00:00:00
Welcome to personal finance for
00:00:02
long-term investors, where we believe
00:00:04
Benjamin Franklin's advice that an
00:00:06
investment in knowledge pays the best
00:00:08
interest both in finances [music] and in
00:00:10
your life. Every episode teaches you
00:00:12
personal finance and long-term investing
00:00:14
in simple terms. Now, here's your host,
00:00:18
Jesse Kramer. Welcome to Personal
00:00:20
Finance for long-term investors, episode
00:00:22
129. I'm Jesse Kramer. By day, I work at
00:00:24
a fiduciary wealth management firm
00:00:25
helping clients nationwide. You can
00:00:27
learn more at bestinterest.blog/ blog
00:00:29
back/work. The link is in the show
00:00:30
notes. By night, I write the best
00:00:32
interest blog and I host this podcast.
00:00:34
[music] I also put out a weekly free
00:00:36
email newsletter, all of which help busy
00:00:38
professionals and retirees avoid
00:00:39
mistakes and grow their wealth by
00:00:41
simplifying their investing, their
00:00:42
taxes, and their retirement planning. By
00:00:45
the way, what is financial planning? Is
00:00:47
it just a a fancy word that people throw
00:00:49
around for investing? What does a
00:00:50
financial planner actually do? What does
00:00:52
the financial planning process look like
00:00:54
in detail? Those are the kind of things
00:00:56
we're going to be diving into detail
00:00:58
today on today's AMA episode. Thanks to
00:01:00
great questions from listeners like you.
00:01:02
Before we get into that topic though, we
00:01:03
do have a quick review of the week from
00:01:05
Nick Reviewer 77. And Nick says, "Top
00:01:08
tier finance education podcast. Jesse
00:01:11
has a knack for making even the most
00:01:12
difficult and complex financial topics
00:01:14
easier to learn and understand. He
00:01:16
covers great topics and has on fantastic
00:01:19
guests. I especially liked his recent
00:01:21
episode with Andy Hill. Well, Nick,
00:01:23
thank you for the kind words. I'd be
00:01:24
happy to send you a super soft t-shirt.
00:01:26
Just shoot me an email to
00:01:27
00:01:29
And by the way, listeners, that episode
00:01:30
that he referred to with Andy Hill, that
00:01:32
was episode 123123.
00:01:35
And now, let's get going with the AMA,
00:01:37
the basics of financial planning. That's
00:01:38
kind of what I'm calling this in my
00:01:40
head, but we'll get into some serious
00:01:41
detail. It's not that basic. And we
00:01:43
start with a great question from Mary.
00:01:45
And Mary's question is, are a portfolio
00:01:47
and a financial plan the same? I mean,
00:01:50
it's just a terrific question. A great
00:01:51
way to start this episode, Mary. I think
00:01:54
it's easy to think that a portfolio and
00:01:56
a financial plan are the same thing.
00:01:57
They're certainly not. But the
00:01:59
misunderstanding totally makes sense.
00:02:01
And I think this misunderstanding
00:02:02
exists, you know, in in everywhere you
00:02:04
look really. And the main reason why or
00:02:06
at least one of the main reasons why is
00:02:09
because the most popular personal
00:02:11
finance topics that you see on the
00:02:13
internet, in books, in print journalism,
00:02:16
anywhere, the most common topics are
00:02:18
budgeting one and investing two. I mean,
00:02:21
investing is for sure one of, if not the
00:02:25
single biggest topic. I think the term
00:02:27
financial planning doesn't often get
00:02:29
used when someone is just starting out
00:02:30
and putting together their budget. You
00:02:32
know, that's not really where financial
00:02:34
planning gets applied, but then suddenly
00:02:36
you're introduced to investing and you
00:02:38
start hearing this phrase financial
00:02:39
planning. And I'm happy to, you know,
00:02:41
confess that I certainly use the term
00:02:43
financial planning without always
00:02:44
explaining it. So, we don't hear the
00:02:46
explanation of what financial planning
00:02:48
is. We hear it associated with the idea
00:02:50
of investing and next thing you know we
00:02:52
think that investing and financial
00:02:53
planning are one and the same kind of
00:02:56
100% overlapped with each other. By the
00:02:59
way, I actually conferred with some of
00:03:00
the the AI large language models, you
00:03:02
know, chat, GBT, Gemini, those guys. And
00:03:05
I asked them actually to scour the
00:03:07
internet and rank the most popular
00:03:08
personal finance topics. And they came
00:03:11
back to me and said, "Number one,
00:03:12
budgeting and saving. Number two,
00:03:14
investing. Three, retirement planning,
00:03:17
then debt management and credit, taxes
00:03:19
and tax planning, emergency funds and
00:03:21
financial safety nets, insurance and
00:03:23
risk management, financial goal setting
00:03:26
and planning, estate planning and wealth
00:03:28
transfer, and last was banking and
00:03:30
financial products like accounts,
00:03:31
mortgages, and loans. So, are they
00:03:33
right, are they wrong? I'm not sure. But
00:03:34
the point is that investing is a topic
00:03:36
that gets talked about a ton. After all,
00:03:38
who doesn't enjoy the idea of
00:03:39
multiplying their money? Who doesn't
00:03:40
want to turn $1 today into $10 tomorrow,
00:03:44
I suppose, as long as tomorrow as 30 or
00:03:46
40 years from now? Investing is cool,
00:03:48
right? Investing is cool. And investing
00:03:50
is certainly necessary. It's very
00:03:52
important. It's definitely part of
00:03:53
financial planning. So, that's a big
00:03:55
reason why investing gets so much press.
00:03:57
And allow me to be a little bit meta
00:03:59
here. Investing is where the money is.
00:04:02
Literally, the US stock market is at $62
00:04:05
trillion of value. As I write this, the
00:04:07
whole world, the global stock market is
00:04:09
about double that, on the order of $125
00:04:11
trillion in value. That's a lot of
00:04:13
money. And if you can tap into that pool
00:04:15
of money in some way, wow, do you open
00:04:18
some doors. Perhaps you're an individual
00:04:19
investor like many of you listening.
00:04:21
Maybe you run a TV channel like CNBC or
00:04:24
a service like Bloomberg or you run a
00:04:26
brokerage like Fidelity or Vanguard. You
00:04:28
work as a stock broker on commissions or
00:04:30
the list goes on. But when you're
00:04:31
tapping into trillions of dollars, even
00:04:34
in some small way, you might have a
00:04:36
vested interest. You do have a vested
00:04:37
interest to make this thing investing,
00:04:40
you know, seem important. A vested
00:04:42
interest to get people to care, to pay
00:04:43
attention, to participate, to compete,
00:04:46
to win. And one of the results from this
00:04:48
line of thinking is that there are many
00:04:49
lay people who out there, they think
00:04:50
investing is the thing, right? Investing
00:04:53
is the thing. That's what I've been led
00:04:55
to believe. I've been led to believe it
00:04:56
by Bloomberg and by CNBC and by the Wall
00:04:58
Street Journal. All these people are
00:05:00
talking about investing like it's the
00:05:02
most important thing. And my profession,
00:05:03
the the professional financial services
00:05:05
industry, hasn't exactly done too much
00:05:07
to avail itself of that reputation. For
00:05:10
decades and decades, the financial
00:05:12
services industry meant exactly two
00:05:13
things. It meant people slinging
00:05:15
insurance products for commissions. And
00:05:17
it meant stock brokers slinging the hot
00:05:19
stock picks again for commissions.
