Tom Hegna’s Book for Getting Your First $1M | Financial Mistakes Young Adults Should Avoid (Ep. 37)

Welcome to the Ideas by Mike podcast, where your one-of-a-kind life meets a one-of-a-kind financial plan. Every episode, we provide insights into financial markets, discuss strategies for navigating Wall Street, and explore how to make informed decisions in a constantly evolving financial landscape. All with the goal of helping you. So sit back, relax. This is not your typical money show. We're going to be all in on helping you live a one-of-a-kind life. Welcome back to the Ideas by Mike podcast with your host, Mike Milligan. We're fortunate enough to have a repeat visitor today to our podcast. From episode 32, Tom Hegna joined us to talk about retirement. His life, his book, and his stats. Well, today we're going to talk about his latest project, Who Wants to Be a Millionaire? So sit back. There's a lot in this episode to help those looking to go from zero to retired. Join us for this conversation next. Hey guys, welcome back to the Ideas by Mike podcast. We are fortunate enough to have Tom Hegna back. for kind of a round 2. If you have not listened to episode 32 yet of our podcast, he went very much in detail about what you can do as a retiree to safeguard your retirement, to live happier and live healthier through that time. And now we want to talk about his newest project, Who Wants to Be a Millionaire? Tom, welcome back.

Thanks. Thanks, Mike. There's the COVID right there. Who Wants to Be a Millionaire?

So, uh, This is your latest project, right? You wrote this just a couple of years ago. What was your inspiration to write this book?

Well, here's the deal. I got asked by a number of companies to develop a presentation on financial wellness. That's kind of the buzzword. And so, I did a lot of research on financial wellness. And what I was shocked at is how financial wellness is tied to physical wellness, is tied to emotional wellness, mental wellness, spiritual wellness. They're all tied together. And you kind of see that. You go to somebody's house, the yard is is immaculate. You walk in the house, it's all spick and span. You say, hey, I need your tax return from 2021. They go, oh, we got it right in the file right here. They have everything organized. 2 houses down, the yard looks terrible. The inside looks like a hurricane went through it. They have no organization. They can't find anything. These things are all tied together. But financial wellness sounds boring, so I changed the title to Who Wants to Be a Millionaire? Now, I've spent my entire time working with baby boomers. My entire career was with baby boomers. So why did I do this for young people? 'Cause this is for, Generation XYZ, millennials, 20s, 30s, 40s. It's because I got 4 kids and I've watched them do things with money. I watched their friends do things with money. And these are the lessons that I taught my kids about money. And I just said, hey, why don't I teach the world's kids about money? Because I think a lot of kids don't, don't have a good idea of what they should be doing.

Well, okay, so let's get a lesson from the book, right? Or a couple lessons from the book, right? So, you talk about the 3 phases of wealth: building, protecting, and distributing. So, talk to us about some common mistakes people make in the building phase and how they can avoid it.

Well, I mean, they go in debt, they get divorced, they spend way too much money on their cars. I got a whole list of things that they do wrong. But what I try to do is show them specific examples. See, the problem is 80% of Americans think they're never going to become wealthy. And unfortunately, they're right. 20% of Americans know they're going to become wealthy. And you know what? They're right too, because to achieve something, You first have to believe it. But here's what I found. Most people have to see it to believe it. See, if you believe something without seeing it, that's called faith. Very few people have faith. Most people have to see it to believe it. So, what I learned very young in this business is if I could put their name on a piece of paper with $1 million, something changed in their mindset. They— once somebody can see their name on a piece of paper and say, yes, it is possible. Now, you gotta remember, this was 40 years ago. ETFs did not exist. Crypto did not exist. There was one product I could illustrate, and that was life insurance. So, what I would do is I would solve for $1 million at that person's age 65. And I use an example, 25-year-old female would have to put away about $7,700 a year. And when she's 65, she'll have $1 million. Well, I wasn't there to sell her a big life policy. I don't know how many 25-year-old females can save $7,700, but I wanted to have her name on a piece of paper. Then, I would take her over to a time value of money calculator. And I say, look, if you could get 6% on your money, you only have to put away about $500 a month. If you get 9% on your money, you only have to put away $250 a month. If you get 12% on your money, you only have to put away $100 a month. Well, now she says, I can do that. I can do that. I might be able to do that. Now, I was no longer a salesperson. I was on her wealth-building team, and we were going to focus on helping her become a millionaire. And that's kind of how this started. This is the way I ran my career. You know, when people said, Tom, what do you do? I didn't say I'm a life insurance agent. I said, I help people become millionaires. You tell me how many million you want, I'll show you what you need to do to get there. And that style worked for me when I was in the business.

