342. What Financial Mistakes Don’t You See Coming? (Confidence Traps to Avoid)

Confidence is often viewed as a strength, especially when it comes to building a career, running a business, or making investment decisions. But when it comes to retirement planning and long-term wealth management, overconfidence can create blind spots that lead to costly financial mistakes.

In this episode of A Wiser Retirement® Podcast, we explore the mindset traps that often affect high earners and successful professionals, and how those assumptions can quietly influence long-term financial outcomes.

Related Podcast Episodes: 

Ep 181. 5 Common Financial Myths Debunked

Ep 287. The Financial $tuff They Don’t Teach You in School

Related Financial Education Videos:

What is Tax Planning?

Does retirement planning software really work?

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Transcript

Why Financial Confidence Backfires

SPEAKER_04 0:00

Confidence is usually a good thing until it comes to your finances, because some of the most expensive financial mistakes aren't caused by fear, they're caused by being just a little too confident. Stay tuned because today we're breaking down the financial mistakes that could be quietly costing you.

SPEAKER_01 0:15

Welcome to a wiser retirement podcast, where we cut through the noise and bring you real, honest conversations about investing, retirement, and building lasting wealth. No sales pitches, no gimmicks, just insights to help you stop guessing and start planning your financial future.

SPEAKER_04 0:34

Welcome to a wiser retirement podcast. I'm Casey Smith. Today I'm joined with financial advisor William Midcalf to discuss the confident traps that can lead to costly financial mistakes. Hey William. Hey everybody. So uh this this so we we plan these uh topics out a quarter in advance. It gives us time to put together notes and some some of them just roll right off the cuff and and otherwise require a little more research.

SPEAKER_05 1:00

Yeah.

SPEAKER_04 1:00

Uh how do you how do you feel about this one? How much prep did you have to put into this one being a confident male?

SPEAKER_03 1:07

Uh I thought it was it was relatively simple to put together. I think that you, you know, we'll go through and talk through all of the stuff, but I think it's stuff that we see with clients pretty frequently. Um, you know, and honestly, it's not just males. That's that's where the the topic originally started. And I was like going through and I'm like, I I I see this in males and females. So I we changed up a little bit in terms of the wording. But um anyway.

SPEAKER_04 1:34

Well, you think about success, and success typically comes from having a lot of confidence at something, right? Or perseverance at least. Yeah. And when it comes to investing, uh, there are a lot of biases. Uh in fact, we we probably should put those in our show notes uh of of all the different behavioral finance and uh topics that we that we've covered over the years. Yeah. But there's there's so much um uh there can be so much bias in in in confidence because you're confident, you're you're a really good at what you do. And you're confident you've got life by the horns, right? And you've got it all figured out. And in the end, um maybe you're not an expert at planning necessarily. Yeah. Or even investing for that matter. It's just like the water cooler talk, you got the friends who, oh, I made XYZ on the Nvidia, I made XYZ on, you know, whatever, right? Yeah. And in the end, they they never tell you about the ones that cost them half the profits of or more of all the all the wins, right?

SPEAKER_03 2:38

Yeah, or when they sold and they caused a big tax problem and and because they're not taking that into consideration. And so there's a lot of different things that you should be taking into consideration that maybe you're just not aware of or maybe not an expert at.

SPEAKER_04 2:51

So it's not because of lack of intelligence. We're not saying you guys are stupid. No, not at all. We're saying we're saying um success can create uh blind spots, and you have to be very careful with that. So after working with hundreds of clients, uh, a pattern emerges. It's uh

Success Blind Spots Before Retirement

SPEAKER_04 3:06

rarely a lack of effort or intelligence that holds people back financially. Uh, it's it's a set of deeply held beliefs that uh made sense at one point, but in life quietly quit working as retirement approaches.