00:05:22
Retirement planning or digging into your
00:05:24
cash flow or estate planning, when to
00:05:25
claim social security, right? That was
00:05:27
so far down the priority list for most
00:05:29
financial adviserss that it literally
00:05:31
never came up. Even today, despite
00:05:32
everything we know, and I mean
00:05:34
everything you and I know about the
00:05:36
world of investing, the average
00:05:38
financial adviser is still leading with
00:05:40
either a product like whole life
00:05:41
insurance or an annuity or they're
00:05:43
leading with investment management. You
00:05:45
know, we build a better portfolio than
00:05:47
the other people. The vast vast minority
00:05:50
of financial planners and financial
00:05:51
adviserss lead with some sort of process
00:05:54
instead of a product. aka let's actually
00:05:57
build a financial plan together before
00:05:59
we for example make investment decisions
00:06:01
for you. Something like about 10% of the
00:06:04
industry operates under some sort of fee
00:06:06
only management structure. The other 90%
00:06:08
is in some form working off a commission
00:06:10
or incentivized to sell a specific
00:06:12
product or a product set. And that 9010
00:06:14
split, it's not a perfect model to
00:06:16
separate the good planning focused
00:06:18
advisers from the others, but it is a
00:06:21
decent place to start because if someone
00:06:22
is in that 90% incentivized to sell
00:06:25
certain products, there's a better
00:06:26
chance that any sort of financial
00:06:28
planning they offer is going to be
00:06:30
steered toward that particular product.
00:06:32
And that right there, that's the whole
00:06:34
reason why are you a fiduciary? That's
00:06:36
why it's a good question to ask because
00:06:38
at the very least, that's not a perfect
00:06:39
filter. I've talked about that here
00:06:41
before, but it's a solid filter. It's a
00:06:43
good place to start. But anyway,
00:06:44
digressing a little bit back to the
00:06:45
program. I get why the world thinks that
00:06:48
investing is the main course, right? I
00:06:50
get why people think that investing is
00:06:51
financial planning. But here's a
00:06:53
definition of financial planning that I
00:06:55
love and I think it goes way beyond just
00:06:57
investing. A very simple definition is
00:07:00
that a financial plan aligns your money
00:07:02
with your life. A more nuanced
00:07:04
definition is that a financial plan
00:07:06
aligns the many elements of your
00:07:08
personal finances and it aligns them
00:07:10
with your goals and your desires and
00:07:12
your dreams. A portfolio alone does not
00:07:14
do that, right? An index fund alone
00:07:16
certainly does not do that. So, think of
00:07:18
this. I I like to dive into some
00:07:20
questions that a financial plan does
00:07:22
answer, but that a portfolio does not
00:07:24
answer. So, here's the first one. Can I
00:07:26
actually afford my lifestyle now and in
00:07:28
the future? A financial plan will model
00:07:30
cash flows and spending and inflation
00:07:32
and income to answer whether your
00:07:34
lifestyle is sustainable over decades.
00:07:37
How about uh when can I safely stop
00:07:39
working or at least when can I start to
00:07:40
work less? A good financial plan
00:07:43
connects savings rates and future income
00:07:45
needs and future tax needs and longevity
00:07:47
risk to determine some sort of realistic
00:07:50
retirement timing or realistic glide
00:07:52
path timing. how much risk do I need to
00:07:55
take instead of just kind of how much
00:07:57
risk do I need to tolerate. A financial
00:07:59
plan should measure the required rate of
00:08:01
return of a portfolio and shows whether
00:08:03
aggressive or conservative investing is
00:08:05
mathematically necessary. And the list
00:08:08
goes on from there. You know, where
00:08:09
should each dollar be saved or invested
00:08:11
and why? How much can I safely spend
00:08:13
each year without running out of money?
00:08:14
How will taxes impact my wealth over my
00:08:17
lifetime? Are my insurance decisions
00:08:19
right? Insurance, is it protecting my
00:08:21
plan or is it actually harming my plan?
00:08:23
What happens with my money when I'm
00:08:24
gone, when I die? And is that aligned
00:08:26
with my wishes? In that list of
00:08:28
questions, we've aligned the personal
00:08:30
financial ecosystem of a person and in
00:08:32
some way we've thought about their
00:08:33
goals, their dreams, their desires, and
00:08:35
and the timeline to get there. We're
00:08:37
thinking about cash flow both today and
00:08:39
in the future. We're thinking about all
00:08:41
sorts of different risks and how to
00:08:42
mitigate them. We're thinking about
00:08:44
work. We're thinking about retirement.
00:08:45
We're thinking about death. We're
00:08:47
finding the balance between some
00:08:48
different options to get people from not
00:08:50
only A to B, but also maybe to C and to
00:08:53
D and maybe a little bit to F2 if they
00:08:55
want. Now, many of those questions, all
00:08:57
those questions can lead to answers that
00:08:59
then get incorporated into portfolio
00:09:01
decisions. Absolutely. This whole
00:09:04
example, it's a little bit like saying,
00:09:06
is a meal the same thing as a diet? And
00:09:08
is a diet the same thing as a healthy
00:09:10
lifestyle? I bet most of us might
00:09:12
answer, well, you know, good nutrition
00:09:13
is certainly part of a healthy lifestyle
00:09:15
and and one healthy meal is this small
00:09:18
but solid building block into good
00:09:20
nutrition, but we should still
00:09:22
differentiate between one healthy meal
00:09:25
and a complete healthy lifestyle.
00:09:27
Similarly, I'm going to say that, you
00:09:28
know, a lowcost, broadly diversified
00:09:30
index fund, that's a great building
00:09:32
block of just about any good portfolio.
00:09:34
And I would also say that investing and
00:09:36
portfolio management and all the little
00:09:37
assorted investing topics like
00:09:39
rebalancing and gain harvesting and
00:09:43
those are all important aspects of
00:09:44
financial planning. Absolutely 100%. But
00:09:47
a portfolio is not the same as a full
00:09:49
financial plan. So awesome question,
00:09:51
Mary. Here's a quick ad and then we'll
00:09:54
get back to the show. Every January we
00:09:55
make the same promises. Eat better, work
00:09:57
out, read more books, and of course
00:09:59
something about money. You know, this
00:10:01
year is the year I finally get my
00:10:03
retirement plan organized. Personal
00:10:05
financial planning is one of the most
00:10:06
common resolutions out there. So, if
00:10:08
2026 is a year you want real clarity,
00:10:11
serious financial planning, a full
00:10:12
review of your complex financial
00:10:14
picture, or just someone to help you
00:10:15
make good decisions with confidence, I'm
00:10:17
currently accepting new clients. You can
00:10:19
head to bestinterest.blog/work
00:10:21
and fill out the short form. Let's make
00:10:23
better finances the resolution that
00:10:25
actually sticks this year. And let's
00:10:28
continue this topic as we pivot to Bob.
