Anne Lester knows money. She helped develop target date mutual funds at JP Morgan, headed retirement programs, and knew her stuff. But Anne, like many of us, is a spender at heart and has had to trick herself into great saving habits. How? We talk about the basics, which do NOT include skipping lattes or shaming yourself into saving more money. In fact, the truth about saving more money is hiding in plain site, and we dive in so you can finally begin or accelerate your journey TODAY.
Before that, though, in our headline segment, the United State government is cracking down on credit card late fees. The Biden administration has passed a cap on fees at eight dollars, and has also foreshadowed that overdraft and other bank fees may not be far behind. Is this legislation going to help you save more money? We’ll dive into what we love, don’t love, and what we’re cautiously optimistic about, assuming that YOU take action on your plan and tighten up your banking practices.
That’s not all. We also answer a question from a Stacker who said, “We’d better call Saul…Sehy and OG for help!” Of course, there’s Doug’s trivia segment as well, and much, much more.
FULL SHOW NOTES: https://www.stackingbenjamins.com/mastering-financial-basics-anne-lester-1491
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
Our Headlines
Watch On Our YouTube Channel:
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Anne Lester
Big thanks to Anne Lester for joining us today. To learn more about Anne, visit Anne Lester | Retire happy—on your time and target. Grab yourself a copy of the book YOUR BEST FINANCIAL LIFE Save Smart Now for the Future You Want.
Doug’s Trivia
- What is the name of a government tax shelter where your money goes in after taxes have been paid, but when you pull it out, it comes out tax free?
Better call Saul…Sehy & OG
- Carlos called in from the beautiful campus of THE NW Bahama State Beauty and Technical College (Go Fighting Blow Dryers!) with a question about the tax triangle – specifically the percentage spilt between the three different tax classifications.
Have a question for the show?
Want more than just the show notes? How about our newsletter with STACKS of related, deeper links?
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Other Mentions
- Tai and Talaat McNeely Talk About Financial Infidelity.
- Financial Self-Defense: Techniques for Outsmarting Scammers (SB 1381).
Join Us Wednesday
Tune in on Wednesday when you’ll learn how to be better in your job from two women who’ve excelled in their careers: former Pepsi COO Grace Puma and former Nike president of consumer direct, Christiana Smith-Shi.
Written by: Kevin Bailey
Miss our last show? Listen here: The Most Overrated Ideas, Concepts, and Beliefs About Money (SB1490) » The Stacking Benjamins Show.
Episode transcript
Oh, I gotta start the show. Is this your first time, Joe? I almost forgot that. We’ve gotta raise our mugs. Raise your mugs. Raising my mug. That’s your
chin. Mine’s empty. We’ve been talking too long. Move
your chin up. Everybody can see that mug. Beautiful little mug that your mama got you. And salute our troops.
Here’s to the men and women keeping us safe while we partied all weekend. Thanks to you on behalf of the men and women at Navy Federal Credit Union and the men and women making podcasts in their mom’s basement, God bless ’em all. Here’s to our troops.
Thanks everybody.
I look out my window and I see my neighbor,
Doug,
poor, lazy, deplorable, Doug
live from Joe’s mom’s basement. It’s. The Stacking Benjamin Show.
I’m Joe’s mom’s neighbor, Duggan. On today’s show, we’ll walk you through the financial basics with a woman who’s a huge spender, but still managed to become a top speaker and money expert. It’s Ann Lester in our headlines, new legislation caps, credit card, late fees at eight bucks. Time to run up the cards.
Maybe slow your roll. Superman. We’ll have a better plan for our TikTok. Minute we’ll talk scammers and how your phone might save you plus a stacker. Who thought I’d better call Saul? See hi and og and then I’ll share some shelter trivia. And now two guys who are hot for teaching you about personal finance.
It’s Joe and O Ju g. I’m running out of breath again.
Doug. You got it made. Got it made. Got it made. ’cause you’re hot for teaching finance.
We just lost every listener.
No, I don’t sub just like David Lee Roth. Hey everybody, welcome to uh, van Halen lyrics for the WIN podcast. I’m Joe Sulci, high average Joe Money on X Twitter.
You choose the name. We are there. We’re more lively though on Instagram, little TikTok having fun today though on a podcast where we’re gonna cover the basics. My favorite shows OG are when we cover the basics in Ann Lester. Coming down to the basement to help our, our younger stackers. You don’t have to be younger to be just starting out.
You know what, who cares what age you are if you’re starting out. We got the perfect guest today. How are you man?
Fantastico today. How are you? I’m gonna be, everything is sing songy today. I’m gonna answer in all song.
Oh, sing us your favorite song.
Okay. There once was A Man from Nantucket.
I’m glad we covered up the rest of that.
Do you know any lyrics that aren’t R rated? Let’s try again.
It is wild how the second that we start playing, uh, the sponsor spot though. You come up with the second one. It’s amazing. Hmm. Ann Lester Day gonna dive into some of the important basics of personal finance, but before that, I. Big headline from a couple weeks ago. Let’s do it.
Hello darlings. And now
it’s time for your favorite part of the show.
Our Stacking
Benjamins headlines.
Our headline comes to us from USA today. This should be, uh, USA two weeks ago, really. Uh, this is written by Joey Garrison. Joey writes credit card, late fees capped at $8 under Biden crackdown on junk fees. Most credit card late fees will be capped at $8 under the Biden administration’s latest move targeting, so-called junk fees.
Consumer Financial Protection Bureau finalized a rule opposed by the banking industry, believe it or not, weird Tuesday. That will close the loophole to slash late fees charged by credit card companies from an average of $32 to eight, which the agency projects will save $220 annually for 45 million. 45 million Americans are gonna save $220 a year og.
On, uh, this move, and
then they’ll just raise the interest rate by, uh, quarter percent. And, um, all that $200 will cost them $400 of extra interest. But hey, there’s no late fees, so
that’s great. The banking industry finds a way to get their money, is that what you’re saying?
I bet that that’s the, uh, that’s the sum total of this.
I, I, I’m not entirely sure that, uh, JP Morgan or American Express or Capital One are just gonna go, yeah, you know that $40 billion that we get in revenue every year from late fees. Nah, you’re right. We actually don’t need that. We’re good. We’ll just give that back. That’s the right thing to do.
They’re also doing the same amount of overdraft fees.
Banks won’t be able to exceed their losses under the new rule. The CFPB has not finalized an amount, but is exploring overdraft fees capped at $3, $6, seven, or 14 plus 50 cents per transaction. The overdraft rule. Currently under review, so we should have, uh, something, something there soon. Rob Nichols, president and CEO of the American Bakers Association said today’s flawed final rule will not only reduce competition, increase the cost of credit, but will also result in more late payments, higher debt, lower credit scores, and reduced credit access for those who need it most.
Let’s walk through these. I don’t understand. Reduced competition.
Well, I mean, arguably if there’s not enough money in it to have market participants if there’s not enough revenue, right? Because part of, if you’re running a bank, if you’re running a, uh, lending institution, one of the things you’re counting on is people aren’t gonna pay.
And part of your money is the fact that they’re not paying. And you can go. Charge ’em more money on their money. That’s what I thought. Maybe, I
don’t know. That’s laughable number one, increase the cost of credit. This is where he actually gets it right though. So, yeah. Mr. Nichols, we disagree on part of this, but part of it we do increase the cost of credit, which to your point, OG banks are gonna find a way to recoup that by charging you in other areas.
It will result in more late payments. We’ve already seen this. If, if, if there isn’t any severe slap on the wrist, yeah. The chance that you might do it again. Now, I remember the early nineties when I was having big financial trouble and Bank of America’s $40 late fees kept just killing me. Absolutely killing me.
So I under, I understand that. I totally, I totally understand that reducing this to eight could have helped me save my bacon, but it still OG didn’t solve the final problem, which was this. Higher debt, lower credit scores, and reduce credit access for those who need it most. What I truly needed to do,
have more credit so that you could have a better
utilization, open up a new card.
I needed to solve my credit card problem. I needed to get rid of my credit card problem. I needed to increase my income. I needed to devote more income to paying off my debt and building the emergency fund and getting rid of this all, all together. So while I think this could be a bandaid, I don’t know that it’s gonna solve America’s credit problems.
