Frugal Living Season Finale: Financial Fitness

In this episode and season finale of Frugal Living, host Jim Markus talks with Shannon McClay, the founder and CEO of the Financial Gym. You can listen to Frugal Living with Jim Markus here, on Apple Podcasts, on Spotify, on Amazon, on Anchor.fm, or anywhere you go to find podcasts.

What Is Financial Gym?

Financial Gym is a place where anyone can go get financially healthy. As McClay explains, they work with people who have seven figures in the bank, people who have less than zero, and anyone in between.

What Is the Most Challenging Part of Financial Wellness?

According to McClay, the most challenging part of getting financially fit is that most people don’t know what that looks like. The financial world uses a lot of jargon, and in order to be financially fit, you need to be financially literate. There are a lot of people who were never taught financial literacy.

What Are Some Common Mistakes People Make?

McClay explains that one of the most common mistakes is that people aren’t mindful about their money. Oftentimes, they know how much they make, and they know they’re spending their money, but they don’t realize how much they’re spending and where that money is going. She adds that almost everyone underestimates how much they spend. She gave an example:

A client explained that they were living paycheck to paycheck, making $2,000 per month, and they had nothing in the bank afterward. Despite being able to explain this, when asked how much they were spending each month, they said they weren’t sure. McClay points out that if they make $2,000 and have nothing left at the end of the month, they must be spending $2,000 per month. While the answer may seem obvious from the outside looking in, a lot of people have trouble seeing their own financials so clearly because it’s an emotionally sensitive topic.

Read a Transcript of This Episode

Jim Markus (00:01):

This is Frugal Living. Building a frugal life without ever talking about finance is like training for the Olympics without ever talking about fitness. It’s the core of what we do. It’s the first and often the most important question people ask when they learn about frugality. So we found someone who knows all about it, including the importance of discussing it regularly. This week’s guest founded her own company. She understands finances, and she shares her knowledge professionally as the CEO of Financial Gym. We discuss how she got started, the most common advice she gives, and some tips for especially frugal listeners. I’m Jim Markus.

Shannon McLay (00:57):

And I’m Shannon McLay, Founder and CEO of The Financial Gym.

Jim Markus (01:00):

What is Financial Gym?

Shannon McLay (01:03):

Yeah, I get asked this question a lot and I just recently got asked, “Is it, is it an investment place where you work out? What, what is it?” And I love when I get asked that question because I’ve been building this business for eight years now and I always saw very clearly what it is. And, so I love when people have no idea what it is because I’m happy to explain. So it’s a place where you go to get financially healthy and it’s a physical location, but also we work with clients virtually. So, especially after this last year, 2020 into 2021, working virtually has been a necessity, but it’s, it’s both places. And I came up with the idea when I was a, a financial advisor at Merrill Lynch, and I was doing that for a few years. And to work with me at Merrill Lynch, you had to have 250,000 in assets. And I didn’t think anything of that when I became an advisor, because I’d been around money and I knew who I would talk to about money. And, but then I just started talking to everybody about money. When you become an advisor you’re just, or people come to you. And I realized that there are so many more people who don’t have 250,000 in assets who want to talk to a human being and, you know, want and need the help that I had at Merrill that, quite frankly, I was like, what does the person with the million dollars need? Why do they need that? And they didn’t even value the information I had versus the person who has, you know, $2,000 in the bank and is thinking they can invest for the first time, doesn’t know. And, and so I remember thinking eight years ago, there’s so many places to get physically healthy, and still to this day, so many places you go to get physically healthy, but if people want to get financially healthy, where would they go? And I just thought you go to “financial gym” to get financially healthy. And I saw it very clearly. I was like, it’s like H&R Block, but fun and cool advisors are trainers. They wear jeans and T-shirts. People pay monthly membership fee, just like a regular gym. Just like a regular gym, anyone can work out there. It’s inclusive of all financial body types. And that was really important because again, 9-10 years ago, I didn’t know where to send these people who were coming to me. And they wanted to pay me. I tell people the altruistic side of me wanted to help them because I was on this mission of helping people and finding purpose and happiness. But the capitalistic side of me wanted to take their money because they wanted to pay me. And I was like, I don’t have a way to take their money. So, I found a way to take their money, but you know what I love most about the gym… There’s a lot of things I love about it. But one of the things I love most is that really we can work with anybody. And so you don’t have to feel this fear and shame around what your financial situation looks like. We’ve literally seen clients with are, are, kind of, I’m not even going to say the worst clients, but the, the most challenging client starting point… We had a client start with negative $2,000 in the bank because of bank overdraft fees. And we’ve had clients start with $3 million in assets. Like, we’ve literally seen it all. And we’ve seen credit. We’ve seen debt from zero to seven figures between student loans, mortgages, and credit cards. And then we’ve seen clients with incomes of zero to nothing because they’ve been laid off or whatever to seven figures. I mean, we’ve literally seen it all at this point in the last eight years. We work with over 10,000 clients and we work with clients in every state at this point.

