Bad Financial Habits to Break Before You Go Broke!

Episode 12: Audio automatically transcribed by Sonix

Episode 12: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to All Things Financial, the show that helps upgrade your financial literacy. Trey Peterson and Yellows Coots are retirement planning specialists here to provide a unique and conservative approach to managing your money. Now, here are your hosts. Trey Peterson and Yellow scoots.

Speaker3:
Hello everyone. My name is Ryan Moffatt with all things financial. With me is yellow Circutz. Uh, today I'm filling in for Trey Peterson and we've got a number of things we're going to dive into today on our podcast, which of course you can find our podcast at ATF Podcast.com. All things financial ATF Podcast.com. Uh, but we've got a number of things we're going to discuss. We've got bad habits that can cost you thousands each month. Thousands yellow, say, each month. Uh, we're going to talk about inflation, and we're going to talk about how inflation is going to impact your retirement. And we've got a list of different things that we're going to focus on as far as what Americans like to spend on what we don't like to spend on, which, of course ties right into inflation. We'll talk about what that means as far as Social Security goes. Uh, we'll talk a little bit about budgeting, etc., a number of things that we're going to dive into today. Uh, so yellow is uh, we've got a number of things to dive into. Why don't you start us off, though, with our quote of the week?

Speaker4:
And now for some financial wisdom. It's time for the quote of the week.

Speaker5:
Okay, so this week the quote is from Orrin Woodward. And Orrin has to say this. You can have a master's degree in making money, but you will still wind up broke if you have a PhD in spending it. And we're going to talk I talk a lot about that because not only is that a concern on the household level, but just as a nation, our government spending, um, what happens when you spend more than what you bring in? And I think it's just, um, you know, it's very it's it's, uh, it sounds like a very basic thing, but something that, uh, we, we encounter folks who struggle with that all the time. And, uh, you know, it seems like a pretty easy principle to, to keep, but, uh, not so easy in practice.

Speaker3:
Not so easy in practice, actually, I will say, if that quote resonated with you, if you're listening to this and you thought, boy, that sounds like me, uh, we'd love to help think map things out for you. We'd love to go through retirement analysis, uh, whether that's a simple comparison and say, hey, how do I do a budget for retirement? Or we're looking at all the pieces and diving in and saying, what do my investments look like? What can I rely on in retirement as it relates to inflation, as it relates to my own spending, my PhD in spending? Uh, we'd be happy to dive into those things for you. Uh, you can reach us anytime. Our phone number is (612) 286-0580. Uh, or email uh Ryan at gmail.com. Trey at gmail.com tr e y or yellow at gmail.com y e l I s e y. Uh. We're happy to, uh, go through those things. That's what we do on a daily basis as we're constantly meeting with clients, uh, constantly meeting, uh, with people and, uh, trying to figure out, hey, how does retirement look for me? What are my goals? Am I going to be able to accomplish my goals, etc.? Uh, but why don't we dive in? Let's start with the five bad habits that cost you thousands each month. I was a little shocked by this. I was lazy, uh, bad habit number one. And again, if this resonates with you, uh, take a take a listen here. But bad habit number one, not budgeting. So a recent study found that 27% of people just plain don't have a budget. Yellow. Say do you budget?

Speaker5:
I absolutely budget I think I budget to an alarming degree. I think, uh, I can tell you about every expense from the last, I don't know, probably ten years. Um, yeah. No one is comfortable by the amount of budgeting I do.

Speaker3:
Why doesn't that surprise me? Yellow? Say, my guess is that, uh, Trey would also not be surprised by that remark. Yeah.

Speaker5:
Well, what you're saying and and, uh, it's actually you, uh, you obviously haven't listened to last week's podcast when we covered budgeting. And, uh, there's a Harris poll that we discussed that showed that 74% of Americans, uh, actually said that they had a monthly budget. But one thing that I wanted to point out, uh, the stat that I thought was actually more telling, uh, it was like 80 some percent of them fail to stay within their budget. Right? I made the point. Like, what's the point?

Speaker3:
Yeah, sure. For sure. Well, so the interesting thing, and what I want to encourage everyone listening, is that there are a lot of different ways to budget. So whether you're the Excel spreadsheet person, whether you're the person that downloads the app on your phone and connect it to your bank so you know where every penny is going, there's a lot of different ways to budget, and I just want to briefly touch on a couple of them. But there are some of the methods that you've heard about, maybe the envelope, like the cash stuffing budget that, hey, once my money comes in, I have an envelope for every I area and cash goes in. Uh, there's the zero based or the net zero budgeting, which I think we oftentimes talk about here, um, especially when going through retirement plans. Is that really every dollar coming in should have a purpose, right? I shouldn't have this, uh, ambiguous bucket of of money that you're not sure where it's going or what's happening with it, but the zero based is saying that every dollar has a specific purpose. And if that purpose is discretionary, great. If that purpose is financial goals, that's great. If that purpose is going directly to savings to not be touched for a period of time, that's great too. But those are still purposes, right? Um, the pay yourself first or the 50, 30, 20, uh, maybe that's you. Where? Hey, I'm just going to say, what's my income? And I'm going to break it into my individual buckets.