00:10:30
Bob asked, "Jesse, we're pretty far
00:10:32
along in our financial plan. At least I
00:10:34
like to think so, but my two kids are
00:10:35
mid 20 years old and at the other end of
00:10:38
the spectrum. I'm encouraging them to
00:10:39
start investing and they are listening.
00:10:41
But where else would you recommend they
00:10:43
focus their financial energy?" And I
00:10:45
picked this question out because it
00:10:46
allows us to continue talking about
00:10:48
financial planning process, but Bob's
00:10:50
children give us um like a blank slate
00:10:52
to work from. So, let's think about
00:10:54
building a financial plan from scratch.
00:10:56
And rather than saying Bob's kids a
00:10:57
million times in this answer, I'm just
00:10:58
going to be talking to you, the
00:10:59
listeners. And and quickly before I get
00:11:01
into this answer, I'm also going to give
00:11:03
a shout out to John from Pittsburgh.
00:11:04
John wrote in and asked, "Jesse, as an
00:11:06
engineer, I feel like you probably have
00:11:08
a system or a process in your head when
00:11:10
you're working on a client's financial
00:11:12
plan. Do you mind sharing that on an AMA
00:11:14
or is that spilling the secret sauce?"
00:11:16
So, John, great question. It aligns very
00:11:18
much with uh Bob's question about his
00:11:20
kids. So, I'm going to walk through my
00:11:21
financial planning process here, helping
00:11:23
both Bob's kids and John from Pittsburgh
00:11:25
and you, the listeners. Now, I'm an
00:11:28
engineer at heart. I'm a numbers guy,
00:11:30
and my brain is naturally wired to dive
00:11:32
into the numbers first. But I would
00:11:34
really encourage you to start a little
00:11:36
bit with the soft side. You know, this
00:11:38
doesn't have to be some sort of deeply
00:11:40
personal philosophical meditation, but
00:11:43
in simple terms, I would ask you to ask
00:11:45
yourself, what's the big goal? You know,
00:11:47
what's the point? Why are you working
00:11:49
hard? Why are you saving money? Why are
00:11:51
you listening to this podcast in the
00:11:53
first place? Right now, at the end of
00:11:54
the day, there's a there there, as they
00:11:56
say, there's a real substance. There's
00:11:58
meaning or significance behind why
00:12:00
you're doing this. Now, being honest,
00:12:02
the most common answer that I hear from
00:12:04
you all and and the answer that I
00:12:05
receive in my financial planning
00:12:07
practice, it usually has to do something
00:12:09
with a comfortable retirement or some
00:12:11
version of a comfortable retirement. The
00:12:13
goal is to set oneself up to live, you
00:12:15
know, decades of of a good retirement.
00:12:17
But that's certainly not the only
00:12:18
answer. I literally had lunch today with
00:12:20
a a great couple and right now they're
00:12:22
at a point in their life where their
00:12:24
biggest one and two goals involve buying
00:12:28
what they hope to be their forever home
00:12:30
and paying off medical school debt. Like
00:12:32
those are the big two things that they
00:12:34
want to get done right now. Number three
00:12:36
somewhere in there is retirement
00:12:37
planning and and they they know it's
00:12:39
important and they know that long-term
00:12:40
investing is important and they do want
00:12:42
to get started on that, but that's not
00:12:44
their number one goal right now. They're
00:12:45
a younger couple recently, one of them's
00:12:47
recently out of medical school. And
00:12:49
yeah, so the goal doesn't have to be
00:12:51
retirement. And I think it was really
00:12:52
good and really important that we
00:12:54
grounded their conversation with that
00:12:57
first before we really even got into too
00:12:58
many numbers. Um, and right, so
00:13:00
retirement isn't the only answer. Maybe
00:13:02
you have a goal around helping your
00:13:03
kids. Um, maybe you want to gift them
00:13:05
money while you live or after you die.
00:13:07
Maybe you have a big goal of just
00:13:08
reducing your financial stress and your
00:13:10
financial fragility, you know, as soon
00:13:11
as you can while you're still in your
00:13:13
working years. Maybe you have lifestyle
00:13:15
goals. You know, maybe that's really the
00:13:16
thing that drives you. You want to see
00:13:18
the world. You want to golf 100 times a
00:13:20
year. You want to spend the summers in
00:13:22
your camper van. Maybe you want one
00:13:24
spouse to be able to stay home with the
00:13:25
kids while the other spouse works. And
00:13:27
you need your finances in such a way so
00:13:29
that you can kind of back into that end
00:13:31
goal. Maybe you want to start a small
00:13:33
business. Maybe you want to figure out
00:13:35
what to do with all the RSUs that your
00:13:37
big tech job keeps giving you. I've got
00:13:39
one client who I think wants to worship
00:13:41
at the feet of Ein Rand and pay no taxes
00:13:43
for the rest of of their life. You want
00:13:45
to reach Coast Fi or Barista Fi or
00:13:48
Chubby Fi or maybe some combination of
00:13:50
all three. You know, Chubby Coast to
00:13:51
Barista FI, which I imagine is like a a
00:13:54
former defensive tackle slinging lattes
00:13:56
in Santa Barbara. That's chubby coast
00:13:59
barista fi. But the point is when you
00:14:01
start your financial plan, you want to
00:14:02
have some idea of what you're working
00:14:04
towards. It's like Creed from The Office
00:14:06
when he asks,
00:14:07
>> "If I can't scuba, then what's this all
00:14:10
been about? What am I working toward?"
00:14:12
>> You want to know what it's all about.
00:14:14
You want to know what you're working
00:14:15
toward. That's your first job. And I
00:14:17
think it's cool to be a little critical.
00:14:19
I'm working with a family, for example,
00:14:20
who when I first spoke with them, they
00:14:22
said, "Our goal is to retire with $10
00:14:24
million in investable assets outside of
00:14:26
their home, $10 million." And yeah,
00:14:28
that's certainly a goal. But I was genu
00:14:31
like it just made me curious the way
00:14:32
they kind of um stated their goal. And
00:14:34
so I really wanted to know surely some
00:14:36
thought went into that number. How did
00:14:38
you guys arrive at $10 million? Why that
00:14:41
number? And the answer was well that's
00:14:44
puts us in about the top 1% of
00:14:46
households. So then I asked another
00:14:48
question. Well, okay, yeah, fair enough.
00:14:50
But like why why exactly do you want to
00:14:52
be in the top 1% of households? In my
00:14:54
mind, I was wondering is this
00:14:55
competition? And is that really the
00:14:57
family's underlying motivation? But the
00:14:59
answer in actuality was, well, we figure
00:15:02
if we're in the top 1% and we can't
00:15:04
retire comfortably, then nobody can
00:15:06
retire comfortably. So, if we achieve
00:15:08
that top 1% net worth level, then we'll
00:15:11
be comfortable kind of by definition.