Jim Markus (04:12):

That’s incredible. That’s incredible. And what a, what a wonderful idea of gyms are everywhere. There’s a gym in every city. There’s a gym, sometimes multiple in every city, because it’s important to take care of yourself. But your self isn’t just your body. Your self is also your financial situation, which is key to what we talk about all the time. When we talk about frugal living, a lot of that is becoming financially independent. A lot of that is making sure that you’re not spending more than you have to, but I think a big part of that too is just taking time to evaluate where you are and where you want to be in your financial life. And it sounds like that’s kind of a core of what you do.

Shannon McLay (04:52):

It’s the core of what we do and the hard part around getting financially healthy and financially well. And we always say, we just, we fit in the wellness space. So you’ve got physical wellness, mental wellness, and then financial wellness. And the challenging thing with the physical–er, the financial wellness space is that people don’t know what it looks like. You know, how much should I be saving? How much should be earning? And, and the problem around that too is that you have financial wellness and encompassing it is a lot of jargon. It’s, so you need to be financially literate, right, to get financially well. And yet we don’t get financially literate anywhere. We, we’re not learning about it at home. We are not learning about at schools. We’re not learning about it at our jobs. And so, although we work with a number of companies that are so gracious to provide it for their employees… But, we’re not learning about it. And yet we’re meant to live in this ecosystem. I always say, it’s like, let’s, eh, like, compare financial literacy to like, er, you know, as a language, to Greek, right? And we never learn Greek. It’s got different letters. We’re not used to seeing it, whatever. And then, and then we’re picked up at the age of 22, 23. Whenever we get like our first kind of adult job, we are told you have to go live in Greece and… good luck. You know, like… Good luck getting around. Good luck figuring things out, where to live, like, choices to make. And that’s, and that’s essentially what we do to people in the financial… And then what happens is you make a number of choices to the best of your ability. And, you know, people tell you… everybody’s got an opinion. Oh, you need to do this. You need to max out your 401k. You need to pay off the student loans. You know, like, there’s so much advice out there. And yet, you know, everybody’s situation’s different. And if you don’t understand the different choices in your situation, then it’s very difficult to make the right choices.

Jim Markus (06:41):

I talked to people from all sorts of different financial positions. I’m sure that’s the core of what you do as well. But I know growing up, my parents never taught me Greek. You know, my parents never talked to me about a lot of the foundations of investing. And I’ve talked to people who came from wealthier families from, you know, pretty significant wealth who had the same issues. It’s just, oh, my parents did well. So we never talked about it. Or my parents did poorly and didn’t know it. So we never talked about it. The common denominator here is we’re not talking about it. And it seems like we should be.

Shannon McLay (07:18):