This is
just simply one of these issues of, you know, you pick up one end of a stick, you get the other type of thing. I think it’s reasonable to, to assume that banks are not going to just lie down and say, cool, we don’t have 40 billion of revenue anymore. Alright fine. That’s okay with us. They’ll just figure out a way to, to, you know, whether it’s.
Make your credit card $10 a month of a, you know, it’s a subscription fee. I mean, that’s all the rage these days. So why would credit cards not have a subscription fee to have a credit card? You know, I mean, like, there’s a thousand ways for them to recoup this money and it’s gonna come out of mostly people who can’t afford to have it.
So it’s just repurposing those dollars is my guess, is how that’s gonna happen. But the bigger problem is exactly what you’re talking about. If there’s not enough of an incentive to not do it, the risk that you run as an individual is you go, well, whatever, I’ll just, I’ll just pay late. I’ll just take this $8 fee, or whatever the number is, because who cares?
It’s only eight bucks. But that’s not solving the problem and the extra downstream effects of that, of having a lower credit score. It affects your car insurance and homeowner’s insurance and it, it affects other things in your life because of the. Lower amounts of pain to having the debt, if that makes sense, right?
Like to your point, it doesn’t hurt as bad, so because it doesn’t hurt as bad, you’re not gonna do as much about it. And there’s other ancillary effects that are gonna have negative effects, I should say, because of those things.
So yeah, I wouldn’t be surprised if we don’t see any increase in interest rates or anything like that.
Because exactly what you just said, there’s less pain. So people are gonna let their balances just slowly increase because there’s not a real motivation to, to pay down that debt. So I, and I also think like this is one of those headlines that you see typically in election years where it looks great, the headline looks great, and hey, we did this for the average Joe, sorry Joe.
But the reality of it is that it’s, it’s not nearly as big as splashes as you think it is when you just dig a little bit. Yeah. But
for those people rolling their eyes, Doug thinking this is election year politics. I heard, uh, them going after light fees two years ago. Sure. But why did it hit? Now part of this program, I believe includes these attacked on resort fees when there’s no resort, right?
Yeah.
That one always cracks me off. The junk fees is what they call ’em. Right? Right. Like the junk fees. Yeah. And don’t get me wrong here, I don’t think that, you know, we should have late fees at 30 bucks. I was quite happy to, to bank at a bank that doesn’t have overdraft fees and account fees and all that sort of stuff.
And I was pretty successful. They even just asking them to eliminate the minimum for an account that has higher interest. I’m like, why do I have to have 20 grand in that account to get the higher interest? Can I just have the account? Why, why don’t you just gimme the higher interest? Like, why do we have to have a minimum balance?
So you can negotiate a lot of those things, but if you’re hoping that the $30, uh, late fee is going to, to your point, Joe, save your bacon, it may once and kind of help that spiral from not happening. But the bigger issue is. You gotta figure out a way to not have credit card debt if you have it. I think
there’s a way for us to zoom out on this, which is banks, to your point, are going to cover their bacon.
They’re gonna make sure no matter what the ruling is, that they make money. We need to do the same thing. We need to think of ourselves as the CFO of our personal financial situation. And I’ll tell you, a very simple hack, we’ll call it that I taught clients, used myself to get over this, worked very effectively was.
Try to make however big a payment you can, but to avoid the minimum fee, which is now going to be smaller, but still eight bucks isn’t nothing. I can spend that eight bucks on something else. Set up an automatic minimum payment to come out of your checking account so that if you, I can’t tell you the number of times I was able to help people solve this problem just very quickly by setting up the minimum auto payment so that you didn’t have to remember.
I mean, how many times has even people with good credit been on vacation or they’re in the middle of some project and they go, oh, I forgot to pay the thing right? Then they got a call, they get it expunged from their record so it doesn’t hit their credit report. And companies are happy to do that if, if you’re not a frequent offender.
But that minimum automatic payment is so useful just to avoid this one stupid nuisance fee.
Yeah, I’m a credit card points junkie person. That’s one of the standing operating procedures. When we get a new card and you log in for the first time in that account, the first thing that you have to do is set up minimum automatic payments from my bank account on the payment date.
Obviously you wanna pay more than that. Obviously you wanna, you know, not carry a balance. But like you said, as long as you’re paying that minimum, you’re not gonna run a run afoul of, ’cause there’s other things for being late too. You know, the automatic default rate goes up and, and all the credit cards are linked now.
So if you’re late on one account, then all your other accounts think that you’re late on them too, even though you’re not. And so the interest rate rises on all of ’em. There’s a lot of secondary effects to having that late payment show up. So auto pay, that’s a great idea.
I like it. We’ve also heard people wondering ways to get their credit card debt down.
We’ve heard some interesting ways over the years from different people. Uh, tie to McNeely came on the show. We’ll link to this in the show notes. And they talked about selling things around the house that they truly, so they became much more intentional about their buying, but they also made money quickly when they started selling items that they didn’t need, it became a game.
And pretty soon they sold stuff OG that they thought they needed previously, but then realized, do I really need this or would I rather be outta credit card debt? So that’s pretty inspiring. We also spoke with Jen Smith from Frugal Friends back in January on our Instagram Live. Uh, she spoke with our friend, uh, uh, Kate Youngin, who normally does our Tuesday morning Instagram lives, uh, about her no spend challenge in January.
In fact, as part of our book club leading people through my book Stacked, we all implemented a challenge. Everybody in the group. So you know what Cheryl and I did, we actually ate, I think Doug, you and I were talking about this the other day. We actually just ate the stuff in our freezer. We couldn’t buy any new wait, what?
Any new meat. Until we finished off the stuff in the freezer. You know what’s funny? It took a month. It took a month to go through all that. Yeah. Saved a bunch of money, Joe. It would,
it would probably take me three months. We have this chest freezer in the basement that just accumulates stuff. It’s actually an embarrassing amount of food that’s down there right now.
Plus, we kept getting these gifts from Omaha, steaks from various people for favors we did or whatever. And so I have a ton of apple tartlets down there. I gotta figure out, stop
sending Doug Omaha steaks.
Got it. That by the way, is what we call Doug on the show. He’s our apple tart.
Oh, I’m saucy. His nickname of nickname from college.
He’s not talking about food
Doug. You will the Apple tart. Let you,
we will link to this not only in the show notes, but also on our newsletter, the 2 0 1. Kevin, uh, Bailey from our team always has, uh, a great tips. Kevin does an amazing job, and for people that don’t know Kevin’s pedigree, he worked for two big asset, uh, management firms and helped people in a lot of financial ways.
Worked with a little company called Vanguard, another little tiny company called TIAA, um, and now helps us, uh, by writing our brilliant newsletter, the 2 0 1, which is stuffed with tips that spring from the ideas we talk about on the show. We call it the two oh one because we go more into depth there.
Speaking of in depth, ma’am, we’re about to have a great in depth conversation with just a brilliant woman. Her name is Ann Lester. Her goal is to help the under 45 crowd. Get their financial act together. She spent 20 years as the head of Retirement Solutions for JP Morgan with a a RP. She co-founded the Aspen Leadership Forum on retirement savings.
What she realized while she was doing that, young people often don’t realize until way too late that they should have been saving money toward retirement. And she’s on this mission to help people get their financial house in order so they can save and make the retirement journey go easier, which is so why we wanted to talk to her today.
So Anne, coming up next, she’s gonna be our teacher. But first big announcement, guys, my book Stacked has not been on sale ever, ever until this last weekend. And if you’re not following us on social media, you don’t get the 2 0 1 newsletter that we just talked about. Well, guess what? You don’t know that you can get a copy of Stacked wherever you get books.
The ebook version for. Wait for it. A buck 99. Wow. But you gotta do it today because it was Saturday,
a dollar 99 and Sunday.
Holy. Or today by the way, big thanks to BookBub who made us a selection. BookBub does a book club and, uh, we are part of the BookBub book Club promotion, a dollar 99, uh, Saturday, Sunday, and today.
So if you’re listening to this on Tuesday. You could have signed up for the 2 0 1. Could have followed us on social media, could have listened the day this came out. I’m great at passive aggressive. Not even passive. It’s just aggressive. What are you doing? Stop being a loser
and buy the book.
I know, I know.
But wherever you buy books, you don’t gotta go to BookBub to get it. You can buy it anywhere. A dollar 99, the ebook format. But Doug, uh, enough of that. Man. You are going to rock our world with some trivia, huh? I
sure am. Joe. Hey there, stackers. I’m Joe’s mom’s neighbor. Doug. You know, I’ve always been a big fan of hair metal.
