19. Timeless Happiness -4 (Money Pt. 2)
“My mission is that I don’t want money to be a burden for people...I don’t want people to be worrying about it all the time. I want money to be something that actually feels good and you get to use it in the way you want and enjoy it with some peace of mind.”
Tara puts on her “financial planner” hat once again but this time to discuss the “numbers” side of retirement planning in hopes of alleviating some of the mystery and anxiety that often surround this topic.
Tara outlines the challenges and uncertainties that can affect financial retirement planning including longevity, inflation, market volatility and unexpected life events. She gives special attention to concerns around inflation and social security.
Together, Tara and Tina explore concepts such as net worth statements, retirement projections, and budget tracking. They stress the importance of using a financial advisor and how to find one you trust.
They continue to focus on how to spend money in ways that bring happiness and peace of mind. Whether you are just starting your retirement planning or fine-tuning existing plans, this episode hopefully will provide you with the tools, information and resources you need to be financially ready for retirement.
-
[00:20] Christina Donovan: Do you feel the need for change in your life, but are not sure why or when or how? Do you feel a pressure of running out of time? Do you spend most of your time doing things that are not important to you anymore? These are all symptoms or characteristics of middle essence. And this is our podcast, Messy Middlescence. Hello.
[00:44] Tara Bansal: Hello. This is Tara Bansal and I'm here with my sister, Christina Conti Donovan. We are continuing on our timeless happiness class. This is class four and it's a continuation of the previous one. Class three focused around finances and money. So if you haven't listened to that episode, I would. I talk about the two sides of money. One is the emotional side and one is the more practical side. I think the emotional side is much more important. And so that's why we did that first. And even at the end of this class, we're going to go back to that a little just because of how important I think that is. Usually start with our homework both or home play. Tina and I both talked about it and we feel like we didn't get that much more than what we had presented and talked about in the previous episode. But the first question was around financial well being and effectively managing your effectiveness, your economic life, for what that means to you. I mean, for me, I'd call it a healthy relationship with money, where you feel like money empowers you to do the things you want to do and gives you that freedom. It doesn't feel like a burden and is not taking too much of your mental and emotional space to just, like, worry about it and take care of Tina any more things around what financial well being means for you?
[02:33] Christina Donovan: No, I mean, I think on that scale, I gave myself a six. I think you gave yourself a nine.
[02:39] Tara Bansal: Yeah, I gave myself a nine.
[02:41] Christina Donovan: And, I mean, my six was mostly around budgeting. I mean, we. We should have enough money, but I feel like we're always, I don't know, worried about money. And I also feel like we don't, even after doing some work around budgeting, still don't have a true sense of where all our money goes.
[03:03] Tara Bansal: And you're not alone there, Tina. That is, I do feel like the norm. This is what I do for a living. I'm a nine that I always feel like there's room for improvement. And where I feel like nimit and I can improve is being more conscious and choosing well on how we want to spend our money, with more planning and more thought. And the other is we have an appointment with our financial advisor coming up and we haven't done any of our homework. So it's been a couple of months and I have a list of things we're supposed to do, and I'm a little frustrated with my myself that we put it off and it's going to be a scramble. But once again, I also know that's kind of human nature. You need a deadline to force yourself to do things, and that's why we got someone, because otherwise you just keep putting it off. Around finances, I believe, like, nothing should be a fire that you have to put out, yet you don't want it to just keep getting kicked down the road and never do it either. So it's just getting stuff done.
[04:19] Christina Donovan: I mean, how often do you meet with your financial planner?
[04:23] Tara Bansal: So it's interesting, and I think this is normal. When you first start working with someone, there's a lot of work upfront just with them getting to know you, gathering all the information and going through it. So we were meeting like once a month for several months, and then we pretty much got to where most of the plan was implemented. Like, we made all the investment changes. We had a to do list that we did most of it, and now we're doing, like, we're going to update our estate documents. And so now I think it's been maybe three months, and I think it goes to we only meet from now. The norm is like three times a year, so it's the way she works with us. And if something came up, she would be available. But the norm is that, I mean.
[05:21] Christina Donovan: Before you started working with your financial planner, how often would you say you and nimit talked about money, like, in terms of, from a planning perspective?
[05:30] Tara Bansal: Not that often. I would say maybe once a year, but even that, I would say not that often.
[05:41] Christina Donovan: That's about what Matt and I do.
[05:43] Christina Donovan: About once a year.
[05:45] Christina Donovan: We, like, sit down and we go through the numbers and I think that's good.
[05:51] Tara Bansal: I mean, I think if things are steady state, I would say once a year is probably the minimum that I would recommend. Like, if I have clients that are just kind of chugging along and you can do some tweaks, but you do want to do a check in. So I think that is true. If you have things changing, like with you guys, like when Jack decides where he's going to go to college or, you know, just. Or with, you know, someone approaching retirement, trying to figure out or fine tune that, you may look at it much more often.
[06:29] Christina Donovan: Yeah.
[06:30] Tara Bansal: Than just once a year, but that's a great question. And, Tina, what are your money concerns?
[06:39] Christina Donovan: Well, really just having enough to do what we want to do for the.
[06:44] Tara Bansal: Rest of your life, for the rest.