Well, the interesting thing about that right now is people's like, oh my gosh, that sounds so simple, right? How do I do that? Right? You can literally go to sec.gov, the Security and Exchange Commission site, sec.gov. They have a calculator on there called Savings Goal Calculator. You can literally put like how much you want to have. Maybe it's $1 million, maybe it's $3 million, maybe it's $5 million. You could put in there how much you have now, you could put the years on there, and then you could put the expected return. And you know what it'll show you in the answer? How much per month you have to put away. It's the same thing that you were talking about, Tom. And it's right there. I mean, we, we always say our government doesn't do anything for us. We just don't know the tools they have. Can you imagine the, the government actually giving us a tool that shows us actually how to get there? It's amazing.

Yeah, right.

You emphasize it's not how much you make, it's how much you keep in the—

Yeah, because here's the deal. If you make $50,000 a year, you're going to earn somewhere between $3 and $6 million over your lifetime. But if you can get to $100,000, you're going to earn somewhere between $7 and $11 million. If you can get to $250,000 a year, you're going to get somewhere between $18 and $28 million. And it's a lot easier to save $1 million if you got $28 million coming in than if you got $3 million. Now, normally at this time, Mike, somebody raised their hand and said, Tom, $1 million is nowhere near enough. I don't disagree with that, but I'll tell you this, it's the first million that's the hardest. The second, third, and fourth come a lot quicker because now you got money working for you. You got to work for that first million.

Yeah, that's so true, right? The first million is by far and away the toughest, right? And it's just the one that takes the most amount of time. And like, if you want to, if like, use that calculator, folks, to see that, put $1 million in, you know, change, find, find, find your answer how much you need to save to get to $1 million, then use that same calculator and change the top number to $2 million. And see, and see what you need to put away. And you're gonna realize, uh, it gets— it's not that big. It's not that big of a difference. It's not as much money difference. It's not double the money, right? Because over time, that money grows faster, right? When you have, when you have a million earning 9% a year and you're putting money in, that 9% is earning $90,000 per year, right?

Right.

It's just, it's just an interesting tool, right? So, um, when you, when you say, uh, when you say pay yourself first, right, we There's a lot of people that say this right out there in the financial planning space. They'll say, pay yourself first. You know, some people say, you know, people of faith say, give first, pay yourself second. It's all about money for you first in the grand scheme of things. What percentages do you put toward how much you should pay yourself first?

Well, I believe people should give 10%. All right? My wife and I, we now super tithe. We give 20%, but I believe at least 10% you should give. And then they used to say, you know, 10-10-80. You give 10, you save 10, you spend 80. I don't think 10's enough to save anymore. I think you got to save at least 15 and you want to shoot for 20%. So try to live on 70% of your income, give 10% away, invest 20% for the long term. That's what— that's my recommendation. I mean, I typically save 30 to 40%. And I, you know, people— somebody asked me, if you could go back, what did you do wrong? And I said, well, maybe I tried to save too much. Maybe I should have spent a little more along the way. But now, we're benefiting from all those sacrifices. We are having the time of our lives right now. And so, I wouldn't go back and change anything, but that's kind of my philosophy on that.

One of the interesting things about like maybe the 10/10/80 rule is so many people today have 401s where the company will actually match, right? So, if you save like of your dollar, right? If you put 10 cents of your dollar in there, Maybe they're adding 5 cents to it, right?

Probably. Yeah.

