Paul M. Caffrey (00:01.484)
Lo and welcome along to the Work Before the Work podcast. Today, I'm delighted to be joined by Sjoerd Bak who is the founder of Become a Millionaire, has had a really, really storied 18 year sales career behind him. And I'm so excited for this conversation. It's going to be a little bit different to the norm, as opposed to talking about how we're going to get there and how we're going to earn commission. This has taken up the gauntlet to find out, well, what should we do with that commission once we have earned it?
Sjoerd how's it going? How are you?
Sjoerd Bak (00:33.357)
Excellent, Paul. Thank you very much. This is my first podcast that I am a guest on, so I'm very excited.
Paul M. Caffrey (00:39.794)
I'm very excited for this conversation because you are blown up on LinkedIn. I'm seeing customer reference after customer reference. You're in high demand. There's a waiting list, which is getting longer by the moment. And it's because you're delivering amazing results for your clients. I'd to give us an overview of what you're doing and how you're helping people find some money that maybe they weren't aware that they had.
Sjoerd Bak (01:05.179)
Yeah, absolutely. So I like, I used to earn money to spend it. So for the first 18 years of my career, I spent everything I earned. If I earned 10,000 euros, that was a spending target for me. But as a result, I always felt broke. So in early 2020, I knew it was time for a change. I thought I'm a sales leader for one of the biggest companies in the world. I shouldn't have to feel like this. And I found out that money doesn't have to be complex. It can be pretty easy. So I
put a plan in place and a lot of my colleagues were interested in it and I've been helping people over the years. But as it turned out, that wasn't appreciated by everybody. So I was asked to stop doing that. And that's when I decided to become a qualified financial advisor. And now I've left my corporate role to help people for real.
Paul M. Caffrey (02:00.174)
And it is a brave move to leave your corporate role, leave those golden handcuffs and go out on your own. And from speaking with you and knowing of you, you're very passionate and very convicted on this topic for sure. The name of the company, Become a Millionaire. Do you think that's attainable for most salespeople?
Sjoerd Bak (02:22.939)
Yeah, now I wasn't sure about the name at first. I was going between become a millionaire or make sensible decisions with your money so you can retire better. But I went for become a millionaire because everybody wants to become a millionaire. Nobody wants to think about retirement. But it's basically the same thing. If you have enough money, you don't have to work until normal retirement age, which might seem straightforward to some people. But for me, that was new.
I think everyone in tech, especially in Ireland, has the opportunity to become a millionaire.
Paul M. Caffrey (03:01.292)
Yeah, it's a boom and it is a boom and sector. People are doing really, really well. And if we think about what tends to happen, particularly in the tech sector, you're probably have a pension contribution that might vary depending on your age. So that's one area we could talk about. There's the employee stock share purchase schemes with ESPPs, which is another, which people tend to be a bit confused about. And then there's
I'm going to just invest money in crypto or I'm going to go and onto my trade and app, Dejiro, whatever it may be and start trading. And I think a lot of people have maybe dipped their toes or done a little bit of those to various levels. If I take it back to the start, where should I begin? What's the first thing that I should look at if I want to start preparing to be able to retire earlier, as you've called out?
Sjoerd Bak (03:56.775)
That's great question. So before you do anything, what you want to do is to have a clear picture of where you are now. So if I were to start today, what I would do is I would track my expenses. I would track how much I earn, how much I spent. The difference is how much I saved, build up an emergency fund, and then I would start to think about investing.
Paul M. Caffrey (04:21.024)
Okay. Emergency form typically what three, six months of expenses.
Sjoerd Bak (04:25.255)
three to six months of expenses depending on how adventurous or how conservative you are.
Paul M. Caffrey (04:32.334)
Got it. Okay. that's probably rent, maybe mortgage bills. I guess, you know, not that whatever. having that chunk of change there. So you say, get that together first. Yeah.
Sjoerd Bak (04:39.139)
Y-yeah.
Sjoerd Bak (04:44.903)
Yeah, because the last thing you want to do is have to sell your investments in an emergency. Because that might mean you have to sell at a loss and that would be disastrous for your net worth.