[06:45] Christina Donovan: Of our lives and to fulfill the obligations that we have, we've made, I feel, like, commitments to our children in terms of paying for their college educations. And, you know, we're going to have done that for two of our children. Like, we have to do it for Arthur, you know, like, we're not going to leave our youngest hanging. There is an age gap between our second and third. So Jim will be finished when Jack, our youngest, begins college. So, yeah, I mean, I guess that would be our primary thing. Yeah. I mean, it's just. It's so hard to plan because of all of the, you know, how old are we going to, how long will we live for? You know, how much can we sell our house for when we go to sell? You know, I don't know. Like, there's just all these things, unknowns play into it that, yeah, I think, really do increase your anxiety around it. And, of course, you do hear about people running out of money. We've seen it in our family. It's particularly, I think, as women, we're more likely to outlive our husbands. That doesn't mean you and I will, but I mean, just the statistics around it. So, yeah, I mean, I think that it is the scary. You don't want to have to become dependent on your children or on other family. Yeah. So, yeah, I mean, I think they're valid fears.
[08:29] Tara Bansal: Mm hmm. No, I agree. I just wanted to see what comes up for you as your biggest concern around money. The last question on the home play was money talk, and we didn't talk about this on the last episode, but it was to pay attention for how even what words you use and language you use with regards to money. And an example of this is when people say, we can't afford to do that because that says something, versus we are choosing not to spend our money in that way. Some people have more excess than others, and some people are really struggling to make ends meet. So I'm not trying to ignore that. And it's to be aware of how you spend your money is always a choice. And even just what food you choose to buy at the food store. Right. Some is more expensive than others and different things of what's most important to you. So the last part was just trying to create some awareness of even how often you think about money and how do you feel when you talk about money and when you spend money, because that is just something to start noticing and I think once you put your antenna up, it's interesting to see what comes up for you.
[10:12] Christina Donovan: All right, I know. Do you want to do a quick plug for the psychology of money? That book that.
[10:19] Tara Bansal: Yeah, I mean, so I love this book. It's by Morgan Hausel, and it's called the Psychology of Money. I can post an article, a couple on each chapter is standalone, and it talks about different things. It sounds like a really boring book, yet the stories in it I found really interesting. And Tina, you read it, right?
[10:48] Christina Donovan: Yeah. And I'd like to say that all three of my children read it, which.
[10:53] Tara Bansal: Is a statement they read a lot.
[10:56] Christina Donovan: But I mean, yeah, but not really on a topic like this. And all of them read it, and I think all of them got stuff from it. I mean, I think it was definitely a worthwhile read for each of them. And this was two years ago, so to give people a perspective, my one daughter was 21, my son was 19, and my youngest was 15, to give you a range of the ages. But, yeah, it was definitely something that they all, I think, considered a worthwhile read.
[11:35] Tara Bansal: But, yeah, it's a book I love and really do believe everybody should read. And it's an easy read, I guess, to me, so don't be put off by the title. And I think each of the things are interesting. All right, now we're going to jump into more of the number side of finances. And I mean, going into retirement, where you. I view retirement as more financial freedom, where you do not have to have a paycheck in order to support yourself in living your day to day life is part of it. And there's some real challenges. I mean, our grandparents had pensions, and that is not the norm. There is still, I guess, very few places, if you're a teacher, you know, or a policeman or some, some military, yeah. Have pensions. But if you do have a pension, even that, it's changed and reduced the increased health care costs and just the unknown around that, I think, brings its own challenges. Personal savings. Some people have it, some people don't. And the norm is to carry more debt. Homes are definitely way more expensive than they used to be as a percentage of salary and income and also taking care of dependents. The sandwich generation, where you have kids that can be younger, like mine, or even older kids that need help. Yeah, need help and support, and parents that they need financial help also. So taking care of others, we're living longer. I mean, when I do a financial plan, I generally assume 95 to 100, and I don't feel like that's unrealistic, mainly because of medical technology and how quickly things have changed. And I always want to err on the side of having enough. Versus I always say my worst nightmare is if you were to run out of money and I set the expectation that you were going to be fine, and then a big one is just the psychological change of not having a paycheck come in. And this is a really big deal. I know for my husband, he's like, I just can't imagine feeling comfortable not having a paycheck come in. And I think that is normal for people. How is this going to work? Where is the money going to come from? What is it going to feel like? And all of these, I don't want to diminish, I guess, like, going into retirement is a big deal and it can take some time to plan and feel comfortable with financially. Any comments from you, Tina?
[15:15] Christina Donovan: No, but I do. I mean, we've seen, at least with Matt's parents, I know his dad retired earlier than he had expected, which I think is also a really common thing that happens more and more that people think they'll work longer, but then either because of an illness or a job layoff, they end up retiring sooner. And I mean, his parents, you could tell the first, I would say five years of their retirement, they were so, I don't know that I would say panicked, but they were so frugal because you could just see like, they were scared that, you know, are we going.
[15:57] Tara Bansal: To have enough and how to make this work?
[15:59] Christina Donovan: And, I mean, they've been fine. You know, they say now that they probably should have spent more in their early, earlier in their retirement, but, yeah, I mean, I totally get it. I mean, I think of Matt not getting a paycheck and I get all panicky. So.