SPEAKER_03 3:21

Yeah. I feel like everybody has things that you kind of just go by intuition and sort of what feels right or what you think is right. And you maybe you're not actually, you know, digging into the weeds and looking at what's actually the case. Um, and I think that a lot of what we're gonna talk about today is is kind of those types of rules where it's like, you know, maybe you haven't gotten a second opinion, you know, maybe you throw it into Chat GPT and Chat GPT says everything looks good. Um you know, but Chat Chat GT is confident in every answer he gives, he's even the wrong. Um yeah, we we'll go through these and and I think that um I think that some will resonate with um a lot of the clients.

SPEAKER_04 4:00

So um one thing find interesting in a stat that uh that was put in our notes here is is high income earners report some of the highest financial confidence levels. Yet confidence and actual financial planning outcomes are weakly cor correlated according to a uh FINRA investor education, uh the FINRA Investor Education Foundation. So it's not that uh um you've been doing all wrong, but whether uh the skills that you have aren't the same ones that carry you through the next 20 to 30 years in your planning.

SPEAKER_03 4:33

Yeah. Yeah. And and one of the things I'm just gonna mention it because we're we'll come back to it, but is, you know, the bottom line is you got to look at it. So don't just fly by the seat of your pants or like, you know, again, go by intuition. You actually have to to look at what your situation is and maybe bring in an expert to actually look at, you know, and get a get a good opinion, a second opinion on it. So you you've been doing a lot of plans.

SPEAKER_04 4:56

Uh in your experience, is it harder to help someone who is struggling or someone who has been very successful?

SPEAKER_03 5:05

Yeah, I would say that the people that are very successful are generally they're more informed, or they they can at least talk to um, you know, finance, financial planning, and those topics. So they they know enough to be dangerous. And so there's more maybe convincing or you have to bring show your work, so to speak, a little more with them. And I don't necessarily think that makes them harder to work with because on the flip side, you know, you you have people that maybe are more willing to listen to you, but also they're maybe not in a state where they have there's a there's a lot of good options. Um, so I'm not just saying it depends, um, but it kind of depends um on the context. But I would say I would I would say that people that are successful and are confident in what they know sometimes are harder to convince of a recommendation, even though we may know what's right, we may have to go the extra mile and say, you know, add a lot of color to it and explain why. Yeah.

Social Security Timing And Bad Incentives

SPEAKER_04 6:03

So yeah, when to take social security is one of those, uh one of those things. Uh I feel like I feel like sometimes less educated wants to go one way, and then more educated um obviously want wants to go the opposite. So it's interesting to see how those those dynamics go. And and uh yeah, because it's really off a feeling. Or if they talk to their buddy Daryl, yeah. Daryl says he's taking it at 62. Yeah. And you're like, well, that's that's crazy. Yeah. And and to make matters worse, you have financial advisors that add confusion just to that topic because they're like, Oh, yeah, you should take it sooner. It's like, well, of course. Financial advisor's incentive is to you not touch the money that they're managing. So that's that's even uh makes it even more confusing when you have a whole industry that's confused in itself as to why yeah when you should be taking social security. Uh all right, so let's talk about some some of these uh biases. So

DIY Planning And Hidden Tax Traps

SPEAKER_04 7:00

let's talk about the phrase, I should be able to figure this out myself.

SPEAKER_03 7:04

Yeah. I think that confident people are high performers or people that you know generally know what they're doing. They think, you know, money's not that hard, or maybe, you know, they have a lot of money, or you know, they're they they don't have to worry about money um while they're working. And so they just kind of assume, oh, I can, you know, figure this out. Um, I think that the these types of people are generally self-reliant. And so I think that's something that um you know, that that is fostered when you're really good at your job and you're doing well financially, um, at least, you know, as from the income perspective. Um, but kind of like I alluded to earlier, you know, there's more to it than just, you know, money in, money out. You know, there's a lot of tax implications. Like we were even talking about if you're playing in the stock market, you know, there's ways you can, even if you make money, then you kind of have another problem, right? Especially if you're in the top tax brackets, um, you know, where you're gonna be in those higher capital gains brackets or things like that. So um it's it's knowing all the different context that's underneath all of the decisions. Cause at a high level, it may be easy to understand certain things, but sometimes there's there's things with clients where it's just a nuanced thing that's like, oh, you probably didn't think of this, and they're like, Oh, you know um, tax is a pretty key one there. Um you know, withdrawal sequencing, that's one we talk about a lot, but that's another important one. Um again, mostly because of tax, but um you know, it's it's a it's one of those things where you could save a lot of money by doing one thing versus another. And it's it it may sound really simple when it's a recommendation, but if you had done it the wrong way, just because oh, my 401k is larger, so I'm gonna pull it there from there instead of my brokerage account, which is significantly smaller, it may cost you more in the long run just because of taxes and things like that. So it's a small decision sometimes add up.