I love the hair. Uh, you know, and the, and the metal. You know, I’m down for all of it. The best band, van Halen, no front man in history comes close. To David Lee Roth. While Van Halen is primarily known for being one of the best rock bands of all time, they’re also known for having a notoriously weird request on their rider.
One we talked about on the show with professors Daniel Simons and Christopher Chari on episode 1381. Possibly the most well-known rider item in rock and roll history is the band’s request for a bowl of m and ms with absolutely no brown ones, which means the venue crew had to pick ’em all out like they were collecting some kind of candy tax.
All of this has been a big hint leading up to today’s trivia question, what is the name of a government tax shelter where your money goes in after taxes have been paid, but when you pull it out, it comes out tax free. I’ll be back right after I find my black and yellow striped leotard.
Hey there, stackers. I’m hair metal scholar and leotard model. Joe’s mom’s neighbor, Doug. You know, a lot of people think that Van Halen were divas for requesting no brown m and ms on their rider. However, the real reason was that because of David Lee Roth’s aerial stunts on stage, it was crucial that event staff carefully read every line of the contract.
The band figured that overlooking the brown m and m detail could be an indicator that all safety precautions may not have been followed. So today’s trivia question was, what is the name of a government tax shelter where your money goes in after taxes have been paid, but when you pull it out. It comes out tax free.
The answer, of course, probably named for the one true front man of Van Halen, David Lee Roth. This type of account is called a Roth IRA, or Roth 401k. And now here to teach you where to begin your personal finance journey. It’s today’s mentor and luster.
Oh, and I’m super happy that we have her here. Ann Lester’s here.
How are you? I’m great. How are you? Well, I’m fantastic and I’ll tell you why I’m fantastic. As we were researching you, and we were so excited that we were able to get you for the Ann Lester World Tour, I think you’re my kindred spirit. Ann, you are a
spender. I am a spender. I totally am. I, I am such a spender.
Yeah. Do you think, is that nature or nurture people like you and me? Is it because, I mean, for me and my family, my parents are spenders, but man, I walk into any store, I’m like, I have to ward off the, gimme that, gimme that, gimme that. How do, how do we get that way?
I think it’s both. Honestly. I think we’re born with wiring in our brains that predisposes us.
And there’s actually some, some research on this. It’s, it’s genetics. All those famous Swedish twin studies that they did where they separate them at birth and then they, like, they didn’t on purpose do this, but like they get separated at birth and then they track them. And actually there’s a huge genetic component to this, but some of it’s the experiences that we had, what we were taught growing up.
And my parents were not spenders. They’re absolutely like depression era kids, you know, silent generation types. And they never spent money. And I didn’t learn how to budget because to them it was so obvious they didn’t need to talk about it. They made decisions about money based on whether or not they thought it was a good thing to spend money on.
So I could get piano lessons, but I couldn’t get, you know, a new pair of shoes to wear to the dance. And it is, I get, well, the piano lessons are good decisions and the new shoes are bad decisions. So I grew up thinking, well, there’s always enough money as long as it’s a good decision. And I never heard the.
Well, only if you can afford it, part of that conversation. So yeah, it’s, I got both badly. Well,
and you just like me teaching other people great money habits. Well, I don’t, I don’t know what your story is and I just thought, I don’t know why I never thought any of this applied to me. I don’t know if you were the same, like, like how did you maintain bad money habits at the same time you were teaching other people great
money habits?
I gotta say it was a little different for me, so I was managing other people’s money as a portfolio manager. That wasn’t a conversation around saving that was like, how do you invest the money? And, you know, I, I, I’d like to think I was pretty good at it, other people that I was pretty good at it. But the savings part of it, I never actually kind of dug into or started figuring out for myself until I was doing research for the target tape funds that I helped build at JP Morgan.
And what I did was learn a lot about how people save and the patterns of sort of saving and spending that people have, but also the behavioral wiring, right. Behavioral economics and the brain science behind why so many of us, you know, I kind of boil it down to have poor impulse control. I have it with money and food, both of which do not help me in the long run.
Oh, me too. We know. I mean it’s a type, it’s a type, right? Yeah. I actually, um, have an alcoholic grandmother. So there there’s definitely a thing, you know, genetic thing that’s there. And then when that gets doubled down with not having a strong financial mentor or teacher or being taught good habits as a young child, right?
That’s, that’s when we get into trouble. So for me, the, the key to unlocking all of this for me was I stopped putting it in a moral framework and basically judging myself every time I slipped up again and thinking it was my fault. And if I were a better person, if I had better self-control, why couldn’t I just do this one simple thing?
Right? It was like, oh. It’s my brain getting in the way. Alright, well then I just better set up some rules and some guardrails. I like to think of the bumper guards you get if you go to a kid’s birthday party in a bowling alley, like those are what I need for my spending. And you set up those guardrails and suddenly the mistakes get less frequent and they get smaller.
And that’s the trick to me. It’s not, it’s not having the willpower to do this. Like for, forget the willpower. It doesn’t work for many people. You gotta figure out the guardrails to keep yourself outta trouble.
I don’t know about for you and you’ve been around so many successful savers, but when I worked with people that were really successful with their money.
It was those guardrails that they put in place. It wasn’t discipline like I think to your point, Anne, I feel like we all try to convince ourself I just need more discipline. I just need more will. But no, these people have set it up. So even if I don’t think about it, I win. Like you’re, what I love about this project of yours is you’ve got so many of these hacks, and we’re gonna go over a few of them here in a second, but I firmly believe it’s gotta be setting up these automations that is really the key.
Not just for you or I, but for even the really good people with money. You know,
automation is everything. And this is again, going back to the brain science and the behavioral economics, the nudge thing, and again, people have won Nobel prizes for this stuff. I’m not, I’m, there’s nothing original here that I’m gonna tell you, but the nudge, the automation, the using your own behavior to help you.
We hate making decisions. We hate making decisions that cause us pain, right? And it’s painful to deny yourself something you want so that you can save money for some random stranger, which is, oh, by the way, how your own brain sees yourself in 25 or 30 years is a completely random stranger. So I’m gonna deny myself this thing I want right now and give that money away to a stranger.
Like, why, why are we surprised that it’s hard to do that, right? Like, there’s nothing good about, and oh, by the way, even thinking about retirement, like, okay, if you’re under 40, it’s just impossibly far away. And if you start thinking about it, you realize you’re gonna be old and die at the end. Like, of course, nobody wants to think about this.
Like, it’s not fun. So, so yeah, we automate it and we get out of our way. We, the second you start asking yourself to make decisions about complex, uncertain things. That’s what investing and saving for retirement is complex and uncertain. We don’t wanna do it. So stop asking yourself to make decisions and automate everything you can.
People hear your voice and they think that now you’re great with money. You’ve set this stuff up. Like I alluded to at the start though, the reason I think we’re spirits is that we really both screwed stuff up in a bad way. I would love to illustrate that, if you don’t mind, the same place you start in this project.
You’re at the Tokyo Airport. Oh, you’re trying to get on a plane. How old are you when this story happens? I’m 26 years old and, and so tell us what happens at the Tokyo Airport.
So I schlep the two huge suitcases plus this giant overstuffed garment bag that I have, which is my carry-on to the airport. And I stand in the KLM line.
I’m actually moving to Italy. My boyfriend’s asked me if I’d like to move in with him. He’s now my husband. We’ve been married for three years. Kids oh two, moving to
Italy. That sucks. That sounds
horrible. Ann. That was terrible from Japan, right? It was, right. It was a terrible life. So I’m all excited and you know, it’s stressful leaving if, you know, shut the apartment down, all this stuff, right?
So I’m super stressed. I get to the airport and I get to the counter and I heave my suitcases onto the scale and the guy looks at me and he looks at my ticket and he says, you’ve only got one bag allowance and it’s max like 25 pounds or something. He is like, you’ve got two suitcases. And they both weigh like 60 pounds.
And oh, by the way, your carry-ons too big. Uh, we’re gonna have to check that too. It was something like $400, which in. 1992 was a a lot, it’s still a lot of money for a lot of people, right? It was a huge amount of money you used. Do
inflation. Now, Anne, just for everybody thinking about that doesn’t, you know, you do the inflation number, right?