[16:19] Tara Bansal: Yeah, and that's what I feel like part of my role as a financial advisor is to help with that, like how to give some comfort and make sure people understand what is possible and what they can do and hopefully how it will work. I mean, that being said, there's a lot of unknowns, and we've talked about this before, but I'm just going to list him here. Like, the risks in retirement, there's four major areas. Longevity. Like, how long are you going to live? I mean, some people do live past 100 to past 110, and they're the exception. Yet they, they exist. And I think that can grow with medical technology and with all that were learning around the human body, inflation. So this is the value of $1 today, what will it be in the future? And I'm sure you've heard, I'm trying to think of an example. When I turned 50, Tina gave me this list of like in 1970, the price of different things. I wish I had the list right in front of me, but it was how going to the movies was like a quarter or something. I can't remember exactly what it was, but what a gallon of gas cost and how drastically different things are. So inflation, it keeps going up. The question is what percentage? And that's a huge assumption. The government right now says it wants inflation to be around 2%. It is not 2% right now, but if you assumed inflation was 3%, a million dollars in ten years would be $737,000. In 20 years itd be almost half that, 543,000. And in 30 years, a little more than 400,000. And im not saying that to scare you, its just one of the variables that you have, like if youre on a set pension or even Social Security does get an inflation increase, but if it's not really keeping up with what things, that's part of the squeeze the longer you live and how people can struggle with that, the volatility in the market. You know, this is where I was giving nimit a hard time. Like, we don't know what, um, what's going to happen in the market and you can't really control that. So, um, but if the market has a huge drop and you take out a lot of money at that point, it can have effects for a really, really long time just because it's hard to recover from that. And then all the other unknowns that threaten or can have an impact on your financial security, illness, divorce, support of your parents or your child, those can be unexpected and change your spending very much. And that, we talked about that a little bit in the last one, but it's like, how do you plan for that without being too conservative?
[20:14] Christina Donovan: But yeah, it's almost like you can't plan for everything. It's impossible.
[20:24] Tara Bansal: So those are, I feel like kind of the risks and that those are the concerns that everybody has and they are valid. I mean, part of the reason to get a financial planner is to help with that. And I wish I knew, like, what percentage of people have financial advisors and I don't know, honestly, but they can help you look at your retirement scenarios and help you figure out how, how this is going to work and how to make it feel like you get a paycheck. If money comes over from like your investment account over into your checking account every month or every quarter or however often so it feels like a paycheck. Any financial plan or any of these retirement scenarios, you have to make assumptions. And those are the things that you can make anything look good and you can make anything look bad, pretty much. And that's part of the art around being, I think, a good financial advisor. Theres a thing called a Monte Carlo analysis, which runs a thousand scenarios and it tries to do a bell curve of the best and the worst. And that will show you, then theyll give you a percentage of your percent of success, meaning youre not going to go below zero. And I use that more than just the linear because all these variables are so uncertain. And that to me helps give a little better picture of what the good or the bad can look like and how much you should try to prepare for. But even that, they generally say you want an 80% to 85% success rate. So there are still 15% that things could go drastically wrong and you may not do well. I feel like Im talking a lot. Teen jump in or ask questions.
[22:52] Christina Donovan: Yeah, I mean, I had told Terry about an article in the Wall Street Journal that was published in April, and it talked about like, the average numbers for retirement and how theyre now saying the average person or couple needs 1.46 million to retire comfortably, which is up from 1.27 million a year ago.
[23:25] Tara Bansal: Which is a pretty big jump. Yeah. As a percentage.
[23:30] Christina Donovan: I think the one thing that the article talked about, too, was that some of this, and this is what people think they need, that it reveals more about retirement anxiety and the concerns around inflation right now in our economy than actual retirement planning. But I mean, the one thing that the article also talked about was Social Security and how the uncertainty around Social Security can really influence these numbers because, I don't know, do they say you should plan on getting about 45% of your income from Social Security? Is that see, or should you not plan on getting any?
[24:21] Tara Bansal: No. I mean, I've never heard that percentage teen. So I don't know, like Tina's much more well read of things than I am. But I mean, so many people come in and say clients are like, I don't think Social Security will be there for me, so I don't want you to include it. And I disagree with that. I mean, I think Social Security, especially for people our age and above, they can't do that drastic a change. I think Social Security will change. Like they'll keep pushing out the age where you will get it and maybe the amount will not keep up with inflation and things like that. So I think Social Security will exist. Do I think it will be changing and maybe not providing as high a percentage as it used to? I think that can be more what I would use as my assumptions.
[25:28] Christina Donovan: Yeah.
[25:32] Tara Bansal: I forget what your question was, Tina.
[25:34] Christina Donovan: No, just kind of a comment on Social Security.
[25:37] Tara Bansal: And, yeah, I mean, I do believe Social Security, like what percentage that should be. It's interesting to me even, like, I didn't get to read the article yet, but I go to, there's so many variables that I almost get frustrated when they throw out these things because if you live in a high cost of living place and you live, I guess they're trying to use an average, but the cost of living in New York City is so, or, you know, San Francisco, California is so drastically different than if maybe you live in Omaha, Nebraska, or, you know, other places that, I mean, this goes to. Everybody's situation is different. Yeah.
[26:36] Christina Donovan: And I mean, the other thing that I had talked to terry about in this article was it actually gave a, I think its given by fidelity, which is a shortcut for trying to figure out without a financial planner about how much money you need for retirement. And they call for saving ten times your annual salary by the age of 67. That was sort of the, and they do say the four major things that affect that are your income, your marital status, where you plan to live and your expected longevity. Those were the four questions that they, that they ask. That they ask. I mean, the one thing is if, in terms of where you live, like your salary, if you don't plan to leave where you live, I mean, hopefully you can afford to live on the salary that you were making. You know what I mean? Like that shouldn't change. I think it's if you're going to move somewhere more expensive or maybe less expensive.
[27:37] Tara Bansal: Yep.
[27:38] Christina Donovan: But there's even like, you know, ten times your annual salary. Well, does that take into account bonuses or like some of these other things? Like, how, how do you, I don't know, is even an annual salary, like an easy thing to.
[27:54] Tara Bansal: Well, and, yeah, and part of my reaction is also, like, if your salary and you're in the top tax bracket and then suddenly you're not, like your, your tax bill. I don't know.