Paul M. Caffrey (04:57.408)
Okay. That makes sense. So get on top of things and let's assume people are in the position where some problem, they might have that without realizing it. They've never actually thought about it, but yeah, if they move a few things around, or it might only be a few months away from, from getting to that level. When it comes to pensions, particularly in Ireland, what do you, what do you recommend? Is it contribute to minimum max it out? What is rule of thumb?
Sjoerd Bak (05:25.393)
So I can't recommend anything because I am a financial advisor, but I'm not regulated by the central bank. So what I do is I help people with financial skills and I help them build their own plan. So what I would do if I was in that position, I would consider, if I would want to invest for the long term, what I would do is to invest in the pension first because of the tax benefits.
And most people don't think of their pension as an investment. When I ask people, what is your net worth? 90 % of people leave the pension out of it because they never think about it. They think that it's something for when they're old and wrinkly, but it's the biggest wealth building opportunity in Ireland
Paul M. Caffrey (06:12.568)
And when you talk about tax efficiency or tax benefits, just high level, what sort of money are people leaving on the table if they're not maxing that out?
Sjoerd Bak (06:26.755)
On average, my customers would find somewhere between five to 11,000 euros per year by not maximizing their pension contributions. But that's in the short term. So if you maximize your pension contributions last week before, or last month before the deadline, you could have had that money back into your bank account by now. But it's not just in the short term. It's...
money that is invested now and growing tax free for whatever number of years until retirement age. So for most people that relatively small contribution will turn into 100, 200,000 euros and that's just doing it one year.
Paul M. Caffrey (07:14.036)
And I really like the idea of compound and looking at what it'll be a 10 or 20 years time. But there's one point there that you've shared and I'm a little bit curious. You speak about people getting money back into their account for maxing out their their pension contribution. I guess people are going to wonder, well, how does that possible? Surely if the money goes into the pension, it's gone.
Sjoerd Bak (07:35.911)
It almost seems too good to be true. if you invest 10,000 euros into a pension, you get a 4,000 euros refund. So that 10,000 euro investment would effectively cost you 6,000 euros. Now, if you invest 6,000 euros in somewhere after tax, and that would have to grow at 7 % annually, it would have to grow for 10 years to be at the same level as the pension is on day one. And it's just unbelievable. A lot of people I speak to,
think it's too good to be true. and then they see the money appear in their accounts and they're very happy.
Paul M. Caffrey (08:11.31)
There you go. So 10, 10 years gross day one and most people just don't focus on it. So.
Sjoerd Bak (08:17.743)
It's like buying back 10 years of investing.
Paul M. Caffrey (08:21.41)
Amazing. So high level on that then, it really just max out your pension pretty much.
Sjoerd Bak (08:29.783)
That's the thing. But then you do need to understand what you're doing because you need to understand how your pension is invested. You need to understand when you have access to that pension, which would be in most corporate pension schemes in Ireland from the age of 50. But you need to understand what you're doing. it's not necessarily the investments that are going to make the biggest difference to your financial future. It's the investment plan. The plan is better than your
is more important than your actual investment.
Paul M. Caffrey (09:01.714)
And I suppose the two things when we talk, when we think about plans and investment plans is one, they tend to be conservative, I guess, from what I've seen. And then the other is good luck trying to figure out the fees. Very, very difficult to calculate. I believe what small fees can even still take a big dent out of what you would be getting.
Sjoerd Bak (09:22.215)
Yeah, like a 1 % difference could be a third less returns. Now you'd have to look at it on a case by case basis, but a 1 % fee could really kill your future wealth. And this is my problem with traditional financial advice. So most financial advice is actually selling financial products. And the reason why this doesn't work for salespeople is because salespeople already have an amazing pension plan. They have amazing health insurance.
Paul M. Caffrey (09:36.866)
There you go.
Sjoerd Bak (09:51.761)
They have a great debt and service benefit. So the only thing that can really be sold to them is either a mortgage once every 10, 15 years, or a crappy savings plan that makes everybody money except for you.