The rule of 72 3%. I mean, we’re looking at over a thousand dollars
today. Oh, it was, it was so painful, right? We complained about luggage fees. Now this was just so painful and there’s a whole bunch of reasons why I ended up in that situation. One of which was not knowing that international carriers only allowed you one free check bag at that point.
Um, and it was 25 pounds. So like I was, I did, I didn’t read the fry and print on my ticket, that’s for sure. But I get there and I knew my credit card was maxed out. I handed it to him and of course it didn’t go through. And I was literally in tears standing there thinking, now what? And the guy ended up just.
Looking at this huge line of people who were feeling very, very angry behind me, just waved me through. And it was, it was horrifying. It was, it was. And I’d like to say that’s when I reached rock bottom. But, but no, there was more, so it just
was
a terrible moment. I just thought I’ve just failed at adulting, basically.
I mean, we didn’t call it that then, but I, I failed at adulting.
It’s still, I got a pit in my stomach when I first read that. And even hearing you say it. And just there’s this sub conversation by the way, that maybe we’ll say for next time, and around just the humanity of that man. You
know? Oh, I can just see him trying to avert an unpleasant like PR incident.
And again, remember, there were no cell phones here, right? So like, this was all, no, nobody was gonna know about this, but yeah, what an act of kindness that that man did. He could clearly see that this was just overwhelming me and I was a puddle. It was very, very kind of him. Uh, like
any self-respecting retirement and saving expert and helping people getting their stuff together, you have, uh, some letters you put together into the word stash for us.
What does the word stash really mean? What do each of those letters represent?
First is save for a rainy day. Second is tax aware savings. Third is assess your budget. Fourth is stay the course, and fifth is have fun. We can break that down in more detail. But, uh, you know, save for a rainy day. The number one thing you should be focused on if you’re just starting your savings journey is saving for an emergency.
And there’s some funny stories in my book about like the kinds of things that can go wrong in people’s lives. My, my, my suitcase is just one example. The second is really the power of tax advantage savings. The reason I urge people to get the emergency savings fund up first and second tax advantage savings before the third step, which is assess your budget and start paying down your debt, is because if you don’t have an emergency fund and something goes wrong in your life, your debt’s just gonna balloon right back up again.
And so getting that, that savings going helps prevent you from running back into an emergency. The third, especially if you’re in your twenties and thirties. The power of compound returns. And if you’re lucky enough to work for an employer who has a 401k or 4 0 3 B and matches your savings, the power of compound returns and free money means that the earlier you can get some money to work, even a little bit is, is huge.
So get going on those two and then start tackling your high interest rate debt and other debt. The fourth stay the course means you then need to work on maxing out. Once you get all that debt under control, you start maxing out your retirement savings. And rule of thumb is you should be trying to save about 15% of your total income a little less if you been great and started like when you were 21, but most people haven’t.
And then last but not least, you start saving up for the fun stuff, right? Have fun and save for the vacations, save for the wedding, save for the house, save for the who knows what. Um, boat. You know, they’re, they, everybody has a very long list of things that they’d like to have fun with, so that’s how you do it.
A lot of people
say that they don’t have the money to save. We’ll talk about a few ways you can find it, but you write. That the average 20 or 30 something spends around 44% of their food dollars. So this is the average person out there, average stacker, listening to this nearly $3,500 a year on eating out within five years, assuming a 7% rate of return you write, you would’ve had $13,000 if you just took $5 a day out of that and invested it.
Yep. Man, that is a powerful reason to bring your lunch to work, which by the way, is the meal where you say we all get sucked into.
It’s so interesting. I I do not wanna do latte shaming here, right? Like I, I talked to one young woman who said, you know, we were actually talking literally about this, this very point, and she said, look, my morning coffee, it is the best part of my day.
I go into the local coffee shop, the barista knows me, they look at me, they smile, they say, I got you the coffee’s there. I’m like, great. That’s a moment to treasure in your life. Do not mess with that. Find the five bucks to save somewhere else. Then brown bag it to lunch three times a week. You’ve saved more than that.
Think about, this just drives me nuts. I’m gonna sound like a boomer here, but delivery food deliveries are so sneaky because you’re paying for takeout food, which almost always costs more than making it home. And you’re paying the delivery fee and the poor restaurant’s getting less money if you’re using DoorDash, right?
So nobody’s winning in that side. Nobody’s winning there. And so I, I really urge people to think about if they’re struggling to save, taking a hard look at. What most people would think of as discretionary spending, right? Because there are many ways to eat that don’t involve getting it delivered to your door in 20 minutes.
Think about finding a couple of low hanging fruit places that you could trim. It might mean investing in some cooking, online cooking classes, you know, learn how to use a knife. It’s a life skill and it makes it a lot easier. And sometimes you do wanna just get the salad delivered, right? Like sometimes your life absolutely requires that, or it’s a great treat.
And of course, you wanna be able to go out with your friends. So I’m not saying eliminate all of it, but just think about the stuff that actually doesn’t matter very much. That’s not bringing you the kind of joy that this young woman’s coffee did every morning. Like, if it’s not bringing you any joy, it’s not making your life easier, then why are you spending the money on it?
I love that
coffee story because I think a good financial plan builds around. Those moments builds around those, you know, I wanna protect those joyous moments. So cut out the ones that you don’t care about. Yep. I love that. Yep. And by the way, the cooking thing, oh my God, stackers, when I learned how to cook, I found at the end of my day now, and there are a few things more fun, and certainly there’s days I’m not in the right mood and I just have to go to a restaurant.
But there are so many days where I will just, I will pour myself a glass of wine. I’ll turn on some music. And into this joyous place where I gotta tell you, you gotta get in the moment when you’ve got that sharp knife because other, otherwise there might be, might be some digits missing. Missing, right? Oh yeah.
So find the joy in those, in those moments. I love that. Oh yeah.
It, it does take a little bit of time. Right? And for many people, if you’re working, if you’ve got kids at home, right? Finding the time is no joke, but it is the kind of thing that a little tiny bit of prep, and again, if you are at home with kids, right?
I, I did this with my kids, right? We’d have like Sunday afternoon meal prep sessions and we’d all kind of dive in there and get stuff organized for the following week. ’cause you know, I was getting home at six 30 and getting dinner on the table when you walk in the door at six 30 is no joke. So having pre-planned stuff ready is, is interesting.
And like today, for instance, as we’re recording this. I’m slammed solidly until six 30 and I was gonna try to run to the grocery store and buy something and I’m like, Oop, that leftover be too is looking pretty good right now. That’s what we’re having for dinner, right? So there goes my lunch tomorrow, I’ll have to figure out a different plan for lunch, but that’s dinner tonight.
So again, and such kindred spirits. Cheryl, my spouse last week made a, a huge pot of a chicken noodle soup that we used all week long for the busy days. There you go. And it was, it was fantastic as it was a little colder here, I wanna run through some of these hacks that you have. You, you have these awesome shortcuts that I think we all need.
Uh, I’ll tell them so that we don’t have to test your memory, but once I bring these up, and I’d love for you to just briefly comment on all these, the first list that, well, and I love all the lists, but the first list we’re gonna tackle here is the biggest risks to a 20 or 30-year-old saving, and you’ve got five of them.
So let’s dive into these, if you don’t mind. Number one, not contributing to a 401k or an
IRA. The power of compound returns. It’s math, it’s statistics. It’s kind of a gnarly equation that raises things to the power of, and your brain shuts down and goes, oh my God, I don’t wanna deal with this. And I have a little story in the book that uses bagels.
I
was gonna say, you talk about this in terms of food in the book. So I wanna
talk about bagels. There’s lot of food in my life. What can I say? I like to cook. I like to eat, right? So your brain thinks compound returns, whatever. It’ll increase, you know, 10% a month. ’cause the bagel fairy is very generous, right?
You have a hundred bagels, you get 10% more a month. You get 110 bagels. The first month you get 120 bagels. The second month you get 130 bagels. The third month goodie goodie. But that’s not how it works. The first month you get 110. The second month you get 121, not 120 because you get 10% on 110. So you get 11 extra bagels and then the next month after that, you’re getting 10% of 121.
So you have 133 bagels. We only deal in whole bagels with the bagel fairy, no fractions. And this goes on and, and it basically means that at a 7% return, your money will double every 10 years if we’re compounding this yearly. And unlike the bagel fairy who compounds monthly, just ’cause she’s very generous, but that doubling every 10 years means that any money you invest in your twenties is gonna be worth 10 to 20 times as much in your fifties.