Yeah, no, I always say we’re not talking about it because money is the ultimate taboo topic still. And so, and it’s true, Jim, people do–on both ends of the spectrum–don’t know how to talk about it because even people who are doing well, sometimes they don’t even know how it happened. You know, they’re just like, I don’t know, able to pay the bills and that’s nice. And then people are like, I don’t know how, and, and I don’t feel comfortable talking about it. And, and we, we’re not talking about it. Because again, it’s Greek. We didn’t learn it. So, you know, if we’re able to survive in Greece by the grace of God or not. You know, like, you’re like, okay, it worked. But, like, you don’t really know how it worked. And I always tell people, the problems are the same. The zeros are different. So somebody who makes a lot of money or has a lot of wealth does not have any more… it is not any different than somebody who does, you know, has a situation with less zeros. I had clients start not too long ago. They have over, over ten million dollars in wealth, multiple tens of millions of wealth. Then they wanted to join the gym. They wanted me to help them ’cause they were afraid of running out of money. Meanwhile, we’ve got clients with $10,000 who are afraid of running out of money. I mean, it, it’s the same things. It’s just, the zeros are different. So, the, we see, we see it all the time and it doesn’t matter if you came from money or you didn’t. The language, we’re not learning about it. But, it, what’s interesting is our most financially healthy clients, the most financially fit, their parents were talking about money at, in home, in the home. And even if they weren’t listening or even if they didn’t do it, they just had this sense, like, you know, they tell, they have storylines of like, “My mom told me the value of a dollar. My dad told me I should be saving this, this, and this.” Like they had positive kind of money storylines happening as they were growing up. And those tend to be the most, but we rarely heard those stories. The most stories we hear is “I remember my mom crying at the table because, you know, we couldn’t pay bills” or “I remember hearing my parents fighting over, whatever, paying the mortgage.” Like most people have a very negative storyline about it.

Jim Markus (09:08):

Yeah. That makes complete sense. Can we dive into a little bit about… obviously you were mentioning people from all different income levels and all different wealth levels having similar problems. What do you think the most common problem you see across these demographics is?

Shannon McLay (09:26):

Yes. Uh, mindfulness around their money. We hear all the time, “I don’t know where my money’s going and I’m making it. Uh, I know I’m spending it. Not really sure where I’m spending it.” I laugh about this all the time because, uh, you know, I’ve raised money. I’m in the FinTech universe. And a lot of FinTech investors hate my model because it, it involves people and places. And they love it to be, like, as high margin, as low touch, as techie as possible. So they don’t love it. But I crack up because I’m like, there’s plenty of apps to tell you where your money’s going. Plenty. And yet people don’t know where their money’s going. And it’s because it’s very emotional around the money. We hear, I’ve heard more than once at the Gym, “Um, Mint.com judges me.” I’m like, “Mint.com’s not judging you.” They’re like, “Well, yeah, Mint told me I, you know, I dined out too much this week or I went shopping too much this weekend.” And it’s like, well, you did. It’s not a judgment. It’s just math. But, but why it’s judging… It’s, it’s, it’s inherently flawed from the get-go because that, Mint, or any of these apps require the user to put in their numbers, their budget, what they’re spending. Like, it requires some kind of initial input. And the problem is people don’t know what the initial input is. We talk to people in the first session they have with us. We’re like, “So, how much do you think you’re spending, you know, on dining or groceries?” They’re like, “I don’t know, maybe 200, 400, whatever it is.” Like, and we always joke as the trainers. We love when clients… They put their best guesses out there, because then we start tracking our, our… We know exactly where the money’s going, is going after a period of time because we’re tracking their expenses. But we love when they, especially a client who’s living paycheck to paycheck and, uh, has nothing saved or maybe has credit card debt. And, and we’re like, “So how much do you think you’re spending?” They’re like, “I don’t know.” And let’s just say they’re making $2,000 a month. I’m like, in my head I’m like, “It’s gotta be $2,000 a month. Right? Like, cause nothing’s here. It’s just, again, the math thing. They’re like, “Ah! It seems kind of high.” And you’re like, “Oh, all right, well let’s see how it plays out.” And then you’d always, is a higher number than they think.

Jim Markus (11:25):

How did you get into finance as a career? I mean, you mentioned obviously working as, you know, a consultant at Merrill Lynch. How did you get into that?