Speaker3:
Right? 50% goes to all my normal bills, my fixed expenses, 30% goes to discretionary, 20% goes to financial goals. And of course, those percentages can vary, right. You'll hear one person that it's a 50, 30, 20. Somebody else says, you know, maybe I want less discretionary and more towards goals. Um, other people will say, well, your goals, if your goal is a new boat, that's discretionary anyway. Hey, I don't have a problem with that. You know, the point is to to know where the funds are going. Right? Um, but the fun one that I think is, uh, worth worth talking about is the no budget budget. And that's really kind of the hey, what comes in goes out. Right? So I know that I say for my, in my 401 K, but other. Otherwise, what kind of comes and goes out? Uh, and I would say a number of times in discussion, this is, this is the this is what we find is that somebody says, you know, this is my net income. I know that my fixed expenses are around, whether it's four grand or eight grand or whatever the number is, but then they don't really pay any attention to that discretionary bucket. So ultimately the discretionary becomes a undefined and unregulated bucket of money, which of course drives your expenses up. So yellow say you track every penny. Would you think that you fall more into the 50, 30, 20, or are you more zero based or categorically speaking what do you fall into?

Speaker5:
So for me it's more of a combination of the two. I do track everything, but that's not what, um, what I use as, as a guide. So I'm a little bit closer to what Trey talked about last week where he's, uh, he's more of a, it's more of a, a margins based, um, budget where we set aside a certain percentage that goes towards, uh, potentially investments or a certain amount that goes towards eating out or, uh, travel and vacation. Um, you know, a variety of categories that we have. And, um, you know, I think the majority, you know, for most people, you know, if you're if you're if you're barely making it, if what comes in goes out every single month, it's really hard to allocate a certain percentage towards, uh, retirement savings. It's really hard to, um, to make sure that your emergency fund is as high as it needs to be. And we've talked about this a lot, where you should have at least three months in savings. Um, you know, and if and if actually, if you're, if you're married and you're the only one who's working, you should have six months of expenses, uh, in your savings account, having an emergency fund. And I think that unless if you if you don't do it automatically, what we find is it's very difficult to do. Most people just don't. So if they don't have a certain amount that's being set aside automatically, whether you're doing it by a dollar amount or a margin of a certain percentage of your income, it just doesn't end up happening. Um, but that's kind of how my wife and I do it. We have a certain percentage set aside for each category, and we try to stay within that percentage with the majority, uh, or as much as we can going towards the retirement savings and investments.

Speaker3:
Yeah. I think I would say that's really similar for in my household as well. And you have to identify what the needs are. And of course we've got four kids. So I feel like as the kids, uh, get older, the percentage it's allotted towards kids activities and sports and camp and you name it, that bucket seems to be growing. Yeah. Let's say I don't know if you've reached that yet, but for us, that bucket seems to be growing quite a bit. Um, but what I would tell everybody and encourage you is just simply that, hey, if you've not gone through any type of budgeting exercise, uh, in any capacity, there's a number of different ways to do it. And the first time you do it may not be the most fun in the world, but it's absolutely well worth doing because ultimately, the no budget plan or the not having a budget, you're going to end up, uh, having a lot of your dollars, your hard earned dollars that don't have a purpose and end up eating away at your goals, your retirement plan, all of those all those things. So definitely dive into the budgeting piece not to, uh, not to focus on that one too much since we covered a lot and the last podcast. But, uh, financial Bad habit number two is over using credit cards. I thought credit cards were free money. Else are they not free money?

Speaker5:
Well, I mean, it just depends. Some people, uh, definitely use it that way because. Well, the reason I say that is because, um, I can't remember the exact number, but I know it's up, um, the number of people who carry their balance forward, who don't pay off their credit cards. And, um, you know, we see this all the time. We run into folks like, hey, do you realize your credit card company is probably charging you north of 20%? Like, that's the interest rate for carrying that balance forward. Like, imagine if, like, we I've mentioned this before, imagine if there was an investment that paid you 20%. Like they're making really good money, they're making it on you and you making a very poor decision with your finances. And, you know, unfortunately, just, uh, looking at some of the national statistics, the national averages, um, credit card, uh, debt is at an all time high. And the more troubling number is, uh, our, our, uh, delinquency rates. Those are also at an all time high. Um, that's a terrible recipe. And I know that, you know, a lot of what we do is retirement planning, but especially to the, like, our younger listeners. That's that's not how you plan a budget. That's not how you pay for your expenses. Uh, it's a very expensive way to do it.

Speaker3:
It is. And the national average credit card interest rate right now. And it varies, of course. Uh, but the national average rate is 22%. So I like your example of, you know, think of an investment that way. Right. Because we would all love to get 20, 22% on an. Estimate, but this is a reverse investment for you, meaning that you're not getting it, you're paying it, and it's a ton of money going out each month when you're paying for your bills like that. Um, there's a number of different people that would look at it and say, don't use credit cards at all, or make sure you pay it off every month. I think the most important thing, uh, like yellow say that you said was just you got to focus on not paying that 20% every month on it. Now, whether it's whether your balance is $500 or $5000, it's it's kind of just money lost immediately. Wouldn't you agree?