00:15:13
So, you see what happened there? As
00:15:14
we're peeling back the layers of the
00:15:15
onion, the real goal wasn't really $10
00:15:18
million. The real goal was to retire
00:15:20
comfortably. And even then, that might
00:15:22
not be the true center of the onion for
00:15:24
them because what exactly does
00:15:25
comfortably mean? I'd argue it's kind of
00:15:27
a subjective term that every family
00:15:29
defines a little bit differently. Are
00:15:30
they retiring to a particular level of
00:15:33
comfort? Are they more concerned about
00:15:34
running from a certain level of
00:15:36
discomfort? Because I'll tell you this,
00:15:37
some people say, "Hey, Jesse, we want to
00:15:40
retire to the lake." But other people
00:15:41
say, "I just don't want to have to be a
00:15:43
part-time cashier at Wegman's out of
00:15:45
desperation." Right? The first family,
00:15:47
they're retiring to a particular
00:15:49
lifestyle at the lake. The second family
00:15:51
simply wants to avoid what they see as a
00:15:53
negative outcome. And those are very
00:15:55
different mindsets. Those are different
00:15:56
goals and both of those people might say
00:15:59
something like, "I need 10 million to
00:16:01
achieve my goal, but the underlying
00:16:03
financial mindset and and goal setting
00:16:05
is pretty different in those two
00:16:06
situations. So again, I encourage you to
00:16:08
to be your own critic and uh find the
00:16:10
center of the onion, if you will, or to
00:16:12
sit with your spouse or sit with a best
00:16:14
friend. Ask them to interrogate your
00:16:15
thoughts. Why? Why? Why? It makes me
00:16:17
think there's the one rule out there to
00:16:19
ask why five times and you'll discover
00:16:21
the real reason for something." I think
00:16:22
that's worth doing here. Uh, and again
00:16:24
going back to the original question,
00:16:26
let's say you've asked why enough to
00:16:27
define why you're doing this. What am I
00:16:30
working toward? And next, we need to get
00:16:32
into the numbers. So, I always start
00:16:34
with what I call the big four. Your
00:16:36
assets and your debts, your income and
00:16:38
your spending. Your assets minus your
00:16:40
debts, they go on a balance sheet or net
00:16:42
worth statement. Your income minus your
00:16:44
spending. That leads us to net cash
00:16:46
flow. And that's the foundation from
00:16:47
which everything else flows. From there,
00:16:50
I'd like to go a little bit deeper into
00:16:51
the the current snapshot of what's going
00:16:53
on. I want to review things like your
00:16:55
current account statements from any
00:16:56
investing accounts where I look for
00:16:58
things like investment allocation and
00:17:00
security selection. I'd want to look at
00:17:02
your most recent tax return so I can
00:17:03
understand more about the money that
00:17:05
moves into and out of your life in a
00:17:06
typical year. Uh your insurance details
00:17:08
so I can understand what risks are
00:17:10
occurring in your life. Your estate plan
00:17:12
so I can understand what happens upon
00:17:14
your untimely passing. and also kind of
00:17:16
what some of your underlying motivations
00:17:17
are and and to make sure that what
00:17:20
you've told me out loud actually matches
00:17:22
what's going on in your estate plan.
00:17:23
You'd be surprised how many times
00:17:25
someone says, "Yeah, you know, it's all
00:17:26
going to the kids." And it's like, well,
00:17:28
your will still says it's going to your
00:17:30
wife, so you might want to address that.
00:17:32
Anyway, once I feel like I have a good
00:17:33
grasp of the current snapshot of
00:17:35
someone's life, I then want to
00:17:37
understand how that snapshot will change
00:17:39
over time. And I know that your crystal
00:17:41
ball is as foggy as mine. But in terms
00:17:43
of your life, you do know more about
00:17:45
that than I do. So, you know, you know
00:17:47
the conversations you've had with your
00:17:48
spouse. You know about that recurring
00:17:51
anxiety dream that wakes you up too
00:17:52
often. You know about what all your
00:17:54
friends are doing, how they're all doing
00:17:55
the cool thing, and you've been thinking
00:17:57
about doing the cool thing, too. So,
00:17:58
some interesting typical examples might
00:18:00
be, you know, you know that your career
00:18:02
is going to change in some big way,
00:18:04
likely affecting your income. You know,
00:18:06
your family will change, affecting how
00:18:07
you spend money, how you save. affecting
00:18:10
your insurance needs, affecting your
00:18:11
estate plan. That's really a big one.
00:18:13
You know, you're going to receive an
00:18:14
inheritance someday, maybe soon, and
00:18:16
that'll inject a bunch of assets you
00:18:18
never really considered before. You
00:18:19
know, you'll get married or maybe
00:18:21
unfortunately, you know, you'll get
00:18:22
divorced. You know that you're getting
00:18:24
sick, that you are sick, and that that
00:18:26
maybe will get worse. It's chronic over
00:18:28
time. You'll hit a certain age and be
00:18:30
forced to slow down either because
00:18:32
that's just the way the rules are
00:18:33
written. You know, maybe at a law firm,
00:18:35
you have to retire by 60 at your
00:18:37
particular law firm. Okay, that's
00:18:38
interesting. Or you're a contractor.
00:18:40
You're a physical laborer in some way
00:18:42
and you know you can't really work until
00:18:44
you're 75. Here's a pretty common one
00:18:46
that affects retirees or even some
00:18:48
pre-retirees with grown kids is that
00:18:50
people in your life will move and you
00:18:52
know that you'll want to follow them.
00:18:53
It's pretty common to hear of empty
00:18:55
nesters who say, "Yeah, well, three of
00:18:56
my four kids ended up in Sacramento, so
00:18:58
we're moving to Sacramento." The point
00:19:00
is that your life is dynamic and the
00:19:01
numbers in your financial plan will
00:19:03
certainly be dynamic, too. you know that
00:19:05
about better than anyone else. Even if
00:19:07
you aren't precisely sure, that's okay.
00:19:09
Any color that you can provide in terms
00:19:11
of how your current state might change
00:19:13
over time, that's really good to know.
00:19:16
And then we start to look at things
00:19:17
like, you know, if you're saving enough
00:19:18
to hit your goals on time, if you've
00:19:20
invested in a manner appropriate for the
00:19:22
timelines to your goals. We look at your
00:19:24
tax situation from now until, you know,
00:19:26
the end of time, the end of your life,
00:19:27
and determine if you're set up in a way
00:19:29
to minimize your lifetime tax bill as
00:19:30
best we can or if we need to make some
00:19:32
changes there. We make sure you're
00:19:34
properly insured against the various
00:19:35
risks in your life. We make sure that
00:19:37
your estate plan matches up with what
00:19:39
your wishes actually are. And with all
00:19:40
those kind of numbers on the table, the
00:19:42
current snapshot and at least a little
00:19:44
understanding of how that snapshot might
00:19:46
change over time, the next step really
00:19:48
is to fill in the gaps. And you know,
00:19:50
what are some of those gaps? Well, how
00:19:52
do you get from your current state to
00:19:54
the point where you achieve your goals?
00:19:56
How much do you need to save? How should
00:19:58
you appropriately invest those savings?