Yeah, 4 or 5. And that's where a lot of people— there's a lot of— Tom, I know you're not talking to people every day that are still working, but there's a lot of people wasting money because they're missing the match and they just don't see it. You know, it just because, you know, maybe the rule is 10/10/80 or 10/15/75. One of the things you can't do is give away free money if you want to, if you want to get there. So if people are struggling to kind of save that amount, what are some habits they can do and stick with them?

Okay. I say almost all Americans could be millionaires except for 2 simple things. Number one, they spend way too much money on their cars. And number two, they get divorced. So the moral of the story is drive a used car and stick with your first spouse. Now, I say that a little tongue in cheek, but anybody who's been through a divorce— I haven't. I've been married 42 years to the same wife, but I've had friends get divorced. I've seen them get just wiped out financially. And so divorce is a big bad thing financially. All right. But it's the cars that cause most people. And, you know, I use 2 examples. One is me. I had a chance to buy a brand new pickup for $65,000, or I could buy a 2-year-old pickup with 13,000 miles on it for $30,000. Well, anybody who knows me knows I bought the 2-year-old truck. It looked brand new to me. It had Sirius Satellite Radio and leather seats and everything I wanted. All right, and then I took that $35,000, I invested. Well, if I just get 6% interest, that's worth $697,000 in my retirement days. And if I got 8%, it's worth $1.8 million. That's one vehicle. Now, I'm married, 4 kids. We're probably on our 22nd, 23rd, somewhere probably 21, 22 is the over-under, I don't know. You start multiplying those numbers and it's crazy. But most people don't pay cash for their cars. They do car payments, which I think is crazy. They're paying interest on a depreciating asset. And so I list a 200— my favorite slide is this one. A $250 car payment, a $500 car payment, a $1,000 car payment. That $250 car payment's going to be worth one— if it was invested at 7% instead of sent to the car company, it'd be $1.36 million. The $500 a month car payment would be $2.7 million, and the $1,000 a month car payment would be $5.4 million. And I know couples where both the husband and the wife have $1,000 a month car payments. Do you honestly think they know they're driving their $10.8 million retirement down the road? It is crazy. Crazy. Stop spending that kind of craziness on cars. And just a good rule of thumb, never pay interest on a depreciating asset.

Wow, that's like powerful right there. You know, by the way, the government and the big beautiful bill just gave people an interest credit for a car loan. Did you see that?

I saw that.

I mean, good gracious. I mean, like our government, when they give you an incentive to do something, it doesn't mean you should take advantage of it.

Yeah.

So don't, don't do that. I mean, there's a lot of people that are 65, 70 years old right now that wish they wouldn't have used the pre-tax option on their 401. And that was an incentive the government gave you as the Revenue Act of 1977, as a carrot to get you to grow your money in a 401. Folks, don't, don't, don't take your car loan if you can afford to. I mean, Tom just did the math for you. Uh, in the book also, you're talking about finding riches and niches. Right? It's so clingy, right? It's so good. How could someone determine their niche in life?

Well, look, you know, I talk about a lot of things. I talk about life insurance, long-term care, but my niche is retirement income. That's where I made my, you know, made my fortune. But, you know, what's interesting is I'm a member now of 2 country clubs. So, we talk to people, how do you do it? You know, what do you do? We got a guy who made it selling shower doors. He sold shower doors. He sold millions and millions of dollars of shower doors. Then another guy did it with siding. Another guy did it roofing. We got multiple doctors. I mean, there's so many ways. What you want to do is you don't have to be everything to everybody, but you want to be the best at something where people come to you. And that's, you know, if you're a UPS driver, have the best on-time, accident-free record. If you're a plumber, be the best plumber in the county. I mean, even Abraham Lincoln said, whatever you are, be a good one. And have you noticed that people who are good at what they do actually get paid more than people who suck at what they do? I mean, it's crazy. Yeah.

You said you wrote this book for your kids, right? As something to inspire them to. Do you have conversations with your kids about money?