Speaker5:
Yeah, absolutely. Yeah. I mean, think of it this way. Like, you know, when you go to the bank and you get a, let's say you get a CD, you're giving the bank your money in return, they're paying you up maybe 5% today. Or if you get like a money market account, they're paying you a certain percentage. Well, the credit card company allows you to use their money, which is what you're doing. You have to pay them 20% if you keep that balance going. Like, that's, uh, you know, I mean, that's an incredibly lucrative proposition for the credit card companies, you know, and I think that, you know, a big part of that is, is we'll talk about this a little bit later. Uh, but inflation, inflation is driving a lot of that, making sure that you can keep up with the expenses, the things that you know, you need to pay for, um, looking at some of the how, how discretionary spending has changed, uh, because, you know, it's, it's things are just more costly. Inflation is a very real thing that a lot of us have to contend with. Um, and unfortunately, the solution that many people have found is putting a lot of things on their credit card. Um, and I think that, you know, I think household debt, the, the report from last year showed that I think we're up like 4.4%, um, year over year. So household, uh, consumer debt is at like $17 trillion, which is a staggering number. Um, you know, in terms of your household debt, it should be about 20% of your net income. That's what your debt should be. Um, as far as carrying it forward, you know, if there are certain things that you have to pay for, your those expenses should represent about 20% of your net income. That's what I meant to say.

Speaker3:
Yeah. Yeah, there is, uh, I don't I don't watch Saturday Night Live much anymore. I used to, but there is a skit here a while back, and it had, uh, famous actor Steve Martin in it, and the whole thing was about credit card debt and spending money when you don't have it. And it was like, based, like a commercial. And then Steve Martin's character is like, wait a minute. So what you're telling me is that if I don't have money, I shouldn't spend, like, you know, this like, giant question. It was actually pretty comical, but it is. It is worth, uh, it is worth, you know, uh, considering that even even in jest, like, okay, hold on a second. You know, if if, uh, the US, uh, consumer debt is 17 trillion, does that, does that make sense? You know, does it make sense for me to contribute to that for my own finances? Right. Yeah. All right. Bad habit number three. And I'm actually not very excited to talk about this one.

Speaker5:
No, I kind of resent this one too, because I don't I enjoy it too much. It's one of those things where I've just kind of decided, you know, I it's it's it's not good for me, for my budget. It's not good for my health sometimes. But, uh, I'm going to continue doing it.

Speaker3:
It's just.

Speaker5:
Something I'm. I'm willing to live with. Yeah.

Speaker3:
If you haven't figured out, we're talking about dining out. So, uh, the number of reasons to dine out, right? Maybe it's, uh, the atmosphere. Maybe it is celebration of something, date night, whatever it may be. Or maybe just. You know what? I don't feel like doing the dishes. I don't feel like planning a meal. I know in our household, usually, if it's like the last minute dining out type stuff, we even even carryout. Usually the last minute stuff is just simply because we didn't plan for the day. Yeah, we didn't come up with a plan. We didn't decide what we were going to have for dinner. We were either busy at work or it's the weekend and we did a lot of yard work, or we're out with friends and we thought, you know, it's getting kind of late. Why don't we just order something? Uh, I think.

Speaker5:
All of us know that, like, you know, cooking at home is probably going to be a lot healthier. That certainly going to cost you a lot less. Uh, but, you know, there's something about eating out. And I realize that, you know, not everybody goes to a restaurant. Some people like to order out, um, you know, and I'm sorry to to have, uh, takeout deliver, deliver to your home. And, you know, but it's, uh, I don't know, it's just there's a convenience there, you know, when you're eating out, like, it's not just not just the food you're eating, it's the atmosphere. Uh, sometimes it's, you know, the social aspect to where you just enjoy doing it with friends and, and, uh, you know, all those memorable conversations and moments that you have, like, it's, you know, those are some of the, the, you know, some of my highlights, you know, some of my favorite moments that I've had. So there's a lot of things that are, that are helping me make a decision that I know isn't necessarily, uh, in my budget's best interest.

Speaker3:
But that seems like the restaurants do a really good job of making that. Like the assumed date night for my wife and I like, what do you want to do tonight? Well, I'm sure we'll go get dinner somewhere. It's, it's, you know, like, we're we're not very creative, evidently.

Speaker5:
Well, what also Minneapolis. There's always so many new restaurants that are coming out and. Occasionally your wife will send me a link to one that's, you know, they're having their grand opening and like. Like, I don't know, I never used to be much of a foodie, but, you know, my wife has really just kind of, uh. I feel like she's brought that out in me a little bit more, because now I'm the one who's encouraging us to go out to eat all the time. And like you said, whatever the occasion is like, it's always going to be, uh, accompanied by a nice meal somewhere.

Speaker3:
Right, right. Exactly. Uh, number four, bad habit, paying for unused services. So I think we've all probably got at least one unused service. And, uh, I think it's always worth looking, whether it's once a quarter, once every six months, once a year, and just pausing and saying, is this something I'm actually paying for? I actually saw recently, uh, because everything is subscription based now, right? You can have, uh, back to the dining out thing. You can actually have these meal packages and things so that you don't have to cook dinner, but it's still dinner. Um, you can subscribe to that. You can subscribe to I saw a pet services. Right. So cleaning up your yard, you can have a subscription for someone to come out and clean up your dogs. You know.

Speaker5:
I was actually waiting. Is he going to say that live on the podcast?

Speaker3:
I didn't know what I was going to say there, but what unused subscriptions. What unused services do you have? Maybe it's the the car wash. Maybe it's the.

Speaker5:
I don't know if that was rhetorical because I actually do have one I want to share. I'm sure that this resonates with a lot of people. Uh, my Planet Fitness membership. Ryan, do you have a Planet Fitness membership?

Speaker3:
I actually do. Oh, you do too.

Speaker5:
Okay. Uh, how often do you go?

Speaker3:
And it's actually a little embarrassing because that's not actually the gym that I go to on a daily basis.