[28:06] Christina Donovan: Yeah, it's, I guess that's the thing. And it is supposed to be just like, I think, average, like to give you an idea, really basic. Yeah. But I had just never heard of that before. And it kind of scared me because I was like, oh, like we're nowhere near that number, but, yeah, it's.
[28:25] Tara Bansal: Yeah. And it's looking at the, like, looking at the different sources. You know, it's interesting to me that they said 67. 67 is the full retirement age for Social Security. So at that age, you can start taking Social Security and even have another job without Social Security amount going down.
[28:47] Christina Donovan: Right.
[28:48] Tara Bansal: Yeah. There's a lot of variables. And in our notes, we're going to give you a place that you can try. I don't know if this article gives you a place, too, besides the one to run a retirement scenario and see what it says and how close you are or what good shape you are in.
[29:12] Christina Donovan: I do think, too, those things are more and more common. I know our bank has a thing where you plug in numbers and it gives you retirement figures. And I also know where our 401K stuff does the same thing.
[29:31] Tara Bansal: And I'm stumbling over myself. But I think the numbers, this is more than just an equation that will spit out an answer. I think that gives a false sense of. That's where I said, doing the linear is very different versus doing one that looks at how drastically it can change with these different variables. And it is more nuanced. Right.
[30:10] Christina Donovan: But I do think in that's part of the issue is there's so much anxiety and fear around it that people want to have a definitive number. Like they want something in black and white to help them feel better about their fears.
[30:32] Tara Bansal: And I think that is true. I think so many people, their finances is almost like this black hole that they may even know how much they have saved, but they don't know how long that would last or what. So I do think that's important. I don't know. I guess I feel like I'm talking out of both sides of my mouth, but it's important, and it's not as black and white as that, I guess, is what I'm trying to say. But it is good. It's better to have some information or more information than no information. Yeah.
[31:10] Christina Donovan: So, I mean, I know the one number you had quoted to us or to me was the 4% rule. I mean, since we're talking about, like, kind of these numbers, do you want to just spend a minute talking about?
[31:25] Tara Bansal: Sure. I feel like the 4% rule is what you hear an awful lot about that. If you are only pulling 4% out of your accounts to live on that, then you should be able to have your money last forever. And the idea is, and right now, living on the interest, you're living on the interest right. And hopefully, like equities or other things are going to grow even more than that. But not every single year. Like, you know, the markets have down gears, but if you can ride out those downtimes by only pulling out basically the, you know, the 4%, you're going to be okay. And there's financial planners listening, they're going to be like. But it does depend on. You can come up with scenarios where that won't work. But I think it is a rule of thumb. In general, if you can only pull out 4%, you're going to be okay. So that's kind of like a target.
[32:38] Christina Donovan: And that's something. I mean, you could kind of look at your portfolio or your savings and you can calculate that yourself.
[32:48] Tara Bansal: And if you know about what you're going to get in Social Security, you can put that in as an income. And then you need to only bridge the gap. Right. With your investments to your living expenses.
[33:03] Christina Donovan: Yeah, yeah.
[33:04] Tara Bansal: So all good.
[33:08] Christina Donovan: I mean, I guess the other thing, I know Tara probably has all the stuff she wants to tell, but talk about, but I mean, the other thing that really struck me when Tara did our plan, Matt's and mine, was Matt and I went in saying, you know, we, we're gonna, in ten years, like, our expenses are gonna go down. Like, we don't need as much money as we're spending right now because we have three kids and we're spending all our money on our children. And Tara was just like, nope, that's not the case. Like, you may think that, but you're going to find other ways to spend that money because you're used to.
[33:51] Tara Bansal: Spending at that level.
[33:53] Christina Donovan: At that level. I mean, I don't know if you want to talk a little bit more. I was shocked by that. I still kind of am. Like, I have to say, I still don't 100% fully believe that, but some of that is, I just want to think that we're not going to keep spending money at the rate that we're spending.
[34:08] Tara Bansal: And you're probably right. I mean, a little bit, I will say a little bit of my reaction to that is to create a cushion. And hearing, like, you and Matt wanna travel, you wanna do these other things that you haven't been able to do.
[34:29] Christina Donovan: And so money stories, that has to come from somewhere.
[34:32] Tara Bansal: Yeah. And so based on my experience, a lot of people think, oh, I'm not going to spend money on dry cleaning. I'm not going to spend money on, you know, hot cleaning, all these different.
[34:44] Christina Donovan: Things, commuting to working gas and.
[34:48] Tara Bansal: Right.
[34:48] Christina Donovan: But lunch is out and.
[34:51] Tara Bansal: But hopefully you do go out with friends and you do travel and you do some of the things that. And like I said, maybe I'm being too conservative, but I feel like most people have a hard time cutting back as much as they think they're going to. I mean, taxes is one that definitely has an effect and will change and will change. And if you down, I will say people who downsize their homes. Right. Like, a lot of people underestimate what they spend on taking care of a home. Right. And all of that. And some people who move into a condo that no longer have lands, you know, like landscaping and all these other things are like. Right. Wow, I didn't realize how much we were spending on that, so. And the other is, I'm just a little bit of trying to plan for the worst was like, healthcare expenses or other things that in the future are.
[36:00] Christina Donovan: Going to drug things that aren't in our world right now but probably will be in 15 years.
[36:08] Tara Bansal: Yeah. So people expect their finances, their outflow to go down, I think, more so than it really will. But part of it is, I'm assuming, or wanting for them to spend it on other things that they're going to want and enjoy.