Like that is just mind blowing, right? So that’s why it’s number one. That’s the biggest risk you have is not getting a little money to work, because time is magic. When you’re in your twenties,
and I’m sure Anne, you’ve traveled around, talked to a lot of people, the number of people that have probably told you I don’t save into 401k because they don’t have a match, and the match is the icing on.
Forget about
the match. You know, forget about that. If you don’t have a 401k, use an IRA that, that the magic is the compound return. And as you say, the match is icing. And man, if you’ve got it, it’s free money and grab it. But if you don’t have it, you still can get the benefit of time and that’s even more
powerful.
Second one, you mentioned this already once, not having an emergency fund, but you know, you hear different experts talk about three months, six months, full year. How much should we be looking at and what’s the criteria?
I think it re the, the answer to everything is, it depends. Mm-Hmm. You can tell I have a master’s degree in economics, but to me it, it’s based on a couple of things, right?
One, how confident are you that, and, and the three to six months comes from how long it will take you to find a new job. Like let’s just say everything in your life goes wrong and you lose your job. Three months is kind of a reasonable, not super scary length of time to think about it, taking you to find a new job.
Except sometimes, like in 2008, people were outta work for years. So three months might not be quite long enough unless you’re hyper confident that you’ve got super good skills and you’re in a period of life where you can move to get a new job. Maybe you can get a job virtually like, so three to six months.
That timeframe depends a little bit on how, what kind of skills you have, how, what level of job security you have, right? If you are a teacher in a union, right, it’s really unlikely that you’re gonna lose your job. So you could get away with three months and then you’re worrying about things like your furnace braking, needing a new car suddenly, right?
Those are like expenditures. If you’re not in a union job, if you’re not employed by the government, if you do think it’s likely that you’ll, you’ll. I’ll be honest. Almost everybody I know has either been laid off or their spouse has, by the time you’ve been in the workforce a couple of decades, like it will probably happen to you or someone you know, no shame in getting laid off.
But, but it happens. So if you think it might happen, you wanna be on the six month side of that. A year starts getting to be a lot. Unless you are in a super precarious industry, maybe you’re the sole breadwinner, you know, you have a very high base of expenses, maybe you wanna go even more. But that, that starts feeling like a lot of money to put aside.
For me. This third one gives me a real pit in my stomach being underinsured. Oh, especially people in their twenties and thirties. Ann, you’ve heard this before, right? I can’t afford it. I can’t afford the insurance. And I think, man, though, if something bad happens, this is just gonna cycle poorly.
I, and this is something I learned as a money manager, right?
You really wanna do everything you can to avoid, you know, the technical phrase for this is the tail risk, right? When you look at the, the chances of something going wrong, right? The chances that this might happen to you is one in a hundred. Okay? I can take that risk, right? I’m not gonna get into a car accident, nobody’s gonna break into my apartment.
I’m not gonna have a medical emergency. My house won’t burn down. Right? These are all things we buy insurance for. And if the risk is one in a hundred or one in a thousand, you think, ah, it’s never gonna happen. Except it does all the time. Somebody’s number is gonna come up for those risks. And I still remember, uh, visiting the MIT Science museum with the kids once when we were on vacation in Boston.
This is the kind of weird family we are. So we go to things like the MIT Science Museum, and they had this,
again, machine, kindred spirits. Ann, that is totally my thing to do. Oh, well there was this
fabulous machine there that took I think like 10,000 steel balls and dropped them into this big hopper, and then they went through like a pachinko machine.
If you’ve ever seen one of those in Japan and had these still steel balls dropping through all these little rods. And it did this every like half hour, it would take these balls and dump them and they would basically fall into like a. A normal distribution, right? The balls would just tumble down and you’d end up with like the bell shaped curve.
And they had, I think, 10 or 20 of these balls painted red. And watching where the red balls ended up was fascinating. Let’s say they had 10,000 balls in a hundred balls. That’s 1% right? They ended up on the ends, right? They ended up in the, it’ll never happen, right? Except up. All will always fall on the end.
And so if you’re thinking, I don’t need renter’s insurance. Renter’s insurance is cheap. Renter’s insurance is so cheap and that will, that will protect you. If you’re somebody breaks in and steals your laptop, that may protect you. Depending on the policy. If your suitcase gets lost, that may protect you from all kinds of things, right?
So being underinsured prevents catastrophes, and you wanna avoid the catastrophes that will put you into bankruptcy.
I always got so sad back. I haven’t been a financial planner in a long time, but when I was, man, I just reme these horror stories. People would tell, they’re like, well, I didn’t think it would happen to me.
And then this happened, and my life has been a mess for the last seven years because. Because of it, and if you can, yep. Avoid that. Yep. Number four, saving for your children before yourself.
Oh, such a sticky one. I think I write in my book that I literally would’ve starved and to feed my kids. If you do that with money because you’re worried about paying for college, which let’s just say is a real worry, and you should be worried about it.
If you fund their education in front of your retirement, you are putting not just your own retirement risk, but also your children’s financial future. Because when you run out of money, which you might, your kids may feel like they need to step in and help you. You’re losing the savings. You’re losing the compounding.
None of us want our kids to go into debt for an education, but there are many, many, many ways to pay for an education. There are no other ways to pay for your retirement other than saving yourself for it. Like you have to do that. You can go to less expensive schools, you can get an associate’s degree and then get a four year degree.
You can go to a state school, you can get scholarships. There are a lot of different ways to help pay for education and there is no other way to pay for your retirement. So that, that to me is a worry.
And the fifth one, buying too much house.
Oh, done that twice. Yeah. It’s tempting and it’s super tempting with mortgage rates where they are and house prices where they are right now.
’cause sometimes you just gotta, you gotta do it. Yeah. My, my son and his fiance who are 26 now are actually contemplating this and it’s like, yeah, it’s, it’s a great thing to do if you can afford it, but my goodness do not stretch too far. It is what got us wasn’t the actual house purchases, it was then the subsequent renovations.
’cause like how could we not fix it? Every house. It’s a really easy thing to slide into. And as my husband said, once, the most expensive words in the English language are while we are at it. So, um, if anybody’s ever done any renovations, you know what I’m saying?
Right. I felt like the people at Home Depot, every house I moved into, I felt like people at Home Depot knew me by day three of the new place I moved into.
’cause while I’m at it, I should probably handle this thing. We bought a
1906 house that still had the original wiring from 1906 oh. And we joked that we put the electrician’s kids through college and now we’re working on his grandkids. Right. I mean, it’s just like, oh, ’cause there is some stuff we will do.
Electricity is not one of them. We will do ourselves. So yeah, that was, that was a tough one.
You have one more tactical list, and I don’t want to, well, you have a lot of tactical lists, but I, and I don’t wanna go through this entire list, but I do want to talk through a little bit. You have this idea of a subscription cleanse early in your book, and I love these.
I’m, I’m just gonna say a few of ’em and ask you to comment on just a couple of these. Avoid Autorenew makes sense. If you’ve more than one credit card, use the one with the closest expiration date for renewing subscriptions. I’m assuming Anne. That’s because when that card dies, it’ll force you to look at that subscription in the face.
Yep.
So don’t get a new credit card if you only have one. That’s a bad reason to get new credit cards. But if you happen to have more than one, you wanna create friction, right? You wanna throw sand in your own gears, especially if you’re a sender. You wanna figure out ways to slow yourself down and anything that makes you stop and think, do I really need that, is great.
Right? So having to put a new credit card number in is a great way to say, how many times did I use that thing? I mean, I have discovered, I. Somewhat to my shame as I talk about this, I’m like, I better go do that cleanse again myself. And like, when did I sign up for that? I don’t remember signing up for that.
Right? And, and there you are paying for something you don’t even know you had and certainly don’t need.
Well, and I love this thing going through your credit card statement, I found, you know, your point on this list is make a list of every monthly fee on your credit card statement, but just walking through your credit card statement or wherever you are tracking your spending is such a great, like, you know, once a week quick, quick activity.
Yeah. And you don’t have to do it every month or every week. Do it. Good point. Do it once a year if it, its some of this stuff for people write, uh, you know, the ostriches, I talk about spending types in money types in my book, but if you’re an ostrich and like this causes you pain and anxiety, don’t make yourself do it all the time.
And you, you might desensitize yourself and maybe it’ll get easier, but just make a date, put it in your calendar and just say, Hey, I’ll just do it for an hour and then I’m out. Like, I, all I need to do is a little bit. Take a little tiny step. That’s all you need to do. Do it for 10 minutes. See if you can find one thing in your statement and say, do I need that?