Speaker5:
So I think I've probably had mine for, I don't know, three, four years. And it's I've probably been there three, four times over the last three, four years. Like I just absolutely don't use it. But it's so cheap. Like I kind of just I mean, it's obviously not a good decision, but I just kind of kept it.

Speaker3:
Yeah. You know, I think, uh, the funny thing is with Planet Fitness is that I'll go from time to time and it is nice just because they're open all the time. Yeah. And they're.

Speaker5:
Everywhere.

Speaker3:
Yeah. And I mean, the, the hydromassage bed thing, that's always nice after a workout too. But I mean, for crying out loud, yeah, I agree with you. I've probably used it twice this year. Yeah. Not not not a great use, but uh, um, financial bad habit number five is just simply not investing. So when you come to your financial goals, when you go through your budgeting process in any capacity, and then you dive in and you say, hey, how much do we actually want to contribute to our financial goals? Maybe that's a retirement goal. Uh, maybe it's not so much a number. Meaning that, hey, I just know in retirement I want to be able to travel. I just know that in retirement, uh, my kids are all over the country now, and I want to be able to get to them whenever I want. You know, grandma wants to get to the kids games, or grandpa wants to be able to help kids out with their house, whatever the case is, you know? So maybe it's not even a specific number in mind. Maybe it's just more of a lifestyle, the activity and the actions you want, those things you still need to be able to support financially, right? And I mean, the the fact is that yes, you can save, but the money in the coffee can under the mattress, actually not under the mattress. I'd be really uncomfortable. But you know, the money that you just stuff in the house somewhere isn't earning you anything. It's not growing at that point in time. I mean, so when you look at it, there's what, 28% of people, uh, have nothing saved for retirement and 39% are contributing to a retirement fund. I think that's pretty staggering.

Speaker5:
It is. And I think that it kind of speaks to the priorities that people have or don't have. Um, you know, there's a lot of things that there's a lot of things that are fighting for your dollars, right?

Speaker3:
That's right.

Speaker5:
Um, you know, maybe it's your mortgage, right? Maybe maybe you want to pay extra on that. Maybe just the you're really not good with budgeting, and you spent a lot on going out to eat, um, or vacation or travel or whatever it is for you. Uh, but you kind of have to make a decision, right? Like, what's the most important? And I think unless you've had a conversation with somebody who can help guide you on these things, like, like, do you know, is it more beneficial for you to to make additional payments on your mortgage, or should some of that additional money that you have should should that go towards your deferred compensation plan at work, should that go towards your emergency fund? How much should you have in your emergency fund before you consider making those additional payments? And I think that sometimes when you don't have these conversations, you end up doing something that you think is good, right? It's good to make an additional mortgage payment, but not to the exclusion of the retirement savings payment. Right. So making sure that you have your priorities in order and on top of that, like, you know, not investing, we're just keeping your money in a, in a savings or a checking account, which is, you know, paying you very, very little like that could have additional problems too. Right? It's the opportunity cost.

Speaker5:
The cost that. You know that you missed out on, you don't end up getting that rate of return that you could easily have achieved. Um, you know, with, with other cash equivalents, if, let's say you're not necessarily looking to invest in the market, but just, you know, having having another cash equivalent or financial instrument that's similar to that, where it allows you to maintain your liquidity if you need it for your emergency fund and also getting a decent rate of return. Um, we'll talk about this a little bit later. And actually, on the topic of some good news related to Social Security, I'll I'll let Ryan handle that in a minute. But one of the reasons why Social Security even has a problem, why we're always asking, hey, what is the latest trustees report saying? When is the trust fund going to run out of money? One of the challenges there is, like the average rate of return on the Social Security Trust Fund has been 1.4%. Now, obviously, like there's a lot of issues with Social Security related to solvency. Um, and the biggest one is the number of people paying in versus the number of people collecting. Like that's a huge problem. But imagine if it didn't average 1.4%, like, you know, how much healthier would the fund be? The Social Security ran a surplus for like, I think three decades.

Speaker5:
And it wasn't until 2021. And I talked about this a few podcasts ago where they finally had to begin dipping into the trust fund, and that's where the whole conversation and depletion. Uh, is coming from. Uh, so Ryan's going to mention some good news of that a little bit later, but, you know, making sure that you are saving, making sure that you're actually weighing all the options, not just making the good decision, because on the surface, it seems like a good decision, but comparing it to other places, how what would be the best use of my financial resources? What's the highest and best use of the discretionary spending I have that can be used? Whether to fund my retirement savings or just investments in general, my emergency fund? Um, you know, various expenses that you do have, comparing the interest rates on those things. Um, you know, the same can be said of paying off your debt. You know, many of us maybe have student loan debt. Maybe you have, as I mentioned, a mortgage or a vehicle payment or unfortunately, some of those credit card debt prioritizing the ones with the highest, um, you know, interest rates when it comes to paying those down. Um, and a variety of other techniques that you can do to help get a handle on that.

Speaker3:
Yeah, absolutely. If, if so far we've gone through some bad habits and you're questioning, do I have these things under control, do I know what my plan is? Do I know what my goals are? If you're questioning that, we'd love to talk. We'd love to go through those things with you. Yeah, I'll say said it best just a moment ago. Sometimes just simply having a conversation with somebody, uh, other than, you know, your spouse or, you know, the people in your immediate circle, uh, is beneficial, right? An outside perspective sometimes is really, uh, helpful in figuring out where you stand in your financial goals. You can reach us out to us at any time at (612) 286-0580. Uh, Trey yellow say or myself. We'd love to have those conversations with you. But yeah, let's say let's dive into inflation. What's going on there? The lot's been happening the last few years.

