americans how to retire with dignity, focusing on mental health, behavioral psychology, and an attitude of doing things scared. She lives with her husband, child, and two cats in New York City.
Worst investment ever
When Shang was in her mid-20s, she was scouting for an investment that would help her avoid income tax as much as possible or reduce her income tax liability. A financial advisor she was talking to sold her a whole life insurance policy that he claimed would give her six to seven percent returns. Shang bought the policy with yearly premiums of $5,000.
It was only a year later, when Shang started reading more into the whole life insurance policy and its financial statements, she realized the growth rates that the financial advisor had illustrated to her were unrealistic. In reality, the value of her policy was likely growing close to inflation.
Thankfully, the $5,000 premium wasn't a ton of money relative to how much Shang invests today, and she's not losing money, but she's not making good returns either. But it's still her worst investment ever, and she feels so shameful because as a highly educated person who can run her numbers, she ended up with this pretty awful investment.
Lessons learned
- Do due diligence on the motivations of any financial advisors that you take on.
- Scrutinize any figures and illustrations you get, especially those with unbelievable growth rates.
- Be able to explain your investment to your teenage self. If your teenage self cannot understand it, don't invest in it.
Andrew's takeaways
- You have a right to ask how much you're paying, who's getting paid, and who's getting a cut. The financial professional must explain it to you.
Actionable advice
Only buy term life insurance as it's a very reasonable policy, price wise for you to put some money into each year to provide for the people who depend on you.
No. 1 goal for the next 12 months
Shang's goal for the next 12 months is to make as many new connections at her new company and do the best that she can there.
Parting words
“Do it scared, but do it anyway.”
Shang Saavedra
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