00:20:00
And why? What are the major risks that
00:20:02
you're currently exposed to that either
00:20:03
you're not aware of at all or that you
00:20:05
are aware of but simply haven't
00:20:07
addressed sufficiently? Where are the
00:20:09
leaks? Right? Frivolous spending,
00:20:11
insufficient tax planning, poor kind of
00:20:13
subpar investment choices. In short, we
00:20:16
want to identify a whole slew of edits
00:20:19
and changes and recommendations to what
00:20:22
you're currently doing. And then you
00:20:24
need to implement those changes. Some of
00:20:26
those changes can be implemented
00:20:27
immediately. Some take time. Some might
00:20:30
take an introduction to another
00:20:31
professional to help you out. Some might
00:20:33
take, you know, months if not years of
00:20:35
conversations internally, right, with
00:20:37
your spouse, with your family, things
00:20:38
like that. Everyone's list on in in
00:20:41
terms of the changes and how to
00:20:42
implement those changes. Everyone's list
00:20:44
is going to look unique to them. It's
00:20:46
actually kind of fun, pretty cool. And
00:20:48
you might go through the process, and
00:20:49
this is just like an example of some
00:20:51
things that honestly it's probably from
00:20:53
like the last month of work alone that
00:20:55
you could go through the process and see
00:20:57
that, oh, you need to start saving an
00:20:58
additional $500 a month, which really
00:21:01
means you need to start spending $500 a
00:21:03
month less, and you need to determine
00:21:04
where that $500 a month is going to come
00:21:06
from. You just realize that, man, your
00:21:08
your spouse could open and start
00:21:10
contributing to a Roth IRA right away,
00:21:12
and there's no reason for him not to
00:21:13
have one. You need to start putting $200
00:21:16
a month into a syncing fund like a high
00:21:17
yield savings account to pay for your
00:21:19
annual camping trip. You need more term
00:21:21
life coverage. You know, at least a
00:21:23
million dollar policy over the next 15
00:21:25
years. And you should probably speak to
00:21:26
a independent life insurance broker or
00:21:28
go, you know, shop around yourself for
00:21:30
that coverage. Uh you find out that your
00:21:32
estate documents are outdated because
00:21:34
now you have multiple children and
00:21:36
multiple grandchildren and you need to
00:21:38
review those with an attorney. you find
00:21:40
out your investment allocation is way
00:21:42
too conservative and you need to make
00:21:43
immediate changes to all your qualified
00:21:45
accounts, but you probably won't take
00:21:47
any action in your taxable account until
00:21:49
the fourth quarter of this year. And
00:21:51
then you're going to look at your tax
00:21:52
projection at that time and you'll kind
00:21:54
of rebalance accordingly. Then you need
00:21:57
to ask your spouse's parents about their
00:21:58
inheritance planning. They've been vague
00:22:00
before and clarity there would be really
00:22:02
helpful to you because it's kind of a
00:22:04
touchy subject. Like those are all the
00:22:06
kind of uh action items or
00:22:08
implementation items that can fall out
00:22:10
of the financial planning process and
00:22:12
you put a plan together to implement
00:22:14
those changes. Changes to your
00:22:16
portfolio, changes to your documents,
00:22:18
changes to your spending habits, to your
00:22:19
saving habits, on and on and on. That's
00:22:22
what deep dive financial planning looks
00:22:24
like. It is more than build a portfolio.
00:22:26
It is more than start buying index
00:22:28
funds. But back to Bob's question about
00:22:30
his mid20s children. I narrowed it down
00:22:33
to four big things that I would
00:22:35
recommend young adults earlier in their
00:22:38
career focus on. Like eventually you can
00:22:40
get to estate planning early on. I would
00:22:43
one get in the habit of measuring your
00:22:45
spending. Know how much money leaves
00:22:48
your life every month. It does not mean
00:22:50
that you have to budget. It just means
00:22:51
that you're aware of how much money is
00:22:53
coming in which everyone is usually
00:22:55
aware of because they know what their
00:22:56
salary is. But you have to become aware
00:22:58
of how much money is going out of your
00:23:00
life on a monthly basis. That's the
00:23:02
first one. The second one I would say is
00:23:04
think about those goals. Again, the
00:23:05
exercise can take the form of some deep
00:23:08
intertwined philosophical process. Why
00:23:11
am I here? What is this all about? Is it
00:23:13
about scuba?
00:23:13
>> If I can't scuba, then what's this all
00:23:16
been about? What am I working toward?
00:23:18
>> But it can also be really simple. It can
00:23:20
sound something like, I'm 25 years old
00:23:22
and I'd love to spend a few hundred a
00:23:24
month on fun things, but also I would
00:23:27
like to save twice as much as I spend on
00:23:29
fun things for the long run. I'm not
00:23:31
even sure why I need to save that much
00:23:32
yet, but I just want to start saving
00:23:34
because it feels like a good thing to
00:23:36
do. I think that's fine. I think that's
00:23:38
a fine goal, a fine thing for a
00:23:40
25-year-old person to say. So, the
00:23:42
second thing was to think about some of
00:23:43
those goals. The third thing is yes,
00:23:46
start investing now. Even in small
00:23:47
amounts, even if only in a couple
00:23:49
accounts, likely an employer retirement
00:23:51
account like a 401k and perhaps a second
00:23:54
one like a Roth IRA or a taxable
00:23:55
account. And even if it is just one
00:23:57
simple index fund, the the reason why
00:24:00
we're investing here isn't because it's
00:24:02
in alignment with some kind of grand
00:24:04
master financial plan. It's simply to
00:24:07
get some skin in the game and start
00:24:08
learning about the process of investing.
00:24:10
I think that's important. And I also
00:24:12
think it's important just to start,
00:24:13
right? get some sort of compounding
00:24:14
working early. You can figure out some
00:24:17
of the finer details later on. That is
00:24:19
totally okay. And the fourth one, we'll
00:24:21
have a little pop quiz here. The pop
00:24:23
quiz is what asset do all young people
00:24:25
have huge amounts of? And if you're
00:24:28
thinking time, you're on the right
00:24:30
track. I would call it human capital.
00:24:32
The economic value of a worker's skills
00:24:34
and knowledge and experience and health
00:24:36
and and other personal attributes that
00:24:38
contribute to some sort of productivity.
00:24:40
Well, time is a really big part of that.
00:24:42
And young people have lots of time ahead
00:24:44
of them. So I would consider learning
00:24:46
more or focusing on increasing your
00:24:48
income over time. It's not a requirement
00:24:51
and it's not easy, right? In fact, it's
00:24:53
pretty rare that it's easy. For example,
00:24:56
my parents were both public school
00:24:57
teachers. Their teaching salary was set
00:24:59
by the state. They had very few dials to
00:25:02
turn to increase their income. You know,
00:25:03
they could coach at school. They could
00:25:04
run the chess club, something like that
00:25:06
for a little extra income. But looking
00:25:09
at them as an example, kind of
00:25:10
continuing the example, my dad started a
00:25:12
a small software company in the late 90s
00:25:14
and early 2000s, basically in his spare
00:25:17
time. Not that he had that much of it,
00:25:19
but the software was test review
00:25:21
software for the New York states, they
00:25:23
they call them the regent exams, kind of
00:25:25
the state school science exams, biology,
00:25:27
chemistry, physics, earth science. So,
00:25:29
he kept on teaching full-time, but he
00:25:31
found this small little way on the side
00:25:32
to earn some extra income. So whatever
00:25:35
your career and your interests allow, I
00:25:38
think as a young person, you can
00:25:39
consider how you could improve or
00:25:41
increase the remaining human capital in
00:25:43
their career, it's not necessary. And I
00:25:46
I don't think everything has to be about
00:25:47
earning more money, making more money,
00:25:49
money, money, money, money, money.