Speaker5:
Everyone's favorite topic. Well, uh, one of the items that, um, has been in the news recently is, you know, like, uh, Americans that are spending less on fast food. Um, you know, and even, like, places like, uh, Starbucks, which is taking a hit and, like, people don't realize that, like, you know, when you when you go to a place like Starbucks, McDonald's, Pizza Hut, it isn't just the food that they're serving like that food has to be delivered there. If the cost of transportation goes up or, you know, if they're serving it on, uh, if they're giving you plastic straws or paper napkins, like if all of those things begin to go up, um, that's going to affect the cost. And I think that as discretionary spending is, is, uh, is, you know, people are starting to feel that their budget is tightening a little bit because they don't have enough to make all the discretionary purchases that they used to be able to make. Um, you know, sometimes things like your cup of coffee in the morning, sometimes that ends up getting cut out. And I think that specifically Starbucks has been in the news for that. And then trying to come up with creative ideas to to increase spending to make it more appealing and more affordable, I think, um, McDonald's recently unveiled some type of plan to, uh, where they're they're hoping to get to consumers, um, you know, who are more on a budget and having them more of a budget friendly, um, proposition for them.

Speaker5:
Uh, but, you know, inflation is is really the heart of the issue here. And, uh, you know, we've spent a lot of time talking about it, but I'm going to go through it one more time because, um, you know, we have a lot of questions on this. People are wondering, how is inflation even calculated? And, you know, there's a couple of different answers to that. But to kind of, um, to summarize briefly, you know, we have the Bureau of Labor Statistics and they have a number of different measures to measure inflation. Uh, and one of those is CPI. You so CPI is the consumer price index. Think of it as just like the basket of goods and services. And the Bureau of Labor Statistics, they track 80,000 different goods and services in our economy. And there's like uh, there's like a month. Um, there's a lovely survey. I can't remember exactly what it's called. Uh, but basically they they say that, hey, this monthly survey that we have called the Cpi-u for urban consumers, it it tracks the the spending habits of 94% of, of the population, the US population, it's an average. So of course, it may not reflect your, uh, particular spending habits, but just on average, the 80,000, uh, goods and services, it's a weighted average. So basically they look at that and they say, hey, more people are probably spending money on things like apple juice, I don't know, compared to beet juice. Right, right. I think you'd agree with that.

Speaker3:
Right? I would agree.

Speaker5:
So so apple juice is probably going to be weighted a little bit more heavily than, than uh, beet juice. And uh, so they survey Americans and um, and basically what they do is, uh, every month we receive a report. And uh, the last report, uh, released in April for the month of March, showed that urban consumers, as measured by cpi-u, um, inflation rose by 0.4%. Now, that might not seem like a lot, but you multiply that by 12. And now, of course, there's, you know, um, that continues to ebb and flow depending on the month that we're in. But seasonally adjusted, they determine that inflation is at about 3.5% now, 3.5%. Like, you know, if you're comparing that to the last couple of years, you know, maybe that sounds like a huge victory. But really, when you consider the objective goal of 2%, that's quite a bit higher than that, you know, and 2%, I feel like, you know, and Ryan, I think you were mentioning some of the stats on on inflation historically, like 2%, you know, like it almost doesn't even seem achievable. And how often have we been below 2% like that doesn't happen very often.

Speaker3:
Right. I'm looking at the last hundred years of I've got the sheet here in front of me, looking at the last hundred years of, uh, inflation. And it is a very small percentage where we were either at or below 2%.

Speaker5:
Very small and 2%, you know, they like they often talk about, hey, like 2%. That's how we grease the wheels of the economy. We should at least have 2%. How about getting to 2% like we're never at 2%. So, you know, of course, you know, there's been a lot of, uh, conversation on on cutting rates lately. And the question now is, can the fed even do it? Inflation is clearly it's not under control. And, you know, most recently Jerome Powell assured everybody that we wouldn't see any rate increases and that all the conversation and rate increases is unjustified. And and I think that like, you know, I don't know, I feel like there's, there's, there's there's a lot going on. We have an election year. You know, the chairman of the Federal Reserve, he is appointed by the president. And I feel like, you know, um, it's understandable why you wouldn't want to make any rate increases. And, you know, the market responded in kind, whatever. You know. So just a couple of days ago when, when Jerome Powell made his announcement, like we had a, you know, the market was kind of rough and, uh, in the month of April and now we're back. Right. We've, uh, we've assured Wall Street that we're not going to see any rate cuts. And I think that, you know, there's an article that I saw in Bloomberg and it said that, uh, Jerome Powell is actually, uh, the lowest rate of Federal Reserve chairman in the last 25 years, in the last quarter century, because inflation is continuing to persist.

Speaker5:
And, uh, according to a Gallup poll, high prices continue to irritate US consumers. So, you know, it's a problem. And some of the things that they cited in the article was that, you know, um, Jerome Powell and a lot of the other central bankers, uh, they were slow to react to soaring inflation. And like in 2022 when when inflation reached levels that we haven't seen since the 80s, they were slow to react. And eventually, you know, when they began to hike interest rates, inflation fell. But now as like we look at the target and what the fed was hoping to deliver, like we're nowhere near that. It looks like progress may have stalled entirely. And inflation is every single month. When they're releasing the inflation figures for the previous month, it's higher than what we were hoping, higher than what we anticipated. And really the whole point of increasing rates, like we've talked about this many times, the whole the whole reason why the Fed Reserve is trying to increase those rates is to lower inflation.