Absolutely. With all of them. And they know that, you know, that I've helped them make money because I've told them to put some money here, put some money in. Oh, it works, you know. But I did teach them this secret to success. I taught everyone, my kids, when you get a job, I want you to go to work early, stay late, and always do more than what you're paid to do. And they say, well, Dad, why would I do that? Because soon, you're going to be one of the most valuable workers in that company. You're going to get promoted faster and paid more than your peers who come to work late, leave early, and do as little as possible for a paycheck. And I am telling you, that secret has helped me throughout my career and has helped my kids through their careers as well.

So, I have kids. My kids are 28, 24, and 20, not too different than your kids and not too different from a lot of our listeners' and our clients' kids. I was just having a conversation recently with a couple in North Carolina whose daughter wants to be, you know, like she wants to do more baking than she wants to actually go do a job. And they said to me that this generation, this generation that's in their 20s, are not as committed as much to the workforce, right? To me, what I heard is that there's an opportunity to help that kid, like the family can help that kid, maybe not give them stuff, but educate them, but also sow opportunity for other 20-year-olds, right? So like your whole concept, one of the concepts in there is choose your hard. You mentioned about that working hard. Is there any other hard disciplines that people can choose to get ahead when they're young?

Yeah, I mean, one of them is patience, believe it or not. I work with a lot, I've seen a lot of 30 and 40-year-olds that get frustrated because they're not rich. They don't think they're doing it. They are Oh, screw it, I'm going to buy the boat. Oh, screw it, I'm going to buy the RV. And what I would do is I'd show them, you know, the rule of 72, it measures how fast money doubles. Well, I would use it this way. So all you do is you take whatever your rate of return is, divide it into 72, it tells you how many years your money takes to double. So if you're getting 12% on your money, your money doubles every 6 years. If you're only getting 1% on your money, it takes 72 years to double your money. I would use 7.2%. Why? Because it divides easily into 72 as 10 years. It's a reasonable rate of return. So here's what I would say to that 30-year-old couple. They're frustrated between the two of them. They saved $150,000 in their 401s and their Schwab account or whatever else. They got $150,000, but they don't feel rich at all. Their friends are going places. And if you just invest this at 7.2%, that $150,000 in your 30s is going to be $300,000 in your 40s, $600,000 in your 50s, $1.2 million in your 60s, $2.4 million in your 70s, $4.8 million in your 80s, $9.6 million in your 90s. That's just that money. You're going to be saving a lot more. You should have many millions of dollars, but you're not going to have it in your 30s and 40s. Well, I don't want it when I'm 70. Well, that's when you're going to have it, buddy. I mean, that's— I was not rich in my 30s and 40s either. So, you know, it takes time. You have to have patience.

The other part of that is the education side of it too, right? Is people don't understand, well, how do I get 7.2% return, right? Because they have bad experience with financial advisors. Right. And, you know, somebody tries to, um, I mean, not to throw products out there, but like the hottest thing on TikTok and all that is tax-free retirement accounts, which are just IULs, indexed universal life policies, right? Um, I've actually never asked you this before, and I don't even know what your opinion on IULs are, but like, uh, do you have an opinion on IULs?

Well, here's the deal. I get hired by a lot of companies that sell IUL. I get hired by a lot of companies that sell whole life and variable life and universal life. So what I try to do is I try to stay kind of product neutral. I personally own whole life. I was raised in 2 AAA mutual companies. MetLife was AAA Mutual at the time, New York Life is. And so that was the product that I'm the most familiar with. But I was the national marketing manager for variable life at MetLife. And, and the truth is, the number one policy ever created is variable life insurance.

Right.

The problem with VUL is It does go down, and people don't like when it goes down and stays down for a while. As far as IUL and universal life, any universal life policy must be overfunded. You need to put lots of money in there. The problem is when they run these, these tight little illustrations and they show that they're going to come back with millions, most of those illustrations are hogwash. Not a single illustration is ever true anyway in any, in any life insurance product. They're just an illustration, not one of them. has performed exactly as the illustration. Not one, because dividends change, interest rates change, all that other stuff. But so, you know, just be careful of people who just push only IUL. Like, for some people, that is a great product, but you've got to overfund it. That is the key thing with any universal life policy. You've got to put lots of money in there.