00:25:50
That's not it. But if someone in their
00:25:52
mid20s is interested in improving or
00:25:55
optimizing their finances in some way or
00:25:57
they just want to see what options are
00:25:58
out there for them, if you think about
00:26:00
the compounding effect of a 10 or 20 or
00:26:03
50% raise or a 100% raise or higher and
00:26:06
you think about that compounding for the
00:26:08
next 30 or 40 years, it's pretty
00:26:10
impressive. So Bob, great question.
00:26:12
Thanks for writing in and thanks to John
00:26:14
from Pittsburgh for asking about the
00:26:16
financial planning system or process.
00:26:18
Here's a quick ad and then we'll get
00:26:20
back to the show. Serious question. Why
00:26:23
do podcasters constantly ask for ratings
00:26:26
and reviews? Yes, they do help highlight
00:26:28
our shows to new listeners. They help
00:26:30
strangers find us on Apple Podcast and
00:26:32
Spotify. It's totally true and a good
00:26:34
reason to ask for ratings and reviews.
00:26:36
But I have something more important, at
00:26:38
least more important to me. I want to
00:26:41
know if you like this stuff. I want to
00:26:43
know if you like my podcast episodes, my
00:26:45
monologues, my guests, the information I
00:26:47
share with you and the stories I tell. I
00:26:49
want to improve and make your listening
00:26:51
more enjoyable in the process. So yeah,
00:26:53
I would love to read your reviews. And
00:26:55
sure, if you throw a rating in there,
00:26:57
too, that's great. If you like what I'm
00:26:59
doing, please share it with me. It's
00:27:01
such a great feeling to read your
00:27:02
feedback. I'd love to read your review
00:27:05
or see a rating on Apple Podcast or
00:27:07
Spotify. Thank you. And the last
00:27:10
question today is from Bernard from
00:27:11
Ireland. Always love it when we get
00:27:13
international questions. My brother
00:27:15
lives in Ireland. Actually, Bernard,
00:27:17
he's in Cork. So, if you ever find
00:27:18
yourself in Cork and you see a chatty
00:27:20
guy in a bar who looks and sounds like
00:27:21
me, it might be my brother. But Bernard
00:27:23
is a uh financial planner from Ireland.
00:27:25
And he said, "Jesse, one challenge I
00:27:27
face is helping clients to take the time
00:27:29
to plan for retirement. The busier, the
00:27:32
wealthier, the harder it is to get them
00:27:34
to sit down and put proper plans in
00:27:36
place. any guidance on the subject would
00:27:38
be appreciated. So, thanks for the
00:27:40
question, Bernard. I love again it goes
00:27:42
back to the engineer in me. I love when
00:27:44
I can create a concrete objective answer
00:27:46
to a question and this one I think is
00:27:48
the opposite. What follows are some of
00:27:50
my subjective observations when I dig
00:27:52
into the way that people tend to work in
00:27:55
psychology and behavioral finance and
00:27:56
some of that. Some of those answers seem
00:27:59
to um not maybe be repetitive or they
00:28:01
seem to rhyme over time. And so what I'm
00:28:04
about to describe is just some of that
00:28:05
that I've picked up over time. And I
00:28:07
think whether you're a financial
00:28:08
planner, which I think somewhere maybe
00:28:10
15 20% of my audience are are financial
00:28:12
professionals, or you perhaps find
00:28:14
yourself in a position where you're
00:28:15
providing financial guidance to a friend
00:28:17
or a family member in your life, which I
00:28:19
do know that the other 80% of you
00:28:21
listening, many of you, you know, smart,
00:28:23
capable DIYers who listen, I know that
00:28:25
you guys do often play that role for
00:28:27
other people in your life. I hope that
00:28:29
my subjective experiences that I'll
00:28:31
share with you now and the thoughts from
00:28:33
other really smart advisers out there
00:28:34
like a a Michael Kitsis or a Carl
00:28:36
Richards or many other industry voices
00:28:39
can help you out. So my first thought is
00:28:41
that well yeah people are busy. It's
00:28:43
true for many people time is one of if
00:28:46
not their their number one scarce
00:28:48
resource. So asking them to sit down and
00:28:51
plan might be like asking them to create
00:28:53
time that doesn't really exist. I found
00:28:55
it does help to acknowledge that reality
00:28:57
pretty explicitly. Not really a to give
00:29:00
them an excuse, but as context. Planning
00:29:02
has to feel efficient. It has to feel
00:29:04
focused. It has to feel worth the
00:29:06
interruption or else it simply won't
00:29:08
happen. There's this great YouTube video
00:29:10
of a Goldman Sachs banker or attorney. I
00:29:13
I know he was he has a law degree and
00:29:15
he's speaking at a law school. So that's
00:29:17
why I think he might be an attorney as
00:29:18
well as a Goldman Sachs investment
00:29:20
banker. One thing he talks about is uh
00:29:23
as an adviser is your meetings ought to
00:29:25
have an agenda. They ought to be with a
00:29:28
you know a set agenda with a bunch of
00:29:29
tasks that clearly you're going to get
00:29:31
done. It's not just you know hey come in
00:29:33
for an hour and let's just shoot the
00:29:35
breeze. It's you're you're there to be
00:29:36
efficient. You're there to be focused.
00:29:38
You're there to get stuff done to to use
00:29:40
everyone's time wisely. I think about
00:29:43
myself and you know over the past month
00:29:44
I felt like I haven't had any time to
00:29:46
exercise. I've had to have this
00:29:48
deliberate, intentional effort just to
00:29:50
move my butt a few times a week. People
00:29:52
often feel like they don't have time to
00:29:54
maintain relationships or friendships.
00:29:56
They don't have enough time to get
00:29:57
adequate sleep. They don't have enough
00:29:58
time to sit down and write the great
00:30:00
American novel or whatever that big
00:30:02
project is they have on their mind. So,
00:30:04
I think the point is it's really common
00:30:06
and and really human to simply not have
00:30:08
enough time or, you know, in quotes, not
00:30:10
have enough time. So, one big takeaway
00:30:12
from my time working as a financial
00:30:14
planner is that 99% of the time they
00:30:16
genuinely don't have the time and it's
00:30:18
it's nothing that you have done,
00:30:20
Bernard, right? And also 99% of the
00:30:22
time, they appreciate you gently nudging
00:30:24
or badgering them into action. And for
00:30:27
what it's worth, if it's helpful, I have
00:30:28
this little rule, it's probably the math
00:30:30
nerd in me, this little rule for when
00:30:31
I'm badgering people to get responses
00:30:33
back to me, especially if I don't know
00:30:35
them very well yet and I'm not sure how
00:30:36
they tend to operate. So, here's an
00:30:38
example of of my rule in practice. I
00:30:41
have a good conversation with someone.
00:30:42
Usually within 24 hours the next day,
00:30:44
I'm sending them an email to to follow
00:30:45
up with them with some action items.
00:30:47
Okay. And then they don't respond to me.