Speaker5:
And the way that we do that is by curbing our spending, creating a restrictive environment, making it so people aren't spending money as quickly as they once were. Right. And unfortunately, what we found is our government spending is at an all time high consumer credit card debt, all time high delinquency rates, all time high. So it isn't necessarily creating the restrictive environment that we want it. You know, last year, uh, we brought in 4.4 trillion in revenue, but we spent 6.1. And that's our our deficit, right? Our $1.7 trillion deficit for the year. Like this year, we're trending for $2 trillion per year. And, you know, as a nation in the last 50 years, like we've only run a surplus five times. And the most recent title was in 2001. So like in terms of like, you know, household budget and running our household budget, the way the, the, the US government runs theirs, like that would be a catastrophic, uh, template, like we would want to follow that. And, uh, unfortunately, you know, the pressure of inflation is getting to all of us. All of us are feeling it, all of us are experiencing it. And unfortunately, some have resorted to carrying larger amounts of credit card debt. Um, and unfortunately, that's that's just the, the scenario that we're in.

Speaker3:
So knowing knowing all of that just wonderful news. But knowing that, uh, what is that how does that directly apply to planning retirement. Right. Because I mean, well, Social Security gets cost of living adjustment. We'll talk about that more in just a moment. But what are the things that, you know, we could typically look at to say, hey, knowing that this is I'll use the phrase a little bit out of control, right. And not a great plan. What are the things that we can do, uh, to help people plan for retirement? Right. The people that are out there listening, saying, uh, you know, gosh, I thought I had a good plan, but will my plan stand the test of time? What are some of the things that they can pay attention to and look at?

Speaker5:
Yeah, well, in a lot of it comes down to, um, and I say this all the time, um, knowing what season of life you're in, understanding what your goals and priorities, what they should be. Um, considering all of your sources of income. Don't look at everything. Don't look at anything like by itself. You can't isolate Social Security and just make a decision of that just because you've retired. And that's kind of it's going to be our next topic here, but making sure you're coordinating all of your sources of income, making sure that you you wait, all of your options. Right. There's no one glove fits all. There's more than one way to do something. Uh, and sometimes the biggest thing is just understanding how everything works and maintaining a degree of flexibility, because life doesn't always cooperate. Um, you know, when we talk about Social Security, um, you know, Social Security has some problems, um, you know, Social Security as, as we all know, like, in periods of high inflation, Social Security is adjusted by not cpiu for urban consumers, but CPI, w for wage earners and clerical clerical workers. And that adjustment hasn't always kept up with inflation. Every October it's announced, by the following January your benefits are adjusted once you reach the age of 62. Um, but, you know, there's many years where that number hasn't kept up. Um, and that's a problem. You know, um, as I mentioned, Social Security ran a surplus for three decades, uh, because they actually collected more in payroll taxes than it paid in benefits. But that's not the case anymore. And the trustee's report, Ryan, you just mentioned that to me. You know, the old number was Social Security. Expected the trust fund to be depleted by 2033. And I think that's improved. Right.

Speaker3:
It has improved actually. Really interesting. Just announced uh, yesterday as a matter of fact. Um, so it used to be 20, 33. They're now saying that, uh, because just a recap that they're saying, hey, 2033, uh, Social Security was only funded at 76%. Right? So we are falling short in 2033 as what it was projected at. Yeah, as of yesterday just announced it's actually pushed back to 2035. So actually it gained two years, which is a positive thing. And instead of only being fully funded or only being funded at 76% in 2035, it's funded at 83%. So the amount that it's funded at is a larger amount than what it was projected at before, and it's actually a little bit further out. So we would actually look at this and say, hey, this is a positive thing. Uh, I was just having this conversation after the announcement with someone yesterday, and they're kind of grumbling about it a little bit. And, and I said, I, I agree, I would grumble too, but keep in mind this is an improvement from what they've been saying for many years at this point in time. Yeah. You know, so we'll take the win where we can get it right. Yeah. I mean, we still need to come up with a solid plan, uh, because this this will continue to change. And as we approach now 20, 35, we need to continue to make sure that, hey, if I do get cut by 17% out of my Social Security, what what is my plan that continue to supplement and make sure that the things are good and I can meet my goals, and I can have the funds I need to, uh, for the rest of my life.

Speaker5:
Yeah. And not to be too critical, but, you know, I am curious, um, you know, what contributed to that? Um, how they determine those numbers. So, you know, as I take the time to read through the report, um, you know, I, I remain optimistic. But at the same time, you know, we all know that Social Security has has the very real challenges and it's going to affect a lot of people in retirement. And, uh, you know, 2033 or 20 35th May seem like it's it's a long ways away, but in reality, time goes by quickly. And, uh, you know, we want to make sure that we're not just making shortsighted decisions, uh, for the next year or two. But as I mentioned, coordinating everything, anticipating those RMDs, uh, making sure that we've not only have we managed them, but we've incorporated them, and it's into our entire income plan, uh, looking at Social Security, looking at our pension, potentially, uh, you know, if we're working. Part time in retirement. How does that additional income, how does that get factored in? How does that affect your Social Security? Um, so these are all questions that we help to answer.