[36:26] Christina Donovan: Yeah.
[36:27] Tara Bansal: So, yeah. Anything else from when, you know, like doing the plan and looking at the numbers for you? Yeah, I mean, I guess this just.
[36:43] Christina Donovan: Goes back to the fear thing. I mean, you know, Tari laid everything out for us in terms of, you know, the graps and the visuals and the charts. But it still is hard for me to think that that amount of money is going to last us. Like, it just, I don't know, it just doesn't seem like enough. And I know that this is like a typical, like, I'm like the stereotypical 55 year old, but it just. It is hard to believe that it could get us, you know, 30 years or 35 years or whatever, you know?
[37:23] Tara Bansal: Yeah. And to me, that's important because a little bit I want to dig down, like, what number do you think it would take for you to feel comfortable or is there any number. Right. Like, this is. Pardon.
[37:38] Christina Donovan: You know, going back to all those uncertainties and things that you just talked about, like, is there even a number where, you know, you start feeling like, yeah, we could. We could handle anything.
[37:51] Tara Bansal: Yeah. And that's the other is, I think it's something psychological and human nature of, like, I mean, they ask people who have $10 million, like, do you have enough? And they're like, no. Right. I mean, they that people just continuously want more. And that's part of my trying to get people to question, like, what is enough instead of just keep. And I think part of it is that fear, right? Like that fear of wanting to make sure and know that you have enough. And I mean, yeah, we can't predict the future. There are quite a. A lot of uncertainties yet we want to try.
[38:48] Christina Donovan: I think the other question, too, that we haven't talked about, but do you want to leave money for other people or for causes?
[39:03] Tara Bansal: That's very personal. Yeah, I think we could do a whole episode on that because I've mentioned the book before, but die with zero if that's what you want. I'm an advocate of. Then how can you start doing that while you're living with people? And it's not trying to spend every penny you have. It's a shift, right? Like of trying to use the money in ways you want now rather than when you're not here. So you get the benefit of seeing the people or the causes you care about.
[39:50] Christina Donovan: Use it.
[39:53] Tara Bansal: But really good things to think about. I mean, when I do a financial planner, there's some key numbers, and one is your net worth statement. So this is a statement that lists everything that you own. Everything you own is on the left side and everything you owe. So all your debts are on the right side. And then you net those out to see what your net worth is. And I think a lot of people, maybe now not more people, may know because there's so many financial different things out there. But I would say before, not as many people knew exactly what their net worth was. And your net worth includes the value of your home or the equity you have in your home. And if you have credit card debt, or you have a car loan or your mortgage or student loans, those are all the things on the right hand side. And this is something you can do on your own. So you can pull these numbers like every single bank account, investment account, your 401K, like all the different things, pull it together and take a look at that. That's one of the first things a financial planner and advisor will do. And then another is looking at all your sources of income. For most people, that can be pretty simple. It's just your job or if you are retired, like you have a pension or Social Security, if you have side jobs. Some people have different other things. They do hobbies or whatever that they get money from. You want to look at all your sources of income. If you have rental property, that can count as a source of income. And the biggest thing I think most people don't know is their living expenses. Like, how much do they really spend? We talked about this last time. I felt good about Nimit and I. We were saving our target goal every year, but I didn't feel like we tracked how much we were spending. And your spending number is one of the most important ones in your financial plan. And people will have these really detailed budgets that they will give us. And I'm like, okay, according to your budget, you only spend. I'm just, you know, $50,000 a year, so you should be saving $30,000 a year. Are you saving $30,000 a year? Oh, my goodness, no. Like, so I'm like, well, then this budget money. Yeah. And the longer I've been a financial planner, often I back into the savings of like, okay, here's what we know your income is from looking at your pay stubs and whatever. Here's what we know you are spending in taxes. Here's what you're putting into your four hundred one k. And if there's any extra money going into paying for your house or whatever above, then I just almost say the rest is living expenses. Unless they tell me we're saving this much of money. And it's sad, but it's true that most people just spend what they earn.
[43:53] Christina Donovan: Yeah.
[43:54] Tara Bansal: And what they see, that's the other is like, if it goes into the 401K, then you adjust it to only spend that. But that's part of why nimit and I. So it's been a year, we have more than a year of data now of our spending, and I'm amazed that we spend more than I thought we did. And it's funny because we see the credit card statements, we see the different things that I thought we had a pretty good idea. Yet when I look at our numbers, they are higher than you would have guessed. Yeah, I would have guessed. And I think what I had in our plan, so that's part of when you, part of the financial plan is you have to have good information for it to be worthwhile.
[44:47] Christina Donovan: The plan is only as good as the information that you put into it.
[44:51] Tara Bansal: So I say garbage in, garbage out. If you have good information, then it will be of more value. So the two softwares I recommend, Monarch, is the one, and right now they have a special. If you're coming from Mint, you can get 50% off, which I just saw, which I thought was, if any of our listeners are interested, the other is you need a budget. There's some people who just love that software. I have not used it, but I feel like it's talked about and very loved by many people. There are different places you can do your retirement projection. Like Tina said, I think most 401K, like the different brokerage houses, Schwab fidelity, they have different tools that you could look at. There's a bank. Yeah. And that's to help you, like Tina said, get information and help hopefully get you on the path of making better decisions and thinking for what you want and what you need. I mean, the other is, do you want an expert? Like, especially as you approach leaving your job. I, I'm biased. This is what I do for a living. But, um, I think, and even I, Nimita and I got one. This is what I do. But I thought it was important for us to get an outside person so both of our voices were heard and to force us to be subjective.