SPEAKER_04 8:58

So this is kind of where DIY versus professional help. This this these are where the areas, exact areas that it it tends to start to break down.

SPEAKER_03 9:06

Yeah. Yeah. It just always pays to have a a good second look at it and make sure you're optimizing things for your situation.

SPEAKER_04 9:14

Yeah. I I would say that a lot of um a lot of meetings that I do, I think most a lot of people have sort of figured some of this out, but they're not sure how it all pieces together. Yeah. And so what we're doing is giving people confidence that they're making the the right decision in the end. Yeah, and I've had more people. It gives you a lot of peace.

SPEAKER_03 9:33

Yeah, yeah. And I mean, and that's kind of a cliche in the industry, but it's true. Like, um, like you know, we've had I've had at least three different people that have put their whole financial situation into Chat GPT, and they're they end up being more confused, you know. And I I'm not just throwing shade at Chat GPT, but um, it is one of those things where it's like you do need guidance from a person that knows what they're doing. And it's not just you know, like Chat GPT just kind of trying to tailor it to you, you what it thinks you want to hear, you know.

SPEAKER_04 10:03

Back

The Pilot Story On Taking Risk

SPEAKER_04 10:04

in my aviation days, I was a new first officer flying a CRJ 700, and I remember talking the captain, you know, a lot of times pilots talk about money. Uh we're it was late at night, think we're coming back from somewhere out west. So you're just kind of sitting there looking at the darkness of the sky, and and the and as I asked a guy, I said, When are you gonna retire? Because he looked like he was ready to retire. Yeah. And he had like two years to go. And he goes, But I'm I'm really behind in my savings. So I I've I've put everything in small cap funds, 100% of my 401k into small cap funds to try to get a higher rate of return. Yeah. And I thought that was I thought it was interesting. Um, I used that actually later on as a reason why we should have pilot workshops on money and education. But uh that uh and if you're not following that example and why I'm chuckling, is because a small cap fund is typically much more volatile than a large cap fund. And actually, large cap's been doing better than small cap. Uh, but historically back then, uh small cap would give you a higher rate of return with a lot more volatility. Yeah. Uh so he was hoping in two years that he can make more on his money rather than just thinking, this is what I got. Yeah. I need to work harder to pay off my debt, maybe. I mean, I didn't get that much into it with him, but uh a lot of things came out of that conversation for me and and just how to how to talk to people about risk. But when you think about someone like him, uh he, you know, he's 60, uh, let's say, and versus someone who's 30. Um, how how should we think about risk differently?

SPEAKER_03 11:35

Yeah, so time is really important in that equation. Um, you know, and one of the things we have written down here is basically that um obviously emotion plays a part in negative uh it has a negative impact on your return if you're making you know emotional decisions in the market. But something that a lot of people don't think about is if your account goes down, the one the example we have is if it goes down 20%, it actually you have to make 25% from that number actually to break even. So you actually have to have more return than what you actually lost in order to break even because of the different basically the timing and the um the value change. So um, you know, that's that's a small thing that's kind of an example of this. But um basically once you're at a at really close to retirement, you want to be preserving what you have. And that's another thing that we're we'll also touch on. But um, an example here is also making sure you have insurance. And a lot of people are sort of negative about insurance because they're like, I'd rather, you know, put that in the market. But for somebody who's built wealth pre-retirement, it makes a lot more sense to be more, you know, like even in a portfolio, we're not gonna put you in a super aggressive portfolio if you're gonna be having withdrawal needs in the next few years. Um, but in a similar, you know, vein to that, you want to make sure that if you're in a bad car accident or something, that somebody can't sue you for all you're worth. Um, so you know, these things where wealth is about growing for such a long part, you know, as you're building wealth, right? But you do get to a point where it's more about preservation. Um and obviously we want to keep up with inflation, so we have to take some risk in the stock market, right? But um but there is a pivot to we need to preserve what we have.