Speaker5:
We put together plans for people daily, right? People who, uh, in some cases people who think that they have a rock solid plan. But you added a few variables, like inflation, right? The one thing we've been talking about and people who have, uh, fixed or guaranteed sources like pensions that maybe don't have a cost of living adjustment like that might seem like a lot of money today. But what if inflation continues at a higher pace than what we anticipated? What does that pension do for you ten years from now? Like, am I seeing like it's a lot of dollars today. But when you factor in the cost of inflation and how those goods and services that you used to purchase, you know, that's that's a problem, that's something that we need to account for and make sure that we're putting together solutions and strategies that help us deal with, you know, things that maybe aren't so obvious. Inflation is an obvious one, right? It's a it's it's top of mind for everyone. Everyone's talking about it. But there are other things too that you need to consider. And that's what we help people do uh, daily.

Speaker3:
Absolutely. Well, and it's worth noting that, you know, if you're not factoring in the cost of inflation into a retirement plan, you're missing an extremely large component to it. Right? And you also use the term coordinating. And I think that's probably the best term that that you can, because it's not just saying this one item I'm making the decision on Social Security. I'm not just making a decision on what investments I'm in. You really do need to take into consideration every single one of those pieces, right? Social security is a great example. When you look at inflation, uh, the Social Security cost of living adjustment that people receive each year is designed to track and follow inflation, but it never is the same number as inflation. And rarely is it more than inflation. It's usually slightly less right. So a long term average cost of living adjustment on Social Security is 2.75 to 2.8%, but a long term average of inflation is over 3%, more like three and a quarter. And those numbers are, you know, plus or minus a couple, uh, decimals there. But, uh, I share that to say that inflation, historically speaking, on average, is more than what your Social Security cost of living adjustment is.

Speaker3:
So keep in mind that not only will your Social Security not keep up with inflation, but you also need to make sure that your investments are there to keep up with inflation and everything else. So, uh, we're happy to dive into those things. You can get a hold of us. Uh, again, you can email us, uh, first name. It's so Trey tr e y at gmail.com. The letter g and the word wealth com Ryan at g wealth.com or yellow stag wealth.com. And our phone number is (612) 286-0580. We'd be happy to dive into those things with you if you haven't gone through a retirement plan, if you haven't coordinated all the pieces, or just double checking to make sure all of your planning pieces are coordinated, uh, the way you think they are, we're happy to confirm as well. Uh, study shows financial literacy is lacking in the US. That's, uh, shocking. Yeah. Let's say. What do you think? What's your take on that?

Speaker5:
Yeah, well, I just think we're just, you know, there's so many things that you can spend your time doing. And, you know, if you're not in this industry, you're busy doing whatever it is you're doing, right? Most of us up here, our team, we're, you know, I'm dropping the kids off in baseball practice, soccer practice. Um, my son plays the piano. My daughter plays the flute. Um, you know, we have a million things that are always fighting for our attention, fighting for our time. And, uh, you know, financial literacy doesn't seem like it's very high on anyone's list, especially with with some of the reports that we're seeing. Um, but it needs to be. It's one of those things that it doesn't matter if you're an engineer, if you're a nurse, if you're a stay at home mom, like, it's just one of those things where you just can't afford to be illiterate in this area. And, you know, shockingly, people think that things are just going to sort themselves out. And maybe you don't say it that way, but that's that's actually what you're hoping for. You're kind of, you know, burying your head in the sand and you're not doing some things that are very practical and easy to implement. But for a lot of people, I think it just seems so overwhelming. Uh, you know, we when you look at the student loan debt that most people are carrying when they get out of college, um, the job market. Right. And, you know, there have been times when it's been very favorable and other times where it hasn't been. And then Covid happened like, uh, you know, it might just seem overwhelming. And where do you start? You know, if you're if you're in your 40s and 50s, like, unfortunately, people sometimes at that stage in season of life, they feel like, hey, like, how do I make up for all the lost time? How do I redeem all of that? Right.

Speaker5:
For the last 20, 30 years, I've been barely making it. I've been making sure my kids are able to, you know, go off to college and taking care of all the weddings and all the things. And now all of a sudden, like, you're in your 50s and 60s and we mentioned this in the last podcast, but maybe you're caring for an adult parent, right? Uh, an older parent or maybe an adult child. And there's other demands that are being. Placed on you. And sometimes, you know, I can give you all the all the textbook definitions and all the things that you should be doing, but it just seems so difficult and so impossible to prioritize those things. When you consider and factor in all of the other demands that life is putting on you. And I think that that's where it really, really makes sense to have somebody who's giving you good, objective advice that isn't necessarily involved emotionally, but just somebody who can give you good advice, who can critique what you're doing and help you implement solutions that will set you up to be successful in retirement, throughout retirement. And, uh, making sure that you're not just missing some of the low hanging fruit, some of the things that you know, of course, it's not all low hanging fruit. It's not all easy, but there is a lot of things that people just simply aren't doing because they lack that financial literacy.

Speaker3:
Right. Well, it's the same thing, uh, you know, whether it's, you know, car repairs, home repairs, you know, if you're in those industries. Sure. Of course you know what to do. You know what the maintenance is that's required. All those items. But but if you're not, how do you learn those things? How do you know those things or otherwise? And you if you you either have the option to learn it on your own, or you have the option to partner with somebody that knows exactly what they're doing. The other day I ran into a couple of, um, moms in, in, uh, my wife and I, a circle of friends and all that, and they're they've got kids our age and everything. And I was just chatting with them at the coffee shop, uh, for a moment, uh, what are your plans for the summer? And I said, oh, well, we got the two younger kids in the soccer and this and that, and, uh, they immediately started peppering me with questions. What program was it? Was it this program? Was it that program? And I kind of looked at them and I said, look, I can tell you what I've got scheduled at work this week. I can tell you how many appointments I have. I can tell you all these things. I couldn't begin to tell you what, uh, what program for soccer my kids are in. I know where I need to drop them off tomorrow morning, but that's about it, right? But that just goes to to support that. Yeah, everybody has a ton going on.