And then the other thing people do is they also leave money in high-yield— too much money. in high-yield savings accounts too early, right? So, you know, we run across people in their 20s and 30s that have hundreds of thousands of dollars when, if they're the best high-yield saver in the country, like the best, they're earning 4.1%.

Yeah.

Right? And so like, talk about like, uh, what risk means to when you have a long runway. Before you need the money?

Well, I mean, when you're young, you should be more diversified. You should not have all your money in a, in a low-risk account. And I'm not saying go out and lose your money. I'm saying diversify it. And if you're in a well-diversified investment like the S&P 500 is not going to zero, okay? And if it does go to zero, guess what? That's the last thing you're going to worry about. You're going to want guns and bullets and ammo and water and toothpaste and toilet paper. That's going to be what's valuable. Then your stock will be worth nothing. So you want to put it into things that typically go up over time. Real estate typically goes up over time. Stocks typically go up over time. You know, crypto, I, you know, I was a big crypto nonbeliever and then I watched this guy who made a believable case to a total nonbeliever like me that Bitcoin could hit $1 million someday. And he said, all we're recommending to our clients, they put 1% of their portfolio in there because if it goes to zero, it won't kill you. If it goes to $1 million, you'll be happy you did it. Well, that resonated with me. So I put 1% of my portfolio in there back when it was $2,000 a Bitcoin.

Wow.

But when it hit $124,000, I think it was like worth $1.8 million or something. It's crazy. Just crazy. And to the Bitcoin nonbelievers, I will tell you this. All I'll tell you is it's been the number one performing asset class for 1 year, 3 year, 5 year, 10 year, 15 years. It's not Beanie Babies. It's not pet rocks. Okay? It's kind of the real deal. And the saying is everybody will get Bitcoin at the price they deserve.

Wow. That's, that's powerful right there. That's a— Bitcoin is also not tulips. Do you remember the tulip story?

Right.

Right. 1700. Right. It's, it's—

And I don't say put a lot of money. I say 1 to 3%. That's it. 1 to 3% of a portfolio is where I'm at. And the rest, you want a lot of guaranteed income. Like I have mostly guaranteed income, but I do because I have that guarantee. It lets me take a little more risk on the side. So it all works together.

So, okay, so let's say somebody follows your advice in their 20s and 30s. Now they're 10 or 15 years later, right? And they, you know, they're starting to get, you know, some accumulation. They're starting to really grow. Kids get out of, you know, kids get out of the house right now. They've got college. What, what are things they can do to amplify it, to go beyond $1 million once they get into their 40s, 50s, and 60s?

You need to, you need to lock in some life insurance while you're still healthy. You need to solve that long-term care problem while you're still healthy. It's, it's very inexpensive if you do it when you're young and you're healthier, so it goes right through. So you've got to start thinking about retirement. Retirement is not about $1 million, $2 million, $10 million. Retirement's all about having increasing income for the rest of your life and managing risks. What happens if the market crashes? What happens if they raise your taxes, double your taxes? What happens if inflation goes to 10%? What happens If you need long-term care, what happens to your family if you die? You got to look at all those risks. So, it's having increasing income in retirement and managing risk. And you can start doing that in your 40s and 50s. Start lining up some guaranteed income when you turn 60 or 65, whatever age you want to retire. You know, start making sure that you've got that permanent life insurance that's going to be there and that long-term care solution. So, that'd be my advice.

So, I'm going to take an advocate role there for you and just maybe push you on that a little bit. Let's say I listen to Dave Ramsey all the time or Suze Orman, or, you know, I met with a Primerica guy, right? They just say the only people that win in that, it's the insurance company. And I'm stupid if I do that.

Well, then I must be pretty stupid because I put $226,000 a year for 12 years. I'm not stupid. All right. I know this stuff inside and out. The problem with— here's the problem with term. I don't have a problem with term. I bought a $5 million term policy when I retired from New York Life, but I converted it to a whole life policy.

Okay.