Paul M. Caffrey (10:05.23)
Hmm. There you go. So. I guess that's probably it's probably pretty key to know some of the things you've mentioned, so that's in service. Some people aren't aware of that in some of these companies is fairly good, but there is paperwork you need to fill out for that. I think a lot of people don't. So I guess that's something else to be mindful of. One other thing that jumps out as you mention that is. Do you?
Is life insurance or life insurance, any of that sort of thing, does that factor into thinking or serious illness benefit or not being able to work or any of that? is that, I know it's a case by Ken, but is that something you think people should investigate or?
Sjoerd Bak (10:48.679)
Absolutely. So people should be aware of financial products and they should know the gaps in their coverage. But most people in the tech industry are sorted when it comes to those things. Like I was out of work for 11 months in 2020 as a result of a stroke. And I was completely sorted with health insurance, with disability insurance, or my pay was sorted.
And this is why most financial products don't really apply to people in the corporate world, in tech world.
Paul M. Caffrey (11:28.918)
Yeah. Okay. So on that side of things, might, you might actually be covered by something that you already have as opposed to going out and procuring it. Because if you're speaking to advisor QFA or, know, whatever that is, I guess they're incentivized to get you packages, right? It makes sense to get some recovery that you need, packages, this, that, the other, but you might be over, overinsured perhaps. So that's maybe something to consider. When it comes to.
I suppose people are going to be thinking that we're talking a little bit about the boring stuff here. Okay. The pensions and this and that. a lot of people, particularly if we think about now it's Q4, which means there's going to be people who'll do really well. January, they'll have those mega, that mega month, that mega quarter. And then in February, they'll have this big chunk of commission and they won't know what to do with it. And let's face it, we've all seen people going out, new cars and going on that, you know, those fancy trips and having some fun.
But even after that, sometimes there's still some left over. What do you think people should be thinking about in those scenarios? Is it pay down the house? Is it maybe invest in the stock market? it something else? What should people be considering?
Sjoerd Bak (12:44.603)
So everything is possible and you can buy anything just not everything. So you need to you need to be aware and so when I coach people I coach them on four pillars and the first pillar is control your spending because if you earn a million and you spend a million you're still broke but if you
spend less than you earn, you need less to become financially independent, plus you'll be able to save and invest more so you'll get there quicker. And most people don't understand the power of controlling your spending. So you can earn lots of money, but if you don't control your spending, you're always going to depend on the salary. And that's what I want to help people achieve. Now, if you want to make better decisions, it's about, okay, well, what do I want to do?
Do I want to invest my money? Do I want to watch it grow? What's my time horizon? And there's multiple ways to invest, but also you should spend on what makes you happy. So when I think of spending, when I think of spending something big, I ask myself three questions. Do I need it? Does it make me happy or does it make me healthy? If it's a clear no for all three, then I'm not gonna spend it.
And the danger with salespeople is lifestyle creep. So, and it starts after they buy their first home. until they buy their first home, they can be pretty sensible. They save a lot of money, then they buy the home and then they think, okay, what can we use that saving muscle for next? And it'd be the big car, the fancy holidays, everything except for investing. And
Investing should be one of the first things you do. If you want to, you don't have to, but then you'll always be working for a salary.
Paul M. Caffrey (14:38.606)
Agreed. And when it comes to invest and there's an appetite there and I personally have used Dejiro for many years, there's eToro, there's so many different platforms. It's actually pretty easy to invest now versus five, six years ago when you were, well, we don't need to get into the rigmarole that used to be needed.
From that perspective, is there any platforms that you would recommend people checking out? And do you suggest, you know, keep your money between Wall Street and Golden Gate Bridge or, you know, go global on your investments? What is the sort of, you know, the approach you think people should be doing?
Sjoerd Bak (15:19.941)
Yeah, it's a good, good question. And again, I cannot recommend people what to do, but what I do is I invest in all worlds index funds, to my pension and through the trading platform called the GRO. So I like to keep things as simple as possible. but like the most important thing is that people invest and that they understand what they invest in and they understand why they do it. And they understand the time horizon. If all those things work.
then as long as you get the results, I don't really care where you invest.
