Frugal Rules’ John Schmoll Jr

Oct 16, 2013 by

Frugal Rules logoToday’s our lucky day at Money Counselor. John Schmoll Jr., founder of the blog Frugal Rules, generously found time to sit down with me (electronically) recently for a chat. I’ve been following John because I enjoy his articles, and I’m intrigued by his story of first using debt irresponsibly, then doing the hard work to right his financial ship. I also appreciate his perspective as a one-time insider working in the financial services industry. Here’s a rundown of the Q&A from my chat with John.

MC: John, your blog Frugal Rules has rapidly become popular, congratulations! What motivated you to launch Frugal Rules?

JS: Thanks for the kind words Kurt! It really was a variety of different things that motivated me to launch Frugal Rules. Many of them point back to my own personal experiences and those that I saw while in the financial services industry. Simply put, I believe that our society is deeply in need of improving its financial literacy and I had a growing desire to create a community to help try and meet that need.

MC: Would you mind sharing some details on your financial services industry work? What sort of work did you do and for how long?

JS: I worked for two years on the administrative support side of a mutual fund company as well as a little over four years at a retail brokerage—that’s in addition to accounting work that I did for another five or so years. The mutual fund role was really exciting…I know I’m a dork…but I got to see how the sausage was made, as it were. I got to see what Fund Managers did and the decisions they made in regards to the holdings in specific mutual funds.

The retail brokerage role was a completely different animal. I worked with clients from all over the country trying to assist them with their investment accounts and decisions, ultimately with the specific goal of upselling them to consolidate outside investment accounts with our firm or pushing them into a guidance product.

MC: What did you like most and least about your financial services industry work?

JS: What I liked most was talking about the stock market. It allowed me to let my inner geek out and talk about investing. Above and beyond that, I loved helping clients try to meet their investing goals and solve their investing problems. Many simply did not know what they were doing and had a genuine need for help.

What I hated most was that it was a numbers game—with the ultimate goal of selling to the client. I understand sales, and it has its place, but when selling supersedes the need of the customer that is where I start to dislike it. This is especially the case when the product does not meet the need of the client to whom it’s being pitched and is ultimately why I left.

MC: How would you characterize your typical client’s grasp of how Wall Street works and the risks involved with equity investing?

JS: Sadly, I would rank the typical client’s grasp of how the market works at below average at best. I would point that back to things like either lack of time or knowledge coupled with possibly little desire to learn more about it. Also key to that is the noise we hear from many talking heads that makes it difficult for those wanting to learn how to manage their investments. That said, I don’t think it’s really that difficult to get a basic grasp of how the market works—if I can then anyone can. (John’s too modest!) The real issue is just knowing where to start and who to trust.

MC: You worked through the 2008-09 stock crash. Were your clients freaking out? What was it like in the office through that period? It must have been stressful for you—how did you manage, personally?

JS: Freaking out is putting it pretty mildly. It was very difficult to watch people who had saved for years lose half of it—if not more—in the span of weeks. I think a lot of it went back to trusting that the market would always go up and ignoring investments. Sadly, that is a toxic combination. It was stressful, though it was what it was. I stayed the course personally and saw it as an opportunity to get in once the dust settled. I only wish we would’ve had more cash at the time to take advantage. I know that might make me sound uncaring—that couldn’t be further from the truth, I just looked for the opportunities while everyone was running the other way.

MC: U.S. stock values have twice crashed by nearly half in the past 13 years. The NASDAQ would have to rise by another 36% from today’s level to recover the all-time high the index reached in March of 2000. Given this recent history, what’s the argument for making equities the key component of an investment portfolio that’s intended to finance retirement someday?

JS: The argument would be that if you stay the course and have a long term view then the market (generally speaking) is going to return you 7-8%. Yes we’ve had some bad times, and we’re still not out of the woods, but I am generally bullish on the market. That said, being in the market requires work to stay abreast of what’s going on and being truly diversified within it. I am not meaning picking 3-4 stocks, but investing across types, sectors, regions and the like. I would also add that you should also be looking outside the market for investment opportunities so you can have a fuller and broader diversity, especially as you get older and want additional streams of income to help fund retirement.

MC: You’re quite open on Frugal Rules about your own struggles with debt and the financial mistakes you’ve made, which I’m sure your readers appreciate. What caused you to turn things around? Did you abruptly hit the proverbial bottom or have a revelation of some sort? Or maybe you experienced a gradual realization that you were on the wrong track?

JS: What caused me to turn things around was realizing I had nowhere else to turn. I could declare bankruptcy or attack it. I had dug myself a hole so deep that there was no real way out of it. It took the encouragement and tough love of a few wise people to help me realize this, and the rest, as they say, is history. It took me just under five years to get the almost $25,000 paid off (you have to remember this was also 15 years ago) and while I hated every time I had to make a payment it ingrained in me the need to turn my financial life around.

MC: What’s the #1 piece of advice you’d give to someone overloaded with, say, $25,000 in credit card debt who wanted to pay it off but felt overwhelmed and didn’t know where to begin?

JS: Man, one piece of advice…I’d say start attacking it now. Look for any way to cut your expenses and combine that with looking for ways to bring in additional income. By combining those two you’ll enhance your debt payoff efforts. Beyond that, I’d say don’t give up. Paying off debt sucks—there is no way around it. If you have a lot of debt it can seem like you’ll never be free of it. Trust me, I was there and I hated it with a passion and wanted to give up so many times. Don’t listen to that at all. Start small and attack it with all you have and keep that vision of debt freedom in front of you and it will happen.

Thanks for your time John! See you around the blogosphere.

And for Money Counselor readers, I encourage you to subscribe to John’s blog, Frugal Rules. I have! And if you have a question for John, you can ask in the comments below. John’s heading to the big financial blogger’s conference, FinCon, but he’ll do his best to reply.

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