00:30:49
So, usually I wait about a week. I send
00:30:51
a follow-up, a reminder email. Let's say
00:30:53
they don't respond to that one. And now
00:30:54
the rule is kind of kicking in. So, I
00:30:56
waited 1 week after the first bit of
00:30:58
radio silence. I give them two weeks.
00:31:00
Now, let's say they still have no radio
00:31:02
silence. No. I send them an email, no
00:31:04
call, nothing. I double the waiting time
00:31:06
again to four weeks. I double the
00:31:08
waiting time again to 8 weeks. So now
00:31:10
it's been a full three or four months
00:31:13
since they've actually gotten back to
00:31:15
me. I'm not badgering them every day.
00:31:16
I'm not even badgering every week. Every
00:31:19
time they don't get back to me, I expand
00:31:21
the time until I badger them again. And
00:31:24
then at that point, if they still aren't
00:31:26
getting back to me, the person enters a
00:31:27
a once per quarter contact pattern.
00:31:30
Personally, I think if if someone's
00:31:31
reaching out to you once every 3 months
00:31:33
and and especially if you hired them to
00:31:35
help you, that's not bad. It's not like
00:31:37
you're really bothering the person. But
00:31:39
I will say if that person's a client, if
00:31:41
they've been really gung-ho about
00:31:43
working with me, and then they go silent
00:31:45
for a whole quarter, they don't answer
00:31:47
three or four or five calls or emails,
00:31:50
usually I'm going to go out and make
00:31:51
some sort of special effort to have a
00:31:53
kind of a hey, what's going on? What's
00:31:55
happening kind of conversation. Mainly
00:31:57
cuz I don't want their expectations to
00:31:59
be disappointed by the fact that we're
00:32:01
not really making any progress and not
00:32:03
really communicating at all. If they're
00:32:05
okay with that and if that's how they
00:32:06
want to operate, well, at least now I
00:32:08
know that. But still, I think the bigger
00:32:10
point here is that people are busy.
00:32:11
Second, you can lead a horse to water,
00:32:14
but you can't make them drink. No matter
00:32:16
how competent or caring we are, we can't
00:32:18
want retirement planning more than the
00:32:21
other person wants retirement planning,
00:32:22
the client or the person we're helping.
00:32:24
Our role isn't to to drag people across
00:32:26
the finish line, right? We have to make
00:32:28
the path visible. We have to make it
00:32:29
accessible. Hopefully, we have to make
00:32:31
it compelling. And that's always a hard
00:32:32
part is to try to make it compelling.
00:32:34
And I've really, yeah, I've struggled
00:32:36
with it at times, but slowly I'm
00:32:37
learning that I think sometimes success
00:32:40
is just planting a seed that grows later
00:32:42
on. It's certainly not always forcing a
00:32:44
decision today. One takeaway for me and
00:32:46
and one little lesson I've learned over
00:32:47
time is that I think I can now start to
00:32:50
notice the pattern when a client is
00:32:52
really interested in getting stuff done.
00:32:54
When they really feel that thirst,
00:32:55
continuing maybe the horse metaphor,
00:32:57
that thirst to get something done. And
00:32:59
sure enough, they get right on it.
00:33:00
They're right on all the action items
00:33:02
and getting back to me and and the
00:33:04
process of going back and forth and
00:33:05
getting them answers is really
00:33:07
efficient. And that feels great, right?
00:33:09
To get a lot of work done and answer
00:33:10
someone's burning questions and to get
00:33:12
it done promptly. But over time, I've
00:33:14
noticed that some people just don't have
00:33:15
that kind of short-term burning desire
00:33:17
for answers. And I just genuinely think
00:33:19
it's hard to to make them drink. And so
00:33:22
we just need to level set our
00:33:23
expectations and realize it's not always
00:33:26
going to work out as quickly or with as
00:33:28
much efficiency or desire as maybe you
00:33:30
want it to. The third thing I think is
00:33:32
yeah retirement and money are definitely
00:33:34
these emotionally loaded topics. And
00:33:36
that's important for a lot of people.
00:33:38
Retirement planning triggers fear,
00:33:40
uncertainty, guilt, fear of not having
00:33:42
enough, uncertainty about the future,
00:33:45
guilt about who knows any number of
00:33:47
things, right? past inaction, guilt
00:33:49
about even being able to retire.
00:33:50
Especially, you know, maybe some people
00:33:52
are out there retiring at 48 or 52 or 57
00:33:56
and their peers, their siblings, their
00:33:59
parents, they didn't get to retire until
00:34:01
70. And people feel guilty about that at
00:34:03
times. The point is that people can
00:34:05
often avoid intimidating conversations,
00:34:08
uncomfortable, emotional conversations
00:34:10
even when they know they're important,
00:34:12
right? Avoidance isn't laziness, right?
00:34:14
It's just um it's very human self-p
00:34:16
protection. It's simple basic human
00:34:18
psychology. It's the same reason why
00:34:21
some people use drugs and alcohol as a
00:34:22
as a numbing avoidance. Some people use
00:34:25
distraction like video games. Uh some
00:34:27
people are workaholics. Some people
00:34:29
dissociate obsessively worry. Humans
00:34:32
have lots of different ways and some of
00:34:34
them are totally subconscious ways to
00:34:36
avoid these hard intimidating topics.
00:34:39
and financial planning, retirement
00:34:40
planning, and money are for many people
00:34:43
one of those hard topics. The fourth
00:34:45
thing, Bernard, I think is that some
00:34:47
clients just truly genuinely don't get
00:34:49
it. They don't get it. They don't
00:34:51
intuitively understand the the power,
00:34:54
the leverage, the benefit of good
00:34:56
planning. They don't understand the cost
00:34:57
of delaying. They don't understand the
00:35:00
peace of mind that they could get from
00:35:02
clarity if only they had clarity. So,
00:35:04
basically, there's an education gap
00:35:06
here. It's not a character flaw. And and
00:35:08
so part of our job is to translate these
00:35:11
often abstract future benefits that we
00:35:14
talk about into concrete present-day
00:35:16
value that they can actually feel. It is
00:35:18
cheesy and and it feels cheesy to say
00:35:20
something like, "Well, what if I could
00:35:22
save you $10,000 on your taxes this
00:35:24
year?" Feels cheesy to say. Or, "You
00:35:27
know, this decision is probably going to
00:35:29
lead you to $100,000 between now and
00:35:31
retirement. Would that interest you?"
00:35:33
What I'm telling you would allow you to
00:35:35
retire four years earlier than you might
00:35:37
think. Is that something you care about?
00:35:39
To me, those statements, they sound
00:35:41
clickbay, right? They sound a little bit
00:35:43
like a used car salesman. Like, really?
00:35:45
Are you're going to put you're going to
00:35:46
keep your family in that car instead of
00:35:49
buying this this new safer model that
00:35:50
I'm about to sell you? Like, it that
00:35:52
feels very salesy to me. But one of my
00:35:55
guiding principles is to let the numbers
00:35:57
be my guide. And if the numbers say
00:36:00
wonderful things, well then I'm not
00:36:01
afraid to say that wonderful thing. And
00:36:03
if someone genuinely doesn't get it,
00:36:05
I'll do my best to close that education
00:36:07
gap. I'll ask them, well, what about
00:36:09
this $100,000 decision doesn't appeal to
00:36:11
them? And it can be hard sometimes to
00:36:13
not come across in that used car kind of
00:36:16
way. But again, the math is the math.