[46:29] Christina Donovan: Yeah.
[46:30] Tara Bansal: And to force us to do the things like that. We weren't doing that. Just didn't feel like. I know they're important yet to actually make it happen. And I think that's where having someone else outside can help with that.
[46:47] Christina Donovan: So if kind of like a personal trainer.
[46:50] Tara Bansal: Yeah. Right. And it is like, you know, you.
[46:52] Christina Donovan: Should be exercising every day and.
[46:55] Tara Bansal: But, yeah, most of us know what to do. And I think with finances, maybe not as many people do know what to do. Right. But some people feel like they do know what to do. Yet are you actually doing it?
[47:12] Christina Donovan: Yeah.
[47:12] Tara Bansal: And that.
[47:13] Christina Donovan: And doing it correctly.
[47:15] Tara Bansal: Right. And so some people just get it for a second opinion. I mean, there are plenty of engineers that have their spreadsheets and they want a second opinion where the wife wants a double check. Like my husband says we're okay. Can you take a look at this? And, yeah, I mean, it's also, you.
[47:36] Christina Donovan: Know, it is in a sense, giving you the idea that you're not the sole responsible person for if something goes wrong. I mean, I have a friend who, like, she made serious mistakes in her investing that have costed. Like, her husband can't retire, you know, as soon as they had hoped. And every time I see her, she brings it up. I mean, it's something that she, I get it. Like, I mean, she lost them hundreds of thousands of dollars and it's like. But yeah, I think, you know, if she had had somebody, maybe then she wouldn't have, it wouldn't just be her and her decisions on the line. Like, there would have been somebody else to kind of share the responsibility because it's a lot, I mean, it is a lot.
[48:38] Tara Bansal: And this is. This is an important part of life. And there's a part like being penny wise and pound foolish, right? Like, I think so many people don't want to spend money on a financial advisor yet. How. I mean, how much value you can get for peace of mind and knowing it's done right and there are economic benefits that. I mean, this one woman had been doing her taxes forever and we recommended she get a CPA and she was so happy, one, to hand it over, but the accountant found a bunch of things that basically paid for them, having the accountant. And that just felt good. Like, one, she was glad not to have to do it anymore, but two.
[49:34] Christina Donovan: It'S funny that she needed. It's almost like she needed permission.
[49:37] Tara Bansal: Yeah, well, that's part of this, right? Like, I mean, I do think so many people, when you think of paying for a financial planner or a financial advisor, they're like, oh, I don't want to spend the money on that. But I can show different things. They can be. It generally does and it's pay for itself. And because people are emotional around money and so they'll have an investment and they'll sell at the wrong time. I mean, we know it's an older couple, but they, you know, during the bubble, they lost half, at least half of all of their. Because they were just taking too much risk and sold out at a bad time. And part of me is like, one, did you have a financial advisor?
[50:31] Christina Donovan: And two, like, did you listen to them? Yeah.
[50:35] Tara Bansal: That is part of this. Like, it's always your money that the financial advisor can give as much advice, but you also.
[50:44] Christina Donovan: You always stay in control.
[50:45] Tara Bansal: Yeah. So if you do want to look for an expert, because I advise widows and different people. Like, how do you find one? And my first recommendation is, if you don't have one, ask other people if they like theirs. And I would interview at least three. Nimit and I did that and we ended up interviewing more than that because I think I'm a tough judge and I was looking for something more. But you want to like and trust and feel good about this person and hopefully it will be a long relationship. It doesn't have to be. I think that's the other is don't feel like this is written in stone, but they should answer your questions. They should treat you with respect. They shouldn't talk down to you, especially if you're a woman. Like, I have the hardest time when I insist that both people and the couple be there. And a lot of times the husbands are like, oh, my wife doesn't want to come. And I'm like, how can she not want to be there? This is her money and her life, too.
[52:00] Christina Donovan: Sure.
[52:01] Tara Bansal: Yeah.
[52:01] Christina Donovan: Yeah.
[52:04] Tara Bansal: That even if part of me is like, even if you don't really want to be there, you should be there. And it's important to have both people there with a voice, with paying attention.
[52:16] Christina Donovan: Yeah.
[52:18] Tara Bansal: I would look for someone with the certified financial planner designation. Are there good planners that don't have that? I'm sure there are, but if you have that designation, you had to go through a lot of work and effort and pass an exam that shows a certain level. And to me, it's like, you made the effort to do that. I think there's some older planners that didn't need to or whatever, but I think more and more, it's a good thing. Fee only. So what fee only means is that they're getting paid only by you and whoever you choose to work with. I think it should be clear and transparent how they're getting paid. Are they getting commissions for things that are being sold to you? Are they? But they should be able to show you and easily explain what so many people, they say. I don't really know what I'm paying my financial advisor, and I'm like, would you do that with anything else? Like, how would you.
[53:33] Christina Donovan: So if somebody is fee based, can they make commission on you or. No, like, if they state that they are fee based.
[53:41] Tara Bansal: So fee based is different than fee only.
[53:44] Christina Donovan: Okay.
[53:44] Tara Bansal: Fee based can take commissions. Can take commissions, and I'm fine with that. I just want people to be open about it is my biggest thing.
[53:55] Christina Donovan: The only is they make no money off of any of the advice that they give you, that it's in your best interest.