Paul M. Caffrey (15:54.83)
Gotcha. So in that case, picking individual stocks first, maybe an ETF or something along those lines. I'm guessing you're putting more towards spreading out to risk and picking out a few good ETFs or Vanguard or something along those lines.
Sjoerd Bak (16:10.407)
Yeah, after I read the Simple Path to Wealth, I went all in on Vanguard All World Index Funds, not realizing the tax situation in Ireland because ETF taxation is very punitive in Ireland. So you're taxed 41 % every eight years, regardless of whether you sell or not. And if you were to invest in stocks, in individual stocks, you pay 33 % on your gains only when you sell. That's a massive difference.
This might be cleared up in the next budget, but I'm not holding my breath just yet. So this is really.
Paul M. Caffrey (16:47.502)
I mean, a few WhatsApp groups I can imagine hearing that sniffle, go, my Lord. So that's scary, scary stuff.
Sjoerd Bak (16:57.593)
is, it was the biggest mistake I made when I started out in this stuff is going all in on ETFs and not contributing extra to my pension. And that's cost me a lot of money by now.
Paul M. Caffrey (17:10.604)
Got it. So individual stocks from an Irish taxation point of view are a way to go. Difficult picking them, right? That's a tricky piece. Like is it a case of researching and making your own bets along those lines, whether it's Motley Fool or other sources like that that you're using, or is there another way that you got...
Sjoerd Bak (17:32.807)
I just, I just don't do it. So, so I still, I still pension. have a little bit of Bitcoin, but it's, it's like 3%. But even with the tax situation, I just like the ETF investment because of the results. So my investments in the S &P 500 four and a half years ago.
Paul M. Caffrey (17:37.013)
What are
Sjoerd Bak (18:00.839)
have still grown by 106%. So yeah, the taxation is pretty crappy. But I never have to think about, okay, is now a right time? Is tomorrow a right time? And I just can pour as much in as I want and just watch it grow. And I'll deal with the tax later. But because of this, I went all in on Pension First, then ETFs.
Paul M. Caffrey (18:28.494)
Okay. So it's a watch this space as well, I guess in eight years, it's a long time. it's relatively on into that. We won't get into it. So I mean, people jump in and out.
Sjoerd Bak (18:39.943)
It makes it difficult to tell people what to do because of the way ETFs are taxed.
Paul M. Caffrey (18:48.686)
Yeah, no, absolutely. for people, guess, if we stick on stocks, I know Rob Halligan and his company Shuttle, which is helping people invest in companies before they IPO. So very early stage. of the things he calls out, and I think it's a pretty apt point, is the first time most people invest in any sort of stock market is from an ESPP, when they're an employee stock share purchase.
Conventional wisdom seems to be, yeah, you know, get that in because you get a bit of a discount, then it's probably better off to sell rather than being over leveraged to one company and having all of your savings maybe related to that one company. If something happens, you could be in trouble. I'm guessing you would recommend, I'm people should consider participating in ESPPs or is it something that you kind of think, maybe it's just avoided, it does not work a hassle.
Sjoerd Bak (19:47.207)
So again, what I would do, what I did was all in on ESPP and take that discount because you get a, even after tax, you get a minimum discount of seven and a half percent every six months. So that would be twice the average return you would get in the market and it's guaranteed. So that's what I would do, but then.
Paul M. Caffrey (20:08.608)
And did you sell it straight away then when you invested available just.
Sjoerd Bak (20:11.941)
Early, yeah, early 2020 and just when COVID was kicking off, I made the decision to sell all my shares and I have done ever since. And there's a lot of misconceptions about ESPP, about capital gains tax and when do you pay income tax, when you pay capital gains tax. But because I always sold the day I got them, I never paid capital gains tax since.
Paul M. Caffrey (20:36.782)
Got it, makes sense. if you are...
Sjoerd Bak (20:38.031)
I take the discount, but not the game.
Paul M. Caffrey (20:41.122)
Take the discount. Got it. when people are then, you've mentioned Bitcoin being 3%. And let's look, we've all known people who've done exceptionally well by backing Bitcoin. And there is a big push that without getting into the minutiae of the detail, that's going to skyrocket again.