00:36:18
And that's something I'll explain to
00:36:19
people, too, is I'll say, "Listen, this
00:36:21
is this is math. And I'm not using this
00:36:23
in in a used car way cuz in this case,
00:36:26
you know, quote unquote getting it,
00:36:27
understanding it, that's absolutely in
00:36:30
in the client's best interest or in your
00:36:32
friend's best interest or in your
00:36:33
family's best interest. So doing what
00:36:35
you can to bridge that gap to getting it
00:36:37
is extremely helpful for everyone
00:36:39
involved. The the next thing I think,
00:36:41
Bernard, the fifth thing is that any
00:36:43
sort of urgency in these situations is
00:36:44
going to be invisible when life is going
00:36:46
well. When the going is good, a lot of
00:36:48
important topics can seem pretty
00:36:50
abstract and pretty distant. nothing
00:36:52
feels if if nothing feels broken I
00:36:54
should say then there's really going to
00:36:55
be no sort of forcing function to get
00:36:57
people to act the way around this or at
00:36:59
least one way around this is to remind
00:37:00
people that financial planning isn't
00:37:02
about fixing an obviously broken problem
00:37:05
in other words so you shouldn't be
00:37:07
waiting for some sort of obviously
00:37:08
broken problem to start financial
00:37:10
planning instead financial planning is
00:37:12
about protecting optionality building in
00:37:15
flexibility uh building in future
00:37:17
freedom for yourself and and that can be
00:37:19
a little bit of a reframing of the
00:37:21
conversation
00:37:22
And I think this one's pretty human,
00:37:23
too. You know, the squeaky wheel does
00:37:25
get the grease. And if it ain't broke,
00:37:27
don't fix it. These are these common
00:37:28
idioms and in ways that we live our
00:37:30
life. And if the person you're talking
00:37:31
to doesn't hear a squeak and they don't
00:37:33
see anything as broken, they probably
00:37:35
won't fix it. So again, it can be
00:37:37
challenging because you don't want to
00:37:39
twist anyone's arm. You don't want to
00:37:41
lead with fear. It's broken and you're
00:37:42
screwed and I'm the only one who can
00:37:44
help you out. You don't want to do that.
00:37:45
I think it's okay to gently say, "I know
00:37:47
what I'm doing here. Uh, I see a few
00:37:49
things going on. A lot of things are
00:37:50
going really, really well. I also see a
00:37:52
few things that I think you ought to
00:37:54
improve on, and here's what they are.
00:37:55
And the last one that came to mind,
00:37:57
Bernard, the last of my little notes
00:37:58
that I took down is that progress isn't
00:38:00
always perfection. It's not always what
00:38:02
you want it to be, but it is still
00:38:03
progress. And so, I try, and it's not
00:38:05
always easy, but I tried to not view
00:38:07
kind of this ongoing client engagement
00:38:09
as some sort of all or nothing event. I
00:38:11
think a short conversation is better
00:38:13
than no conversation. I think a a first
00:38:16
draft plan is better than no plan. And I
00:38:18
think even a small a small win, clarity
00:38:21
on some goals, getting someone to start
00:38:23
saving a little bit more, getting
00:38:24
someone to understand some trade-offs
00:38:26
going on in their life, that will build
00:38:28
momentum over time. And I have a few
00:38:30
clients who I work with who they tend to
00:38:32
be 3, four, 6 months of radio silence
00:38:36
and then a twoe flurry of communication
00:38:38
where I spend 10 hours dedicated only to
00:38:41
them over over a oneweek period of time
00:38:43
and then uh and then six more months of
00:38:45
radio silence. and it it seems to just
00:38:47
be that way over and over and over
00:38:48
again. I've learned over time that's
00:38:50
just their MO. And and I'm glad we make
00:38:52
progress during those really brief
00:38:54
flurries. And when asked, I usually tell
00:38:56
people that the first 6 months we work
00:38:57
together will tend to have a higher
00:38:59
concentration of communication as we get
00:39:01
this baseline plan put together. And
00:39:03
then as time goes on, maybe we only have
00:39:05
two big sitdowns a year. But some folks
00:39:08
I work with due to their preferred
00:39:10
communication schedule which is a little
00:39:12
more spread out. We're still kind of
00:39:14
talking through those initial details
00:39:16
and we're two years into our working
00:39:17
relationship but still there's progress
00:39:20
and that again is the important thing.
00:39:21
Those situations to me they aren't
00:39:23
perfect but they are progressing. And at
00:39:25
the end of the day, I want to measure
00:39:26
success less by how many clients kind of
00:39:29
fully engage immediately, and more by
00:39:32
whether I'm consistently creating
00:39:34
clarity, lowering friction, keeping the
00:39:36
door open for future action and and
00:39:38
helping people the way that they want to
00:39:40
be helped. I still want to be able to
00:39:42
put my head on the pillow at night and
00:39:43
feel good about what I do and feel like
00:39:44
I'm really helping people. But again,
00:39:47
you can lead a horse to water. You can't
00:39:48
make them drink. And if there's slow but
00:39:50
steady progress, that's better than no
00:39:52
progress at all. So, thank you for the
00:39:54
question, Bernard. It was a really cool
00:39:55
question and I think we have a great
00:39:56
group of people listening here who
00:39:58
choose to spread you know smart
00:39:59
financial ideas into their small corners
00:40:02
of the world and I hope today's
00:40:03
conversation helped you all out and
00:40:05
that's all I have today everybody. So
00:40:06
thank you as always for submitting your
00:40:08
questions. Please keep them coming to
00:40:09
jesse at bestinterest.blog. While you're
00:40:12
emailing me make sure to sign up for uh
00:40:13
the free weekly newsletter over at the
00:40:15
homepage at bestinterest.blog. We'll
00:40:17
talk to you next time on personal
00:40:18
finance for long-term investors. And
00:40:20
have fun scubaing. Did one of you tell
00:40:23
Stanley that I have asthma? Cuz I don't.
00:40:26
If it gets out, they won't let me scuba.
00:40:28
If I can't scuba, then what's this all
00:40:31
been about? What am I working toward?
00:40:33
>> Thanks for tuning in to this episode of
00:40:35
Personal Finance for Long-Term
00:40:37
Investors. If you have a question for
00:40:39
Jesse to answer on a future episode,
00:40:41
send him an [music] email over at his
00:40:42
blog, The Best Interest. His email
00:40:45
address is [email protected].
00:40:48
Again, that's jessevestinterest.blog.
00:40:51
blog. Did you enjoy the show? Subscribe,
00:40:54
rate, and review the podcast wherever
00:40:55
you listen. This helps others find the
00:40:58
show and invest in knowledge [music]
00:40:59
themselves, and we really appreciate it.
00:41:02
We'll catch you on the next episode of
00:41:04
Personal Finance for Long-Term
00:41:05
Investors. Personal Finance for
00:41:08
Long-Term Investors is a personal
00:41:09
podcast meant for education and
00:41:11
entertainment. It should not be taken as
00:41:13
financial advice and it's not
00:41:15
prescriptive of your financial
00:41:16
situation.