Kill it. And
I’m gonna come back to that because you’ve got the word kill in another one of these. But before we get to this one, stackers have been with us for a long time and know that I’ve been threatening to do this for a long time. And everybody, I’m finally doing this one, rotate your streaming subscriptions.
I’ve been talking about this. And for over a year, my cousin does this, he called me up, he’s like, what do you like on Netflix? And I’m like, well, like this and this and this and this. And then, you know, like four months later calls me and goes, what do you like on Disney? Plus? I go, this, this, this, and this.
’cause I’ve got ’em all, you know? Mm-Hmm. And then I finally asked him, I go, Randy, what are you doing? He’s like, well, I only have two eyes. So I watch one of them and I wa
it’s, so, I I, I have a couple that I watch one show on and is like, not gonna be, the New Season’s not gonna be out for three months. And I’m like, why?
Why am I paying for this? Because I what if, what if what it is? Like just, just do it. Oh, just do it. It’s hard. It’s hard. It is. FOMO is a real thing, right? And you’re just like, well, what if I, what if I want? And then you can turn it back on. It’s, I can watch it six months from now. Like, if you’ve got internet to watch, you’ve got internet to turn it back on.
You know, it’s
funny, I’ve been talking about it for a year out loud thinking that will make sure with this microphone on my mouth, it’ll make me do it. Yeah. It took me 12 months. This is
why I announced that I was writing a book when I left my job four years ago. That’s exactly why I did it. Yeah.
Personal shame.
Yeah. I wanna bring up this next one though. Kill you. You say kill at least one quote, essential subscription each month. Like, if it’s a, a quote essential. Why are you talking about killing that? Well,
you know, and I’m gonna pick on the poor food things. If you’re getting one of those food box things really, really tempting for busy families, how much do you really need it?
You may find if you suspend it, you know, maybe the word kill is a little aggressive. If you suspend it, you won’t notice it. I got this one box of, uh, delicious, amazing flash frozen seafood delivered during the pandemic when like our local fish store wasn’t running. And it’s cheaper than buying it in the store.
And it’s fabulous. And I stopped it. I don’t know, a year ago when I opened up our freezer in the basement, I’m like, this thing is full of frozen fish. I’m not eating as much fish as I thought I would like. This is crazy. Right? So I just, I, it was just piling up and I thought, well, I can turn it back on when we’ve eaten all the fish.
That was six months ago. I’m just, just like, I didn’t eat it. I wasn’t gonna waste. Right. But I didn’t, I didn’t need it.
Well, and you think about, you know, the carrying costs, we think about that. Like if you run a company, people think about the cost of inventory sitting there. We don’t think about all this stuff in our freezer as carrying costs, right?
Yeah. I mean, Cheryl and I did a cleanse this last month where we just said we’re not buying any meats until we get through all the ones that are in the freezer. And you know, it took us the entire month, Ann took us the whole month.
Uh, we did the same thing. We had a, a basement second fridge. ’cause you know, when the kids are home and fence friends and family, we need two fridges.
But we were leaving it running all year, mostly empty. Which as my husband pointed out, it’s not cheap from a utility pill perspective ’cause you’re just cooling off air and, and it was full of food. So we worked our way down and, you know, whatever was down there is now wandered into our fridge. And now I’m just like, why do I need this giant jar pickles?
We don’t need that many pickles. This is ridiculous. Right? So
I think, by the way, that is half the fun. That was half the fun. I’m like, oh, when did I buy this?
But, but this conversation is such a great example of how many things we all have in our life. And I don’t wanna get all Marie Kondo here, but like, I.
There’s so much stuff that we have that seemed like a another sentence. My husband is fond of quoting. It seemed like a good idea at the time, right? It did. But you know, give yourself a chance to reflect and to throw some sand in your gears so that you pause a second and say, do do I really need that? I can happily never buy another jar of pickles in my life.
I think, ’cause we got this like five gallon, I don’t know how big this jar of pickles is, but it’s enormous. Like there’s no way we’re gonna ever eat the, we’ve had it for like eight years. They don’t go bad, but like. It’s a lot of
pickles. I like pickles a lot. The book is your best financial life, guys.
Those are just two of, I, I think the number’s a bajillion list that Anne has of ways to save money, ways to hack your, your savings, get things moving, get things automated. Ways to change your mindset so that you do a better job of all this. The book was available everywhere last week, literally everywhere.
I was just on walmart.com. I saw it there. Anne. I mean, I’m seeing your book everywhere.
So exciting. Yeah. No, it’s great. Thank you so much. Listen, I, the reason I wrote this book is because I want, I want to help people understand the consequences of decisions that they don’t necessarily realize they’re making, and to avoid the ones they will regret in hindsight.
There’s so many things I look back and go, if only I’d understood, I wouldn’t have done it. Or maybe I would’ve done it anyway. But I won’t be surprised right now that I am where I am. Right? So it’s like help helping people untangle That to me is just, it’s, I really want people to look back with less regret on their financial decisions.
Hey, this is Andy Hill from the Marriage Kids and Money Podcast, and when I’m not singing
Disney karaoke songs with my kids at home, I’m
Stacking Benjamins. Big thanks to Anne. Oh gee, Anne, you, me, proof that you can be a spender at heart and, uh, and still at your financial house in order.
Well, half that’s true for me.
Definitely can be a spender at heart
working on the house in order part, but, uh.
Well, I like that because it, it is, you know, um, who was it that said that a plan is junk, but planning is the most valuable thing you could do.
I think it was, uh, one of those singers you were, that Doug was talking about, probably David Lee Roth. Yes. Yeah.
Whoever that guy is who probably stole it from Vince Neal at Motley Car.
I’m sure. Absolutely.
You sound bitter, Joe. The dudes from Foo Fighters. That’s just this big incestual. I don’t know man. Fun fact, uh, that wasn’t a quote from anybody. That was actually a lyric in an unreleased Van Halen song. So who knew?
I think which
they stole. A rat planning is what matters or something.
I
dunno. Rat with two T’s.
I’m sure that’s what I was saying. Okay. There’s something missing from our name. It’s RAT. It seems kind of generic. Yeah, I know what we’ll do Jim. We’re gonna add another tea. Put a tea that’ll make it different. Did you guys ever
hear of the Hairband? It was a Christian hairband called Wasp.
No, I swear to God that’s not the opening to a joke there is there you go back to the eighties, there is a Christian hair metal band called
Wasp. It was a cool Christian rock band. I used to like in the eighties, the res band. You guys ever listen to the res band Uhuh?
I was in elementary school. So, no, it’s a
whole different thing.
Hey, uh, you know what I. He said distracting people from this conversation going nowhere. Somebody just said, you know what? Better call us Saul. See hi and og. This is the part of the show where we shine a light on a stacker who needs our help. It’s like they have the bat signal, you know? And they show it all over Gotham.
Well, here they show it all over Texarkana and we see it there it is out the basement window. ’cause there’s lots of windows in basements. Just work with me people. Uh, and it
turns out Ros window, it’s required by code.
Duh. Uh, it’s Carlos who needs our help? Carlos, here we are, man. What do you need? Hey,
Joe OG and most importantly Neighbor Doug.
Oh yes. This is Carlos calling from the beautiful campus of the Northwest, Bahama State Beauty and Technical
College. Beautiful blow.
Now I know that my investment should be split between pre-tax after tax and taxable accounts, but what percentage should I have in each of these buckets? Here’s some background. For the last couple years, my wife and I have maxed out my Roth TSP contributed enough to her traditional 401k to get her employer match maxed out both far Roth IRAs and then with anything we had left over we’ve invested it in a taxable brokerage account.
However, at the beginning of this year, my wife got a new job and for the first time she now has access to a Roth 401k and thanks to a pay bump, we are now maxing out both our employer Roth accounts. Given that Matt, we now have a significant amount of our investments going into Roth accounts. How should we allocate the remainder of our money?
Should we still max out our Roth IRAs and take advantage of all the tax free growth? Or is that just too much money to have in one bucket? Should we instead take any leftover money and invest in our taxable brokerage account, which would allow for more flexibility? Thank you in advance for your advice.
I’m very much looking forward to my Doug 2024 T-shirt.
