In episode #3 Hari and Phil reveal the top 8 unintended financial mistakes Phil sees clients making when they first meet him! They take a deep dive into all 8, discussing psychological reasons as to why people do it, and how they can all be prevented.
After sitting with thousands of clients over 3 decades. The avg person is making 5-6 of these 8 mistakes. How many are you making? Tune in today!
Go To https://www.philbodine.com/401K to learn more about the concepts mentioned in today's episode.
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Hey guys, welcome to the new episode of the wealth in overdrive Podcast is your host, Harry Luker. And co host extraordinary Phil Bodeen. How are we doing today, Phil?
Doing great. Glad to be a part.
Man, you're just so happy to be in front of a camera, right?
Actually very uncomfortable, but a new school a new way.
You talk around the country multiple times for many decades, and you throw a microphone in front of someone. It's a whole different appearance, right?
It's easier to talk in front of hundreds or 1000s of people than it is for me to get on front of the camera.
I appreciate you helping us out. I didn't want to before we start into the podcast today. It sounds like you had another pretty progressive meeting with the book company of the day with your book that is coming out here in the next couple of months. You're gonna provide us a quick update on that on expectations and how that's going.
Yeah, we're already through are almost through finished with our first edit. They're telling me we might go through two more edits. But we're through chapter 11 of the first edit edit of a 16 chapter book.
Nice. It's getting there. It's paying off.
Yes, yes. Yeah, exciting. I'm seeing light at the end of the tunnel.
That's always good. Give me some motivation on that one. Yeah. And whenever that book does come out, guys, don't worry, you will be notified immediately. Obviously, we'll bring it up on the podcast and review the book itself. So don't feel don't worry about missing out on that one, primarily a turn in a long work in progress, taken around 30 years of knowledge, education, life lessons, learning mistakes, and piled all into between two covers. So definitely looking forward to that one. In this podcast. What we wanted to hit primarily though, is a really important slide that Phil hits on in the seminar that has been going around the country, like we mentioned here a couple times. And it's always entitled, what we classed as the eight unintended financial mistakes. And what we're gonna have Dave did his fill basis break down all eight of those. I think it's great insight to people specific when he breaks into at the start of every seminar, even no matter how well educated you feel you are, I think at least a couple of them differently ring home, and kind of make you realize that it's not as easy as it sounds. So Phil, gonna start us off with those and hit us off with number one and kind of the background where this slide came from?
Sure. Absolutely. Thanks, Harry. I believe it was approximately four years ago, a financial advisor magazine reached out to me want to meet a quote some material for a particular article that they were putting out and it happens a lot, I would say three to five times a year. Particular. Magazine magazines will call me for a specific quote. And I found this one most interesting. Because when they called my office, they said they would only need 30 to 45 minutes to pick my brain. And lo and behold, we're in the interviewer. And the writer or editor stumbled across a question that he said, you know, Phil, if you're over 30 years of experience, what is the most common financial mistakes that you see most people make? And I said, Well, that's easy. Unfortunately, three and a half hours later, we're still talking it. So I'm going to break down what I shared with him. And I'm going to condense the list to what I believe are the top eight things that I've seen over my years of experience. And these are unintended. I think the majority of these mistakes are unintended. But for the most part unavoidable, especially if you have or they can be voidable especially if you have the right expertise or the knowledge or the education to I steer clear of these mistakes. And so number one is very easy. Basically what potential clients tell me they want. And what they have are two totally different things. It's our experience when we have clients come into our office, managers fly through, walk them through an assessment. And in that assessment, we find out what their values are and how they attach those to money. And so pretty much everyone has about the same desires, they want more freedom, they want more control, they want more liquidity, we, we want less exposure to risk. We want to travel, we want to vacation more, we want a better lifestyle. We want to own our own business, we want to pay less than tax, we want more balance in our life. But however, everything that they're participating in is basically the exact opposite of what they're telling me. They're basically positioning their money in places where they're locked up, for instance, a retirement plan or something like that, that they don't have access to. They're not saving enough money, they're not doing the things that they need to be doing. That coordinate with their values. That would be the the first and foremost thing that I find with most people. Number two, I believe that most are unaware of their present position. And what I mean by that everybody that comes into my office, they have stuff, I mean, they have their money's invested somewhere, whether it's a retirement plan, a stock portfolio, bond portfolio, real estate, multiple things. But they really don't have a financial inventory, meaning they they have all this stuff, but it's what we call the junk drawer mentality. Everything is just scattered everywhere. There's really no structure. And in fact, what you don't know, you don't know. And one of the big concerns that most people have is is this, you know, if something happened to my spouse, we really don't know where everything is that they don't know their present position. And there's a difference between thinking and knowing what your present position is. And so I think it's very, very important that people have a financial inventory of everything and where it's positioned. Number three, most people lack a financial plan, roadmap or blueprint, whatever you want to call it.