Have you consistently invested in Bitcoin? Have you consistently invested in other altcoins or have you just avoided that?
Sjoerd Bak (21:12.153)
No, I did do that in 2017 before I discovered all this financial independence stuff. It didn't go too well. So I bought at the peak in 2017 and then five months later I sold everything in a panic because I just didn't understand it really. Now I have a bit of Bitcoin, but like I said, it's 3%. If it takes off, great. If I lose it all, it's not the end of the world.
Paul M. Caffrey (21:21.388)
Yeah, well.
Paul M. Caffrey (21:40.11)
And I do remember looking at Bitcoin where in 2020 when COVID hit, I remember seeing the drops at about three grand a coin. I'm going, that looks pretty interesting, but it feels like the world is going to end. So it's one of these things where, you know, had I jumped into it then, it would have been such a gamble because we just had no idea what was going to come. But when you're looking at, do you do due diligence on like,
on Bitcoin. So when you're investing in that, are you looking at that with the same criteria that you're looking at, let's say companies with and factoring in that I might get a bigger return because it's showing, you know, XYZ results or is it purely just a little bit of diversification to have it there?
Sjoerd Bak (22:33.351)
I would go further than diversification. would call it gambling. I don't pretend to know what exactly what's going to happen with Bitcoin. I do know that the stock market has always gone up for the last 150 years. So that I feel comfortable in. So if I invest in index funds or invest in the stock market through my pension, I understand that over time that will go up because it historically has always gone up and there's big fluctuations in the short term.
Paul M. Caffrey (22:37.218)
family house.
Sjoerd Bak (23:03.463)
with Bitcoin, people say they know exactly what's going to happen. And I am not one of those people. will see whatever happens and I'll take it as it comes.
Paul M. Caffrey (23:15.598)
Absolutely. That's one of these things where we started hearing about in 2013 when musicians were getting paid with it. It was this cool new thing. I have wondered, will we look back and remember, yeah, remember Bitcoin was a thing and then it's gone? Or will we look back and go, wow, it's now everywhere. It's ubiquitous. God, we missed that. But again, gambling is something we want to stay away from.
Sjoerd Bak (23:37.735)
I have no idea. It could go either way. But it's the same with individual shares. And this is why it's so dangerous to have all your shares or all your wealth tied up in shares of the company you also work for. Because if the company you work for invests a lot in AI, now that investment could pay off or they could get swallowed up by smaller AI vendors from the bottom up. And what way it goes, I have no idea. And it's
it's too risky to find out with your life savings and your job at the same time.
Paul M. Caffrey (24:10.638)
Yeah. And if you, if you look at the dot com crash, there was people who were massively leveraging to, you know, single companies that were set for life and then weren't. We've seen the same thing happen to a lesser extent around 2022, 21, where a lot of companies really took that drop. So, yeah, I really liked the fact that you're underlying in that point to be diversified in that.
One stat that I heard recently on Gary Fox's podcast, the entrepreneur experiment was...
Sjoerd Bak (24:39.264)
It's tough to do, right? So if your company has historically always gone up, then...
Are you still there? It's tough to do if the company you work for.
Paul M. Caffrey (24:50.805)
Yeah, we haven't.
Sjoerd Bak (24:55.143)
Sorry.
Paul M. Caffrey (24:56.91)
No, I think there might have been a little bit of lag, but I think it's back now. So yeah, please keep going.
Sjoerd Bak (25:00.101)
Yeah. Okay. So it's tough to do. If the company you work for has historically always gone up, it's difficult to think of anything else happening. But there's been countless companies that have done really well that no longer exist today. And your company could very easily be one of them. Everything ends at some point. So
That's why I love diversification across regions, currencies, industries, company sizes, and just invest in everything.