[54:02] Tara Bansal: May say that that's a little too extreme, but I. So use your judgment. I think it is the cleanest. But once again, are there really good fee based people? Yes. So, and you want the fiduciary standard. So what that means is in a lot of the big brokerage houses, they're, I'm trying to think what the term is, but it's almost, like, good enough. But the fiduciary standard is they will always put the clients first instead of like, anything else. Yeah. And so that's important. I mean, you want them, and I think a good advisor should be doing that. That is a big deal. And the most important is you want to feel comfortable with them, that you trust them, that just listen to your body, listen to how you feel, and I mean, part of it is you want to look forward. I think finances brings its own big emotions, but you want to like them as people. Like, I enjoy talking to my financial advisor and, and my clients that I love. Like I look forward to talking with them. And I think that's how it should be in my personal opinion. Any questions teen about trying to.
[55:39] Christina Donovan: No, I mean, I think it all.
[55:42] Tara Bansal: And it sounds good. I mean, and I'm going to post in our show notes there's a set of questions that you can ask that can be helpful. So if you are going to interviewing. Yeah. To help you with that also, I mean, a financial plan is not just going to look at the retirement projection. It's going to look at your taxes, it's going to look at your insurance. So both like home and auto, disability insurance, life insurance, and it's going to look at estate. So going to like how much money do you want to leave your kids? And let's take that into account and making sure all areas are, because they all overlap and they all have an impact on each other to some extent. Right. If you're spending a lot in taxes, you have less to save or to work in other ways. So if you can save on taxes, that's beneficial and then just the investments. Right. What is your comfort level so you can sleep at night if your accounts go down. And that is important. So how much risk are you willing to take and what does that look like? So when I say the higher equities are like owning companies in the stock market and then fixed income is generally cds or bonds or a guaranteed percentage. Right. So there's. You don't need. I feel like our financial advisors make things seem more complicated than they need to be, honestly. But you should feel comfortable asking questions and feeling like you're learning, understand all.
[57:51] Christina Donovan: Aspects of your plan and your money. Yeah.
[57:57] Tara Bansal: Yeah. I mean, we've talked more than I thought we were going to, but part of this is feeling comfortable. That's the most important thing about where you are financially and where you're headed and how you are managing your day to day spending and your investments and how, what they're invested in and what that looks like for you. So planning both short term and long term. Yeah. I feel like my mission is I don't want money to be a burden for people. And that's part of my objective, that I don't want people to be worrying about it all the time. I want it to be something that actually feels good and you get to use it in the way you want and enjoy it with some peace of mind, right? Like I think that's part of where I want people to get. So theres also how to spend money in ways that make you happier. One of the exercises I used to do was when you spent money, put like a plus, a minus or a neutral. So one exercise is, its not forever, but for a month try to keep track of how much you spend and it can be literally just writing it down on a piece of paper. Its harder these days I feel like with credit cards and other things but. Or look at your credit card statement at the end of the month and look at when you spent money. Did it feel good? Like I mean I want to spend money to go see my family and that is something. And I also spend a lot of money on like classes and self development that I'm sure not other people would but that's something that I enjoy and feels good to me. I think everybody has different things. Like Morgan Housel's wife, she I guess really is a gardener, but she's like, every time she goes to a nursery, like she's always embarrassed but she's like, I buy a lot of even rocks but she's like, it gives me joy. And that is a choice, right? To notice what you enjoy spending money on. And most people are happier spending money on others. And I'm not saying that to put yourself in debt, but to notice if you just keep your money for yourself. They've noticed. Most people who are happier share their money with others or give it as you know, a way to help others. Trying to think what else the other is. Research shows buying experiences increases your well being instead of material objects. Like if you buy the term like you buy something and then you adjust to it and it doesn't feel that special anymore. Like buying a new car. I think they say generally it lasts like a month and then it becomes your new normal and it doesn't really.
[01:01:41] Christina Donovan: Feel, doesn't bring you joy anymore as much. Yeah, I think it's like a diminishing to me.
[01:01:46] Tara Bansal: Yeah, yeah. And I don't think that's true for everybody. Like I think there's car people that they may totally love it. And Morgan Hausel, he says he's a car person, so he'll like if he goes away on a trip, they rent a super expensive, rare, fun car. And he's like, that scratches my itch that I do it and I love it. But then he's like. And he even questions like, so do I want this? And he's like, then I realize I don't really need it for my day to day. So I thought that was interesting. Yeah.
[01:02:27] Christina Donovan: I don't know. I guess cars are a funny thing, that anytime I get in my car and start it and I'm not worried about anything, is, like, that's success. That brings me joy.
[01:02:39] Tara Bansal: Me too.
[01:02:40] Christina Donovan: Like, I'm not worried about a flat tire or that funny noise or breaking down on the side of the road. I don't know. It's.
[01:02:49] Tara Bansal: I mean, the other is to set up default systems, right, so that you worry less about money, and that can be, like, automatic savings in your 401K. Getting a financial planner that gives you the advice or the peace of mind that you know you're on the right path. Just be on the lookout for things that can help with that, too, and notice where your fears are and what you think may help with that. Right. Like Tina to think of. Okay. Is there a dollar amount where I. I would feel fully comfortable? Yeah, I don't know.
[01:03:30] Christina Donovan: Yeah, I mean, I think these past two episodes, because you talked about it in the last one, too. I mean, I'm definitely getting that budgeting.
[01:03:38] Tara Bansal: Software, and it really works well.
[01:03:43] Christina Donovan: I mean, I've tried to do it on a spreadsheet, and it just. I know. Like, our father uses a spreadsheet. He sent me his spreadsheet that he uses, and, I mean, it obviously works really well for him, but it's not really a good solution for me.