Because I want to have the coverage. Term only pays if you die young. It won't pay if you die old. And people say, well, I won't need it when I'm older. Who buys the biggest policies? Old rich people buy the biggest policies. So I can prove that one wrong right away. And less than 2% of term policies ever pay a death claim. Think about that, less than 2%. So you're buying this policy, less than 2% pay a death claim. Who do you think's keeping the rest of the money? The insurance company. So I would argue that Term is not the best deal, especially term won't work in retirement. Term doesn't work for estate planning. Term doesn't work for most business planning either. You need cash value permanent life insurance. You'll be glad you have it. Ernst Young, they sell no life insurance, they sell no annuities, but they got a lot of smart people and they used AI and they said, what would the perfect portfolio in retirement look like? You know what it looked like? 30% whole life, 30% income annuity, 40% investment. I'm not making it up. Google Ernst Young life insurance annuities. You can read it for yourself. It's math and science, people. I'm not making it up.

Wow. I didn't know we were going to school today, but we definitely went to school, right? When you brought in math and science to this. Tom, I mean, any last thoughts for people who are, who are a little bit younger, 20s, 30s, and 40s? And they—

Here's what I will tell you. The only person who will take care of your older self is your younger self. And I'm just proud of my younger self That 40 years ago, 30 years ago, was thinking about little old me today and took very, very good care of me.

I just realized that I may have gotten that saying from you somewhere along the way, because I say that. I say that all the time. I didn't realize— I didn't realize where I got that from. You know, we— it's not stealing if you use a little bit from everybody, right?

Right. Right. No, they say it's a favor. It's the best form of flattery. So when people—

it is. And so, Tom, I've— on my radio show, on the podcast, I've used the only person that can take care of your older self is your younger self. I've used that so many times. So if that was you, thank you.

It's my closing slide in my presentation.

Maybe that's where I got it from. When we— maybe, maybe I heard it when we were in Puerto Rico together or somewhere else. I don't know where, where it was. But hey, thanks for— thanks for coming back and doing this so we can, you know, get more content out to the beneficiaries of our older retirees. Because, I mean, I think it's very valuable in a firm like, uh, like our firm to be able to talk not only to the people who are in retirement but the people that are going to inherit, because that is really where a real firm builds longevity. So, Tom, thanks for your time.

Thanks, Mike.

Thank you for joining us today on the Ideas by Mike podcast. This has been Mike Milligan, your host, where I look to bring real-world conversations with you of people changing the game in the financial planning, investment, and retirement income space. If you want to reach out to our firm to learn more, you can go to oneoakfinancial.com. That's the number one oak financial dot com. One Oak Financial is a nationwide firm here to help you build a one of a kind financial plan for your one of a kind life. CFP board owns the marks CFP certified financial planner and CFP in the United States. As a reminder, Mike Milligan certified financial planner is an investment advisor representative of. Advisory Alpha LLC, an SEC-registered investment advisory firm. All opinions expressed by me or our guests are solely our own opinions and do not reflect the opinions of Advisory Alpha. This recording is for informational purposes only. It should not be relied on for investment, tax, or legal decisions, and it's in no way intended to communicate or guarantee specific performance or suitability of any security instrument, or product as we may have discussed. Investment advisory and financial planning services offered through Advisory Alpha, LLC, a registered investment advisor. Insurance is offered through Ideas by Mike, a Virginia-based LLC here to serve you in all 50 states and the District of Columbia. Ideas by Mike is a separate and unaffiliated entity of Advisory Alpha, LLC. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal services. Please consult with your tax or legal professional prior to making a decision relative to those decisions. Any and all statements of purported or observed general practices of non-affiliated firms and advisors or conditions of the broad financial services industry are solely the opinions of Mike and are not intended to be offered as factual. The validity of these statements has not been verified, and as such, no representation of their validity are made. An annuity is a long-term financial product designed largely for asset accumulation and retirement needs. All guarantees are backed by the claims-paying ability of the issuing insurance company. This podcast is produced in conjunction with Mike Milligan, LLC. Thank you again for joining us today. We'll see you on the next podcast.