Shannon McLay (11:34):

So I, when I went to college, I knew I wanted to make money. That was my primary goal. I was like, what career path can make me the most money with the least amount of schooling. So it was like law, medicine, and business. And I was like, let me try out business. So I, you know, did, like, I was in the business school at, in college and I loved it. And, you know, there’s so many different ways you can go in the business school. And I ended up having a job on a trading floor of Bank of America when I was 22. And I loved it. I loved being on the trading floor, I loved finance, and, and that just kind of, like, set it off. And I used to tell people, then I went on this, like, eight-year journey of being in, like, the investment banking world. And I would tell people all the time, “I am not changing lives. I am just making money.” Like, that was… And I knew very clear that I was on a path of making money. I kept making more money and was doing that and hit 30. And I remember telling my then-husband, like, you know, all these friends, all my friends were freaking out about turning 30. Cause, like, they didn’t have a great job. They weren’t married. They, they didn’t have children. Like all the, the lifestone, milestone things that they hadn’t accomplished yet. And they were feeling, like, behind. And I remember telling him, like, “Thirty is going to be so easy for me because we are married. We got the kid, we got the house, I have this great job.” And I turned 30. I had, like, a great 30th birthday and then hit 30 and a half and just had a meltdown. I was like, “I don’t want the job. I don’t want the kid. I don’t want the husband. I don’t, like, I don’t want the house.” Like, I signed up for somebody else’s life. And I was like, I don’t even know, like so many things were up in air. And then I ended up getting life coached and read a book about happiness. And that, and then… What’s interesting, the first question the life coach asked me was what’s your purpose in life? And I remember thinking all I ever say is my purpose is to make money. Like, that doesn’t feel… Like, it wasn’t resonating with me now at this point in my life. And, uh, and then I read this book about happiness and it was, like, the whole, at the crux of the whole book was, to have long-term sustainable happiness is to help people and not expect anything in return. So, like, just even opening a door and not expecting a thank you. And that was, like, the first… I was happy because that’s the first aha I’d had at the Gym because I was, like, “That feels like it.” You know? But I didn’t know how to get to it. So I was just, kind of, had that in the back of my mind. I was like, “Okay, I think that’s where I’m going. I don’t know where it’ll lead.” And I end up working for Bank of America, Merrill Lynch at the time. And I was working with Merrill Lynch financial advisors. And I remember thinking, “But there needs to be diversity in the advisory space.” And I was like, “Maybe this is, like, my purpose. I’m gonna help more women become financial advisors.” That was, like, one of the main reasons why I became a financial advisor cause I needed one. And I thought, you know, there needs to be more women in the space. And I laugh about it all the time ’cause I was like, this is moving me toward my purpose. And then, then I realized when I became an advisor, people need help. We don’t have money. And the next was keep, kept going to my purpose fulfillness. And I remember having this realization probably like a year ago that, you know, I’d said I want to help more women become financial advisors. The majority of our trainers at the Gym are women. And so I was like, I have helped more women become financial advisors. I just did it in a better company. But I was like, I did say that and it has happened. And you know, I just did it a better way.

Jim Markus (14:38):

Fantastic. Congratulations on that. That’s a life goal accomplished, which is pretty amazing.

Shannon McLay (14:44):

Yeah. Ongoing, it’s ongoing, you know, the path to, to, that. And I, you know, I, and I tell people it started with the book. And the last year plus, I mean the pandemic took a big hit on the business. Like every, like every other business, like, it was challenging to make it through. And we’re still, like, working our way out of it and all this stuff ’cause we have physical locations and all the, all the factors. But I tell people, like, I didn’t build this business… I built this business for our clients. Like, because I had that aha of, like, I have to help more people. And that is my purpose. And that’s what I’m meant to do. And interestingly, in the process of the last year and a half, like, we had investors mad at us. We’ve had employees mad at us. We’ve had all these like, you know, negativity, but our clients have never been happier. Like, and every time I’d have a bad day, we’d get like a five-star review from a client. You know, like, “This changed my life” or “I’m so glad I joined.” And I’m like, “Okay, like, this is who I built it for. This is why we’re here. And as long as we’re still doing that, then, then we’re on the right path.”

Jim Markus (15:42):

I love that. And that gives us kind of two prongs I’d love to dive deeper into while we’re talking about investments. This is something, when we talk about the taboo of money and the taboo of finance, this is something that I didn’t learn until I was an adult in the workforce: The idea of living off of dividends. When we think about, I don’t know, I think a lot of us have very simplistic views of what it means to invest. I’m gonna buy stocks. You know, I’m gonna, I’m gonna buy shares in the company. I’m going to find a company I like, go all in on Disney, and not realize that the wealthy among us, the people who are financially independent, aren’t putting everything in investments and then deducting what they’ve put in. They’re not selling at all in a lot of cases. They’re just living off of, you know, quarterly or annual dividends. And that can be a reasonable, reachable goal for a lot of people. Can you speak a little bit more to that?