Speaker3:
And it's totally valid that you're going to focus on certain areas, especially in a relationship. Right. My wife focuses on things more than I do in certain areas and vice versa. I focus on things, uh, sort of things in more areas than she does. But, uh, I share that to say that that's the value in, in partnering with somebody outside of just relying on yourself. Right. The value and saying, okay, maybe this is an area where I do need to dive in a little bit more, or maybe this is an area where I need to rely on somebody else. I'm relying on my wife to figure out what soccer program to put the kids in. Right. Uh, so, you know, looking at it and mapping things out and saying, do I have a map? Am I partnering with someone? Uh, on this map as well? Is is highly valuable. Uh, as we, uh, kind of close here, just a quick five steps to master your cash flow and create a budget. And we won't spend a lot of time on these. I think we've pretty well covered, uh, the majority of the topics here. But, you know, step one, assess your financial landscape. And you really just have to take inventory here. Right? What's coming in, what's going out. And you have to take into consideration all, all forms of income and all form of expenditure, not just your fixed expenses. And I think we probably talk about the difference in fixed expenses versus living expenses. And almost all 12 episodes so far is my guess.

Speaker3:
I know it's a frequent conversation. Uh, but but it is because it's an important one all the time. We see people think that they're only spending five grand a month or seven grand a month, and it's at least 20% more than that very frequently. Uh. Step two set clear financial goals. Goals can be a big topic. And whether that's having a set number of retirement funds or just having a set plan for retirement, um, or if you're a younger listener out there, maybe it's not even retirement. Maybe your financial goal is more so. I want to make sure that I save a certain amount. Right. You're backing into the equation saying, hey, I know I want to have X amount of dollars in retirement. What does that look like? I got online use a couple of basic calculators for compounding interest, etc. and now all of a sudden I can back into a goal to say, here's what I need to be saving on a monthly basis. Uh, track and categorize your expenses, whether you're the 50, 30, 20 or whether you have a spreadsheet for every single penny. Uh, I kind of laugh a little bit. Uh, one of my good friends is the, uh. It's not you, yellow. Say you. You're more reasonable in this area. One of my good friends is a track every penny budgeter. And I kind of tease him a little bit, and I say, like, what good is it knowing, uh, everything that you already did? But, uh, you know.

Speaker5:
Really push back on that. But for the sake of time, I'm going to let that one go. No, I.

Speaker3:
Know it's a lot of fun. Uh, but I was hoping you would push back a little bit more. But you're right. For the sake of time, we'll let it go. Um, allocate your income. Uh, so just know where it's heading. Um, as we wrap up again, just want to encourage you to map things out. If any of these things, uh, were, were, you know, your ears were burning as we were talking about it a little bit, uh. Reach out. We're happy to go through a plan with you. We're happy to coordinate all the pieces to your retirement. Plan. Now, it's important to partner with somebody that is an expert in these areas and yell, say, reference it. This is what we do on a daily basis. Every day we're meeting with people looking at retirement plans, uh, talking about how to fight inflation, coming up with a time tested plan that will last for your retirement. And we'd be happy to to go through those things with you. Complimentary consultation phone number is (612) 286-0580. Yellow. Say anything else as we close?

Speaker5:
Yeah, I think my final word would be, uh, you know, don't be afraid to to have someone challenge what you're doing. Yeah. Uh, don't be afraid to course correct. You know, the environment as that changes, we've had to shift and make some adjustments on behalf of our clients. And and as we identify new ways to make sure that we can help them retire successfully, like, it's it's it's just a part of the conversation. And you can't be afraid to have these types of conversations. Um, you know, it's it's a lot easier to not to, as I said, bury your head in the sand and not do anything just to kind of hope for the best. Um, but it's a little bit more difficult to do some of the heavy lifting to think through things. And, uh, you know, one thing I'll say, the last thing I'll say is, you know, um, retirement. It's, um, it could be it could be challenging or it could be very rewarding. And, um, you know, when it comes to retiring, well, we want to make sure that we're doing everything we can to help the people that come through our doors to make sure that we're giving them good advice, um, that sometimes we're challenging what they're doing. And, uh, you know, surprises are never fun at any stage of life, let alone in retirement. So we want to make sure that we minimize those surprises, and we give people good holistic advice that helps them to plan well for the most important, one of the best seasons of life that they could have. And that's, uh, that's what we're here for.

Speaker3:
Yeah, absolutely. Make today that make today the day that you get things in order. Make today that the day that you, uh, partner with somebody and make today the day that, uh, you ensure that you can retire once and retire. Well, I feel.

Speaker5:
Like that deserves, like, an amen after that or something. Amen. How about a day? All right, all right.

Speaker3:
Thanks. Have a great.

Speaker5:
Week. Thank you.

Speaker2:
Thanks for listening to all things financial. You deserve to work with retirement planning specialists who care about your money, and take a unique approach to your financial and retirement needs. Visit all things financial.com and set an appointment today.

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