[01:03:58] Tara Bansal: No. And I am amazed our dad is so detail oriented. I can say not many financial planning clients are. No. To the extent. I mean, our dad does of what they spend and how they spend it and things like that. But, yeah, I mean, I'd be interested. I'm happy with the software, and, like, I go in maybe once a week and look at it, and then you categorize it. And to me, it's been so much better than mint was, and I do think has helped us.
[01:04:36] Christina Donovan: So I do also think, I mean, this is just me, but moving from a cashless, moving into a cashless society has helped with budgeting. I know, like, when Matt and I were first married, you know, he would take money out, and I'd be like, well, what'd you spend it on? And he'd be like, I don't know. You know? And I'd ask him to keep his receipts, which was like, maybe a 50 50.
[01:05:05] Tara Bansal: And then you had the effort of.
[01:05:07] Christina Donovan: Like, yeah, but, like, now, I mean, he never uses cash, and, I mean. I mean, I can see everything. It's right on. He uses his debit card everywhere. And, I mean, I get a clear sense of exactly how much he spends. And so, yeah, I do think things like that have made. Should have made budgeting more easier because, you know, you're not tracking down.
[01:05:31] Tara Bansal: Yeah, I'll call myself out, though. I don't like using cash for that reason. And Nimit and I each have our own credit card that we use. And yet, like, looking at my tracking software, Amazon. Right. Like, I have so many things and so then it's like, okay, and I can go back and look at my Amazon thing, but it's just like this huge bucket that is once again another level. But they have shown it's good for keeping track. But there is. People who pay with cash have something. Yeah. It triggers something different. And. And I do think people, you just swipe and it doesn't register.
[01:06:21] Christina Donovan: It doesn't register.
[01:06:22] Tara Bansal: Yeah. So people who have spending issues, that is what they recommend is because you.
[01:06:28] Christina Donovan: Actually see the money leave your hand. Yeah.
[01:06:32] Tara Bansal: It's to do like the old fashioned envelope system where you have the money for the week and that's what you use. I think it's hard because a lot of places now don't take cash, especially.
[01:06:44] Christina Donovan: Since COVID I think that that, more than anything, really pushed cash out. I'm always surprised when I go in a place and they say, no, cash, we don't take cash.
[01:06:55] Tara Bansal: I mean, the ballparks don't take cash, the amusement parks don't take cash. It's. Yeah. All right, well, this. We would love your questions, we'd love your feedback. I hope this gave at least some value on things to think about or things to consider. And I'm here, Tina's here. We'd love to hear what you think. And we're going to move on. There's just one more class for those of you who are like, how much longer is this class going on? But there's one more class around, like community and well being that we're going to talk about next. So that's what's coming up. And the home play is really more about just paying attention. Like, you can. I'll send out, like, you can create your own net worth statement or try looking at your retirement projection if you're up for that. But I'd recommend tracking your spending for some time and even go to. Is it a positive emotional response, negative or neutral? And just notice. Yeah.
[01:08:12] Christina Donovan: I've never heard that exercise before and that I'm very curious to try.
[01:08:18] Tara Bansal: Yeah. Because, like. And that's where Morgan Housel's wife, like, she's like, generally she hates spending money, but when she goes, it shows that that's something that she really loves and enjoys.
[01:08:30] Christina Donovan: Yeah.
[01:08:31] Tara Bansal: So, all right, till next time. Be well.
[01:08:34] Christina Donovan: Thank you everyone. Thank you, Kara.
[01:08:38] Christina Donovan: I am not sure if it is just my age and stage of life, but it seems impossible not to be inundated by all things related to retirement. It is a big word and it is everywhere. I hear it on tv ads, I see articles in major newspapers almost daily, and don't even get me started on social media. But for all this talk about retirement, I think especially for those of us who are uninitiated, there is a layer of mystery and yes, unease or fear around it. And I think it's specifically because of the financial side or the money side of it. We hope today's episode helped dispel some of this mystery and we were able to give you some insights, tools and resources to assist you with the practical financial side of your retirement planning. Again, as we have tried hard to emphasize in the previous timeless happiness episodes, the important thing is to just begin. Whether it is creating your own net asset statement, researching a financial planner, or just plugging numbers into the various retirement tools provided on the web, these small steps can have a huge impact. Please reach out to us with comments or questions about your own financial planning and retirement. We would love to hear from you and be sure to check out all the resources that we've posted in our show notes. See you next time.
[01:10:18] Tara Bansal: For show notes and other information about our podcast, please go to our website, messymiddlescence.com. If you enjoyed listening, please share with others and come back for more.
Our quote today is from Morgan Housel. “More than your salary, more than the size of your house, more than the prestige of your job, control over doing what you want, when you want to, with the people you want to is the broadest lifestyle variable that makes people happy.”
-
Class 3 Timeless Happiness Slides
Link to pdf of Timeless Happiness Class 3 Homeplay
Class 4 Timeless Happiness Slides
Fiduciary versus Suitability Standard
Budgeting or Spending Tracking Software Tara uses is Monarch Money. The other one she mentions is You Need a Budget (www.ynab.com)
The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel
Link to Tara’s Blog Post on Chapter 13 from The Psychology of Money by Morgan Housel, “Room for Error”
10 Questions to Ask When Interviewing Financial Advisors
More Questions to Ask Potential Financial Advisors
Scroll down on this page to see: The Soul of Money: Transforming your Relationship with Money and Life by Lynne Twist
Link to Blog Post Tara wrote about The Soul of Money
Information on George Kinder and the Kinder Institute of Life Planning
Interview and Podcast with George Kinder discussing his 3 Questions: George Kinder: Three Guiding Questions To Reveal Your Fulfilling Retirement