One last
thing, Doug, if you could please would you talk to the good folks over at Flying Pork Apparel and see if we can get them to print up some Northwest Bahamas state merch. I just left the campus store and they’re totally sold out of shirts in my size.
Extra medium. See you
extra
medium. Well, first of all, I don’t think I’m gonna ask flying pork to make a shirt for our rival school, because I went to Southwest Bahamas State. Yeah. Beauty School and Technical Institute. So I mean, the fighting blow dryers, they were our main rival. There’s no way we’re gonna make t-shirts for those guys.
They were losers,
hated them
fighting blow dryers.
We, we, uh, I do have a call coming up though with, uh, Brad about some shirt designs. He actually wrote me yesterday as we record this Carlos. So I think you will see some new Stacking Benjamins designs, which I think are way, way clever. I love the stuff that he does.
So many of our shirts, uh, have these little hidden things. I love the, um, I love the bowl and bear boxing match. Doug, you were wearing that shirt last week.
Uh, yeah. What am I, am I wearing it right now? Well, I’m wearing the fighting. Fight night.
Yeah, that is the one. Yeah. Believe it or not, Doug hasn’t changed his shirt in a week.
Didn’t notice that until just now.
Is that a requirement of my employment? It’s the
requirement of an Apple tart Apple Tartlets change
shirts once a week. But if, if I remember right, Brad is proposing that we have the I dig Doug. Logo on the back of every shirt somewhere, right?
I’ve never heard that. Not, not once.
We do the fifties poster, which is behind me, uh, the fifties movie poster, which, which is a fun shirt, of course. Ben Franklin, the financial ed shirt. Good stuff. Stacking Benjamins dot com slash shirts if you wanna check ’em out. And hopefully more coming. But og let’s talk about this idea of the tax triangle.
People wanna look at this, by the way. We’ve got this in PDF form, uh, stacky Benjamins dot com slash tax triangle. Just all one word. And you could just download it. But let’s talk about what the tax triangle is first for people that don’t know this. ’cause this is to give you some tax diversification.
Yeah, well, think about it like
there’s three different places where you can put your money and each one of those places have different taxable rules in terms of, or tax bills related to the money going in and, and how it grows, and then how the money comes out. I. Carlos mentioned them. There’s basically pre-tax money, so that’s your pre-tax, 401k pre-tax.
IRA. You get a tax break by putting it in, grows tax deferred while it sits there, and when you take the money out, it’s fully taxable. The other side is tax free. So you put money in, it’s uh, already taxed. It grows tax deferred, and then when you take it out it’s tax free. So you pay your taxes today.
Basically. Those are the kind of two major options when it comes to retirement savings. Pay your taxes today, pay your taxes tomorrow. Those are your two choices. And then the third bucket is the taxable bucket. Your regular taxable brokerage account. When you go, Hey, I got an extra a thousand bucks left over this month and I dump it in my brokerage account, you’ve already paid taxes on that money.
You’re gonna pay taxes on that money while it grows in the form of capital gains and dividends. And when you take it out, you only pay taxes on the gains if there are any, or if you haven’t paid those already. So it’s kind of a combo, but it provides the most flexibility. So the, uh, the three different buckets there.
Tax deferred, tax free. Taxable. Now, those are the two, or I’m sorry, those are the two buckets. It’s called a tax control triangle, og. The triangle means three. Say there’s three buckets. I’m gonna go dose not two. You dumbass. It’s the tax control line that has a beginning and end. Just two things. Anyways, what he’s talking about is how do you allocate your retirement savings?
If you’ve got the ability to contribute pre-tax, you’ve got the ability to contribute into the Roth, which is an after-tax contribution, and then you’ve got extra money. Where do you put it? Should you keep on putting it in tax free buckets? Should you get tax breaks today? Should you add the flexibility and liquidity of the taxable account?
And the answer is, I don’t know. It just depends on what your goals are. So it’s kind of a big cop out answer, but I think it requires us to know a couple of things that you can think about if you’re in this situation. The first thing is, is when you think you might need the money. If you’re looking at your financial independence time and your retirement time, and you’re thinking.
I like what I do. I’m gonna work until I’m in my late fifties or sixties, is the kind of traditional retirement time, then the need for that liquidity, the need for access to money prior to the traditional retirement times goes down. You might not need to have that brokerage account to supplement your lifestyle from 55 to 60, for example, if you’re gonna, uh, retire early.
If on the other hand you’re like, I wanna maximize all my tax. I’m high income. You know, I make a ton of W2 income, where should I put my money? Well, maybe it makes sense to take a big tax break today because for every dollar you contribute to your retirement accounts, and you can do 23,000 if you’re under 50.
If you’ve got, if you’re married or in a relationship, you could do $46,000. And if you’re in a high, high, high tax bracket, you’re saving 12, $13,000 in taxes today by contributing pretax. The other end of that stick, however, is that you’re gonna pay it on the backend. So a lot of these things are kind of unique to what’s going on in your, in your world and the goals that you have.
I like the idea that Ed Slot provides, which is if you’ve got the ability to pay the taxes today to save it in the Roth, because that’s a known outcome, right? You have known tax free money in the future. It’s tax free for your life. It’s tax free for your beneficiary’s lives. There’s no withdrawal requirements.
It’s a lot easier to manage when you get into retirement. You’re losing out on tax deferral today or the, or the tax break today, but in the future, you know, maybe that’s worth it. I think that the right answer is likely that you need to have money in all three of those buckets. What the ratio is hard to say, but you wanna be able to take advantage of any sort of tax law changes that happen, any sort of liquidity needs that you have.
In a perfect world, you’d be able to contribute a whole bunch of money to the pre-tax 401k side, get a tax break today, and then figure out a way to convert it to tax free at a really low tax rate. And so you kind of get both sides of the equation on that. But in practice, that’s a lot harder to accomplish.
In reality, most people benefit from having a fair distribution of all three of those buckets because nobody knows what the future’s gonna look like. I don’t know what tax rates are gonna be in 2045 or how much money you’re gonna wanna take out for a second home and 2037. You know, I mean there’s, there’s too many things that are unknowable to just say, I’m gonna put all my money in the Roth, or I’m gonna put all my money in my brokerage account.
You know what I mean? Like, it just seems like having flexibility will be helpful.
Hey OJ, I get why the answer on the ratio is it depends. I mean, it always does. Everybody’s individual situation is, is unique. Are there any guidelines though, that people can use? Like, well, if you work for a government organization, you might wanna wait this one a little bit more.
Or if you’re self-employed, you might wanna wait this side a little bit more. Are there any even rough guidelines or it’s just not, can’t even do that?
You know, it’s funny, Doug to answer that. The thing that Carlos and actually a lot of our stackers need to know is that. 20 years ago, 99% of people were barely using the Roth.
They wanted to tax optimize. So all their money was going into the pre-tax, 401k pretax, 4 57 pretax, 4 0 3 B. Everybody was using pretax, pretax, pretax, pretax. And it was a way for the financial planning community and go, whoa, you gotta even stuff out. So if we take what OG talked about, which is the ED slot bias, by the way, ed slot coming back on the show, you don’t wanna miss when he’s coming on because he brings it every time with great tax tips.
I love when we’ve got Ed and we just booked him again with of course, uh, tax filing day coming up. But I think that Carlos is nailing that bias, which a bias toward the Roth as much as possible. Because we so much don’t need the pre-tax bucket as much as we need that Roth bucket. And think about it this way, if you’re growing money pre-tax, you’re also growing the interest on that money pre-tax.
So when it gets taxed later, not only is your money getting taxed, all the gains are also getting taxed. With a Roth, you’re gonna pay the penalty, but you’re gonna pay it on just the dollar you put in. So it’s gonna be an upfront tax, heavier treatment, I get all that, but it’s going to be ultimately, uh, probably less money in tax.
So, so I really like what Carlos is doing with just putting money in the pretext to get the match now that his wife has the ability to go Roth and still get the match. Well, I don’t know about you og, but given the two, if he can swing it, I’d probably go Roth with that as well, right? Well
the Yes, I would as well, generally speaking.
But let me give you another example of something that is kind of the importance around. Understanding all of the financial planning. Uh, I think a lot of times we get focused on one particular thing, right? The taxes, or we get focused on our asset allocation. We get focused on our fee structure or like one particular thing and not looking at all of the ancillary effects of this.
We are dealing with this right now. I have a junior in high school, so we’re applying to college. We listen to me. He’s applying to
college. Are you writing his essays for emoji?