Shannon McLay (16:40):

Yeah. Um, yeah, people don’t understand. I mean, we just talk about people not understanding the financial, financial literacy in general. There is a ton of jargon and there’s a significant amount of jargon on the investing front. And, and so, it, it… There’s no reason why you shouldn’t understand even what a dividend is or what is… We had this event a few years back we call… We have different educational series at the Gym. And one of them that we do frequently is Investing 101. And it’s just, like, you know, explaining the difference between stocks and bonds and uh, asset allocation, to, you know, the initial concepts of it. And we had a woman stand up and say, “This is gonna be a dumb question, but can you just tell me what the markets are? Like, everybody tells me I should be investing in the markets. What are they? Like, is it a place I go to? Or, like, what are the markets?” And more than half the room was nodding their head. Like, can you answer her question? And I was like, “Oh my God, yeah!” Like, and, and the, like ’cause, the jargon, like, a lot of people just repeat it, repeat it. Like, and they’re like, yeah, you should be in the markets. And it’s like, yeah, what the hell is that? If you don’t know what the markets are, what are they? Like, how do I…? I, I should invest in the mar–. I don’t even know what they are. So, you know, that’s the kind of basic, like, financial literacy we’re not, we’re not… So forget knowing, knowing what a dividend is, I mean. And what market you get that from? I mean, so for people who are listening, who don’t know, I mean, there’s, there’s stock markets, there’s bond markets, there’s crypto markets, there’s real estate markets. There’s different areas to buy into and stocks, and, are the same as, uh, equities. We also get that question a lot. What’s the difference between stocks and equities? Same thing. What’s the difference between fixed income and bonds? Same thing. And so, and so dividends is what you get from the stock market. Interest is what you get from the bond market. But both of those are, like, payments you get on your investments that could be paid out at some period of time. And so depending on what kind of investments you own, you can get a significant amount of payment just by owning them. So, so, it, that is a strategy we look at. And for our clients who are getting closer to financial independence, we will look at more of, like, dividend, uh, -type options. We’ll look at more fixed income options because then you’re living off the interest. And what happens is when you’re living off of those, those are what you get paid out on top of it. Then you still own the stock. You still own the bond. They’re just paying you money for owning them. So you can live off of that. And there’s different strategies. So then you, and then you also have stocks and bonds that you buy ’cause that’s going to be worth… you’re going to have more of them over a period of time. And that’s the strategy. You own those in the beginning part. And then you switch to the other part. And yes, there is a, an, a formula where you could live off of just that. And we talk about that with our clients of like, “Hey, if you need $40,000 a month to, $40,000 a year to live, you need this much in your investment portfolio to be making about this much.” And let’s just say it’s a million dollars in, in that portfolio that’s gonna give you that 40,000 a year. The great thing is, and we tell this to clients, is, like, you’re still gonna have that million dollars, like, consistently, as long as you’re living off the 40. And it’s gonna keep… that million’s likely gonna keep growing. ‘Cause you’re not, you know, it’s gonna have, you’re gonna have the growth stock still. And so it’s gonna keep growing, but you, you know, it’s, it’s like this miraculous thing, which is really funny. I always, people ask about investing and I’m like, “I take the Nike approach to investing. Just do it.”

Jim Markus (20:13):

At Brad’s Deals, you never need to question the integrity of a store or the quality of a deal or the security of online shopping this holiday season, add bread. That’s B R a D S D E L s.com. Special. Thanks to Shannon McLay [inaudible] and Sidney Smith. I’m Jim Marcus. Thanks for listening.

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To hear more from Shannon McClay, check out the latest episode of Frugal Living. Frugal Living is a podcast for smart consumers. How do you spend less and get more? The show, sponsored by Brad’s Deals, features interviews, stories, tips, and tricks. Jim Markus hosts season three, out now.

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