If I could use an example, here, Harry have something that occurred here. Just a perfect word picture, if you will. My wife and I, we built a guest house on our property. And one day, I was looking out the window from our home, and I was watching as people, the subcontractors and the general contractor had blueprints everywhere. And they were planning, you know, how they were going to erect this building? And I thought to myself, how interesting would that be, you know, if the 12 guys that I saw on the job job site didn't have the communication or a reference point, or a blueprint, and in which order to build. And, and I think that comes back perfectly, to the lack of I couldn't even imagine them building that structure with without a blueprint, but yet people are going through life. And and I don't think that people plan to fail, they just fail to plan properly. And so I believe that people need a roadmap in order for them to get from Plan A to Plan B. And, you know, majority of the discussion that happens in our office, is tell me about one of your goals that take money and planning to achieve. And so if we're going to give money assignments We need to have a structure or the planning process, or that blueprint to get us from A to B. Does that make sense? Absolutely, that's a huge point. So those are what I believe are the top three, number four, I would, and I believe people do this unknowingly. They're not saving and or investing enough money. And if I could give you an example of that, as you know, Harry, I have an office here in Sacramento, California, but I also have an office in Fort Wayne, Indiana, were born and raised. You know, if I were going to get in to my car, here in Sacramento, California, and drive to my office in Fort Wayne, Indiana, I'd probably have to stop at least six or seven times and refuel my car. Again, if I'm going to get from point A to point B, it's going to take fuel in order for me to get there. No matter what means of transportation, even if I get on a jet, it's going to take jet fuel to get to that desired destination. Well, I believe people unknowingly aren't putting enough fuel into their plan to make the plan work. And that in and of itself takes discipline. And I've noticed the difference between the haves and the have nots are basically just discipline and we subscribe to the 1015 75 rule. We believe that people should give 10% of their money away to charitable causes, we also believe that people should invest 15 to 20%, depending on their adjusted gross income. Now, if I'm working with a professional athlete, they're making millions where we believe you should be investing at least 50 to 60% of that income. And then the 75% as long as you're accountable with that, that first 25% of income, blow the other 75 Because you know, some subconsciously in your mind, you're being a good steward with the 10 and the 15. But I can't we find too many people spend money that don't spend any money, they don't have to buy things they don't need to impress people they don't even like, and I believe that was quoted by Well, Roger is one of my one of my favorite quotes. And you know, they're trying to keep up with the Joneses. And so we believe that people need more discipline when it comes to saving and in or investing money.
Number five, we believe that white collar individuals are still making blue collar financial mistakes. And And here we're talking about old school versus new school mentality. What I mean by old school, a lot of people are taught, you know, max out your contributions to your 401k and get a tax deduction. And then at the same time, I'm seeing them making extra house payments on their mortgage, reducing their tax deductions. And so it's like I see some individuals going down the highway of life, when one foot on the accelerator and one foot on the brake, or maximum maximizing contributions to go into a 401k and creating a so called tax deduction, we we prefer that being a deferral. But at the same time they're paying down their house, reducing their liquidity, reducing their tax deductions, reduce reducing control and doing the exact opposite of what they really intend on doing. And so I believe that people need to defeat yesterday's understanding of how money works and coordinate a better outcome. Because we always believe that strategy will out produce a specific, specific, specific product. And so financial Ignorance is not bliss when it comes to money. Number six, one of the other unintended mistakes that we see people make there unknowingly pay more taxes than they should. And, you know, if I can, quote judge Learned Hand, in America, there are two tax systems, one for the informed and one for the uninformed, both are legal. And it comes back to, okay, you better know what game you're playing and who you're playing with, or you're going to lose the game. And the problem with financial planning in and of itself is the rule of game, the rules of the game are constantly changing. So it's very, very hard to plan. And so you're constantly updating, you're constantly reviewing, you're constantly going back to the plan. And seeing if adheres to today's tax. Tax Code, also, are basically a roadblock of something you're trying to achieve. And in fact, majority of people in America and that this is kind of sad to say, but I believe the majority of the American people are paying more in income taxes over their lifetime, than they'll ever save or invest for retirement. Number seven. They are unaware of their current risk exposure. I believe that most individuals we meet with if you actually read the prospectus of the investments that you're invested in, you would run screaming. In actuality, you must understand this one thing, it's not the adviser that recommended that invested that investment to you. Nor is it the financial institution that's providing that investment for you. You're the one that's taking the risk. It's not the financial institution, it's not the financial adviser, you must take responsibility for that. And I believe that most people understood the current risk exposure they're currently undertaking and their current plan, they would not be pleased. And so I believe clients should be given full disclosure when it comes to risk. Last but not least, number eight. Subconsciously, I believe that people procrastinate, I'll never forget the financial workshop that I hosted.