Paul M. Caffrey (25:35.22)
Absolutely. And it is amazing when you, speak about the stock market for the last 130 years or so. lot of big companies up the top of that have dropped off and been replaced. So it does happen, which is pretty scary to think about. Well, I was listening to Gary Fox's podcast, The Entrepreneur Experiment recently. And one of the things that was called out is there's 15 billion in cash just saved with the Irish people in banks.
earning little to no interest and just sitting there. And if there is somebody who is listening and let's say they're sitting on, they've got a hundred K saved, 20 K saved, whatever that number is, there's a chunk of change. It's sitting somewhere. It's not really doing anything for them. When you've been in that position before and you've had that chunk of change sitting in a bank account, what has been your thought process?
Sjoerd Bak (26:31.943)
good question. I would ask a couple of questions. So am I happy with this, this money sitting there doing nothing, or would I rather have that money working for me? Because, and that's what investing is, right? It's putting your money to work, but it can be scary. And people think it's, it's expensive or it's something rich people do or, but it's how rich people get rich is by investing. And
You just need to need to get started. Read some books on the topic. Talk to a coach. Talk to me. Follow me on LinkedIn and get some ideas. I've had people come up to me and say, look, I got 6,000 euros worth of cash, 5,000 euros worth of cash into my bank account because I did my tax return as a result of one of your posts. That's awesome.
If my post can have that effect for people, like I'm so happy that that is the case, but people need to first figure out where they are now. Like what is everything they have? Most people don't even know. And then we can, we can have a conversation about, okay, well, what do you want to do with that money? How much risk do you want to take? And, and then see, see where that goes. A lot of, a lot of financial advice start.
starts with where do want to be in 20, 30 years or how much do you want to have in retirement? I think of it a little bit differently. think let's do the actions today that will get you the biggest results possible. So instead of saying what's the minimum you want to have in retirement, let's get you to retire early with as much money as possible. That's my thinking of financial planning.
Paul M. Caffrey (28:22.358)
Yeah, I like that. Yeah. So you can that different mindset is definitely going to pull that forward. One more question comes to mind before we look to wrap up. We both have kids. A lot of people listen and will or maybe you're planning to. Is there anything that you've considered or done before to help your kids financial future when they get a bit older?
Sjoerd Bak (28:48.517)
Yeah, so and not necessarily about the amount, but it's about the knowledge. So one of things that I do is my kids go to Dutch school on a Saturday and they're not the biggest fan of going to school on Saturdays, but now I bribe them. So I give them 10 euros put towards an index font in their bank account. And then when they have enough money there, they buy a unit of index font. they get exposure to investing and growing your money early. The other thing I do is when they give me money,
Let's say my son says, here daddy is five euros. I put 10 euros towards the index fund. So he gets exposure to seeing his money grow pretty quickly. I wish someone did that to me when I was younger.
Paul M. Caffrey (29:29.454)
Yeah, me too. Think of the compound as, you know, we're all in love. Yeah, we're all that. Yeah, that's it, isn't it? And from that, that typically just an index one that is one of yours that you would have set up or is that a special account that you set up for, you know, for kids or anything like that?
Sjoerd Bak (29:34.523)
compounding from the age of nine. It's unbelievable. Yeah.
Sjoerd Bak (29:50.759)
It's a unit in the index fund that I have. the Vanguard All World Index Fund and the Giro. I'm not going to make it overly complex. Now I might look at estate planning and inheritance tax and all those things and the annual gift exemption. There's ways to minimize the tax burden on your children. That's a bit too soon for me right now.
Paul M. Caffrey (30:16.224)
Story for another podcast, but yeah, the whole, can have three grand a year, every year tax free, this, that, the other, it gets very confused, fast. Sure. It's been an absolute blast. I've really enjoyed the conversation. If people want to find out more and want to find out how they can even just read somebody's posts, which are literally saving people thousands and thousands of euros. How can they do that?
Sjoerd Bak (30:21.863)
Yeah, yeah. Yeah.
Sjoerd Bak (30:39.153)
Yeah, people can follow me on LinkedIn. that's S J O E R D B A K and they can go to my website, which is recently gone live, which is BAMillionaire.com. So the letters B A and Millionaire.com.
Paul M. Caffrey (30:55.4)
Excellent. Well, thanks so much for coming on and look forward to the next time we speak.
Sjoerd Bak (30:59.591)
Thank you very much for having me, Paul.