No, I’m not, thank God, because he wouldn’t get in anywhere. I’ll take helicopter parenting for 200, Alex. Um, so he’s applying to college, right?
And we have to do the FAFSA and the FAFSA’s is gonna be based on our tax return from 2023. Right? Because that’s the most recent tax filing. We will not have done the 2024 filing yet. Well, we know that the new FAFSA came out in 23. A lot of hullabaloo around all that. But one of the major changes is that I.
Pre-tax 401k contributions in a FAFSA do not count as income on your FAFSA form. Roth 401k contributions do. Why is that? I have no clue. But maybe they think, well, if you don’t need the tax break, you don’t need the college break. So it would be prudent if you’ve got kids going to college and you’re gonna fill out the FAFSA and you think you might qualify for some aid to maybe make those contributions pre-tax in the FAFSA years, even though over a long period of time, maybe the Roth is slightly better edges it out, like you said, Joe.
But for the purposes of like, I might get $20,000 of grant because the way that this income is categorized on this government form, you know, you, you know what I mean? Like there’s some other, there’s some other decisions around this in a vacuum. I think pay the taxes today, it’s a known outcome. You know, you go, I know what I’m getting.
You generally don’t feel the pain of it ’cause it’s just outta your paycheck and you’re done with it. But there’s some other effects that you just gotta be aware of to make good decisions.
And that’s why og I love the fact that on Carlos question you led with, it depends because I think it comes back to job one.
And this is, this is our starting spot no matter where we are, when it comes to anything you’re trying to achieve, timeline out those goals, put when these things are going to occur. And as an example, if you’ve got the FAFSA years coming and you’re, you’re worried about student aid at the same time as retirement, you’re dealing with a whole different thing.
And if you timeline things out, you know, this is gonna happen this year. This can happen this year, this can happen this year. You’re also not gonna get caught in these over optimization tax traps, right? Where you’re like, oh. I save way too much money in a spot where I can’t get it easily before 59. I can get at it, but not as easily as I could if I’d had flexible my timeline out the goal.
And then everything comes from your goal, and that’s the part, Carlos, that we don’t know. That’s why it’s so difficult for us to answer your question. But I think ultimately og, it seems like he’s leading with Roth and then going flexible with the rest. Directionally probably, yes. For sure, maybe for sure.
Just agree with him. There’s a very confident answer. Carlos. Uh, if you would like us to discuss, uh, more tax triangle tax benefits, uh, estate planning, your budget, credit cards, whatever it might be, stacky Benjamins dot com slash voicemail gets you there if you need help on a bigger level because your goals are not going the same way your money is, well guess what?
OG and his team are taking clients, so head to stack your Benjamins dot com slash og and that’ll be your first step in seeing how his team can interface with you to make a better money decisions. We’re deciding that this podcast just about over, we go to the final segment, we call it the Back Porch Doug.
Uh, not a lot going on on the back porch besides, I dunno if I told you yet, but our book’s on sale. Oh, I think I mentioned it maybe a couple times. Bye Bye bye. I’m just excited. No, it’s awesome, man. That’s cool. I was like, I was like, when does our book go? I see all my friends’ books go on sale and I’m like, when does, when does my book go on sale?
And they’re like, oh, you know, at some point. And then we get this big huge book pub thing. So today people, if you missed it earlier, if you were mowing the lawn, I don’t do people mow the lawn in Vermont this time of year. I’d probably not this, this winter. They do day before the snow shovel. Wherever you buy books, the book is stacked.
You’re super serious. Guided modern money management handles financial planning like it is getting the Cub Scout wolf badge. The end of every chapter is not a chapter. It’s an achievement. We start with the early achievements, the easy achievements, and then we work into very complex stuff at the end of the book.
So start with the basics as we think you should timelining your goals. By the way, Carlos is number one. So we, we begin there like we do when we talk about the show. But Doug, you’ve been watching a bunch. A lot of stuff on tv. Yeah. Are we gonna do Doug’s uh, reviews in, in, uh, 60 seconds?
Yeah, I can do ’em really fast.
’cause I’ve, I’ve been traveling more than typical lately and yeah, I’ve just been kind of embarrassed how much TV I’ve been watching. I didn’t realize it until I made a list, so I can just run through ’em quickly and kind of give thumbs up and thumbs down if you wanna go that route. Or do you want me to do the OG method?
Here we
go. 60 seconds. We’re starting the calendar. We’re starting the timer now. Okay. Ready?
Go Masters of the air Thumb sideways. It’s okay. Oh, it’s so good. It’s, it’s a thumb sideways, man. It okay. But that’s it. We’re moving on. Fargo Major. Thumbs up. The TV series. Not the movie. We’re
not, how can you call that?
Just thumb
sideways. Masters of the air. Don’t care about the characters. Nearly as much as I cared about Band of Brothers, I actually put it kind of on par with Pacific at best. Uh, it’s visually amazing. I love, you know, it’s visually amazing. Um, but it’s just, I
think it’s, it’s Pacific. It’s worse than Band of Brothers.
Oh, for sure. But it shouldn’t, it shouldn’t be compared because these guys had. 30 minutes of knock white knuckle and the rest of the time they’re on the base. And, uh, but, but man, when they were dying, they were dying quick. Well, at the highest
rate, we’ve got 12 seconds left of any arm of the service. It was the deadliest form of battle you could go into by, by the numbers, by percentage.
But still, I just don’t think they put it together and times’s up. Damn it. Joe, I knew you were gonna do that to me. You guys took me off the, the focus and then you cut me off. We’re doing this again. We’re gonna talk about my shows at another back porch.
I’m excited to do that. I just, you gotta give, shows the right review.
I think that’s the answer. Give shows the right review and then we want it to stop you like Masters of Air. Way better than
some sideways. You’re saying my review has to agree with yours and then you’ll let me talk more.
Nah, I think it just needs to be right, not, not agree with mine. Just be correct. Just be a little
bit more accurate.
Speaking of accurate, there is an accurate, uh, to-do list. Let’s see if you can get this right. Doug. What should be on our to-do list today if we were paying attention? I do not
like my odds on this, but let’s give it a shot here. So what’s stacked up on our to-do list today? First, take some advice from Ann Lester.
Are you a spender? Whether you spend or save naturally, setting up systems are a great answer. Second, struggling with credit cards while capping late fees helps set up systems to have no late fees ever. Sign up for automatic minimum payments to go from your checking account to pay the bill. Your credit will.
Thank you. So what’s the biggest to do? I need to buy more leotards. I forgot how well these show off my figure every last inch of it. And look, og, if you pull ’em up to your chest, they make a great girdle. O og. Where you going? Thanks to Anne Lester for joining us today. You can find her new book, your Best Financial Life.
Save Smart Now for the Future You Want wherever books are sold. We’ll also include links in our show notes at Stacking Benjamins dot com. The show is The Property of SP podcasts, LLC, copyright 2024, and is created by Joe Saul-Sehy. Our producer is Karen Reine. This show is written by Lisa Curry, who’s also the host of the Long Story Long podcast.
With help from me, Joe Kate Youngen, Karen Reine, and Doc G from the Earn and Invest podcast, Kevin Bailey helps us take a deeper dive into all the topics covered on each episode in our newsletter called the 2 0 1. You’ll find the 4 1 1 on All Things Money at the 2 0 1. Just visit Stacking Benjamins dot com slash 2 0 1.
Wonder how beautiful we all are. Of course you do, but you’ll never know. If you don’t. Check out our YouTube version of the show Engineered by Tina Eichenberg. Then you’ll see once and for all that I’m the best thing going for this podcast. Once we bottle up all this goodness, we ship it to our engineer, the amazing Steve Stewart.
Steve helps the rest of our team sound nearly as good as I do right now. Wanna chat with friends about the show later? Mom’s friend Gertrude, Stacey Doe and Julia Garib are our social media coordinators, and Gertrude is the room mother in our Facebook group called The Basement. So say hello. When you see us posting online to join all the basement fun with other stackers, type Stacking Benjamins dot com slash basement.
For more interactive fun, join us on Instagram every Tuesday and Thursday for our Instagram lives. Kate Yakin and Joe host those weekly. Not only should you not take advice from these nerds, don’t take advice from people you don’t know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor.
I’m Joe’s Mom’s Neighbor, Doug, and we’ll see you next time Back here at the Stacking Benjamin Show.
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