Attendees will fill out a survey, and I read this one particular individuals survey. And he said that he wanted to meet with me in three to four years. And I thought to myself, you're going to procrastinate for three to four years before you receive financial advice? How many, you know how many people drive their cars around with red engine lights on? And when that red engine light comes on? Do you immediately take it to your mechanic? Or do you wait three to four years and this particular individual, I don't know how many red lights he has on? I'm certain he didn't know how many red lights he has on but I'm certain he did. And he just chose to procrastinate, three to four years into the future before doing anything about it. Another unintended mistake that most people make they procrastinate. I mean, why do today what you can put off till tomorrow. And tomorrow leads to next month and next quarter next year. And before you know it, it's you're in your 50s and you're coming they're coming into my office. My kids are 16 years old, and I need to start saving for their college education. I mean, I'm, I'm an advisor, not a magician. And procrastination just doesn't mix well. When it comes to building wealth into your future. The earlier you start, the better your start, the better the finish. So those are the eight Most Popular unintended mistakes are most common mistakes that that people make that at least I'm aware of. I'm certain there's longer list than this. But these are some of the most common mistakes that I see most people make.
Out of all those, what would you say is probably the most damaging? Wow,
good question. Probably the most damaging is not saving and or investing enough money. They're not there. They're just not putting enough fuel into their engine. And blindly going into the future thinking they're going to have enough. And then getting to the end result or the finish line, and maybe in their late 50s, oh, you know, maybe I should start. Maybe I should go in and get an analysis done from a financial advisor. And by then it's too late. So it's a combination of all of these, but probably the the most damaging is not saving and or investing enough money. Because really, the difference between the haves and the have nots is essentially discipline. I mean, I remember as my first 10 years in the business I used to teach I would go into the into junior high schools, and I would teach Junior Achievement just once a month. And I'll never forget the question that I asked them. I said, Hey, can I see a show of hands? Now keep in mind, these are seventh and eighth graders. Can I see a show of hands of people, students in the class? That could save $20 a month? And believe it or not, I'm just curious if you're trying to guess in your mind, what percentage of the classroom raise their hands? It was actually higher than I thought he was like 60% of the room, raise their hands and said yes, I we believe that we could invest $20 a month now I know. I don't know where they're getting that $20. But they said if they had that they would they would discipline themselves to invest it. The next question is, well, why aren't you doing it?
Okay, no, do you know you those kids nowadays to see where they're at right now?
On the other side of the planet I live out in California now, or what I call the Left Coast. So
did you ever bump back into that? Did that guy who procrastinate for four years that he ever reach back out to you?
He never did.
He will never know how many lights he had on. Yeah.
I have no idea how many engine lights that would that were on his dashboard.
So you've been given that seminar now for a long, long time when when you have people come in, or you could say just over these decades. Out of those eight or nine unintended mistakes. On average, how many mistakes are people unintentionally made? It made them when they first meet you?
Out of those, what I would call top eight, there at least exercising three to four of them.
Okay, is a pretty easy conversation to have with them. But what they are and how to break it down new people pretty realistic when it's brought to their attention.
Yeah, conversations, do they, they they go really well. And sometimes they just look at themselves. And they're like, if we just would have known and and obviously I'd rather catch them earlier than late later. But yeah, conversations go well, it's kind of like learning to ride a bike for the first time, they thought they knew how to ride a bike. But hey, let me show you a more efficient way to ride that bike. Let me show you a different. Let me show you something that I believe that you're unaware of that could make a significant impact and bring significant value to your current plan. Because I believe that everybody has a plan, whether they know it or not, whether they're planning or not, they have a plan. They have a plan to get from A to B. And it's it's our job to get from C to D with no out of pocket costs less risk and pay less taxes. That's the ultimate
next to go goal. What's your and we'll wrap this up here shortly. But I think one of the big big points you make within those unintended mistakes one is kind that's to do with with not having a plan or what they want to do. Isn't this what they got going on over the last I'm gonna say probably five or six years, you've seen a huge introduction of robo advisors, marketing, social media influences, and these Robin Hood's people in your crypto, do you find a lot of people do their own DIY research, put 100 bucks here, $1,000 here, and then they come in, they've got like these 12 accounts, but they're almost like experimental accounts, no one's really putting that much effort into them. And money's being lost that way.
That's interesting, you asked that question. Because probably over the last four to five years, I see that more often that people are dabbling, or what I call gambling, and in the marketplace, and I think because the market has cooperated with them over the last four to five years, they think they can do it on their own. But, you know, usually, and my suspicion is, is when something goes wrong, are they gonna still call that robo advisor or the 800 number to try and fix the mess that they're in. And so it really is important to have a relationship with a credential, financial professional, that knows what it is that client wants, what their desires are, what their dreams are. And they've created that roadmap or that blueprint together. I don't think you can do that. And Robin Hood or as a robo advisor I think people received in believing that that could actually happen.
Yeah, with the markets where the like you said it's kind of hard to fail. And this year really just throwing a dart at the dartboard almost but Well, that brings us kind of this one Phil any other things you want to any gems you want to add to the end of this? Anything you think we missed out at all anyway?
No, I think that pretty much covers it for for these particular topics.
Absolutely. Well, I appreciate when hanging around with us during this podcast. If you're more than welcome to write a review, head over to Apple. We are pretty much everywhere. Now. We're on Stitcher, Amazon Alexa, where you can find us on the podcast itself. Feel free to share this friends that you know like and love that you believe these podcasts can bring value and profits to their lives at the same time. From Phil and myself. We will see you in the next episode. Thank you.