Working Longer Is Not A Plan

SPEAKER_04 13:23

So the the other part is I'll just work longer. And so people become overconfident in that statement alone. Yeah, I'm just going to work longer. So walk us through what you're telling your clients on what what are the what's the reality to that? Yeah. Just I'm gonna work longer. Not I'm not saying I'm gonna work from 60 to 65, yeah, but you're gonna work beyond 67, even working beyond 70. I've had people tell me, oh, I'm just gonna work until I can't work anymore. Yeah. And you don't understand there's only a few people that are working productively past certain ages.

SPEAKER_03 14:02

Yeah, I'd have to think through that, but I feel like our clients, I feel like most of our clients retire around 65 or lower. Yeah.

SPEAKER_04 14:10

Um well, we're well, we're a wealth manager firm. Of course. We're seeing the best of the the best savers for the most part, right? Right. But just in general, um, we have you know, 9,000 people will listen to this podcast eventually, right? So not all of them are wiser clients. So if you're thinking that that I'm just gonna work longer, yeah.

SPEAKER_03 14:30

I mean, what do you what do you say to that? Well, and that's something, and when we're doing planning, I love showing scenarios, even if the client doesn't, it's not necessarily a goal of theirs to show them how early they could retire if the client has a flexible situation. So that's one thing I love showing them just so they know that, especially if I get some indication, you know, maybe they don't they don't say my goal is to retire early, but I get some indication, you know, maybe they're a little fed up with their job or like, you know, there's there's some situation like that. So that's one thing I like to show as an option, but just to know it. Um and that is important because we actually have a stat here that says, um, I think it's yeah, 40% of retirees end up retiring earlier than they originally planned, you know, and there's a lot of reasons for that. Could be health issues, could be layoffs or things like that. But it could even just be, I'm just tired, you know, I'm I'm ready to be done. Yeah. And and a lot of people make that decision from an emotional perspective, which is important, but you also you want to make sure that the numbers actually back up or that this is actually gonna work. Um, so we have clients where we're able to change plans and say, hey, this is what you could actually do, but maybe you know, the spending needs to change, or there's some sort of life lifestyle aspect that needs to be different. Um, you know, and and we work with a lot of pilots too. So sometimes that's different for them because they're able to just drop trips, you know, and maybe they're not officially retired fully, but you know, they're flying the minimum and things like that. So also depending on your job, it could look a little different.

SPEAKER_04 16:02

But I think you have to be careful of your own health issues, layoffs. I believe that age discrimination in the workforce is real and they don't want you there past a certain age.

SPEAKER_03 16:12

It's definitely harder to find work, you know, it's gonna be really hard to find work post-get laid off.

SPEAKER_04 16:16

I'd say post-55, it gets difficult, yeah, but definitely post-60, yeah. It gets really difficult. Um as an even as an employer myself, you you we feel like I hire the best people that apply. Uh, but you take on someone older, their healthcare premiums are so much bigger. And so if you're looking for mid-sized firms, they're probably paying attention to that too. And that's one of the reasons. Yeah. Um, also, there's you know, you could be out because of your health issues and they don't they want a productive workforce. Um, but another thing that people don't think about is caregiving responsibilities. There's so many clients that we have that are caring for uh their their parents still.

SPEAKER_05 16:52

Yeah.

SPEAKER_04 16:53

And the the toll on you for doing that is horrendous. If you don't have the resources to have help, yeah. Um, there's I don't know how people could do a full-time job and care for care for people at home.

SPEAKER_03 17:04

No, yeah, what do they call it? The uh sandwich generation. Sandwich generation.

SPEAKER_04 17:07

Yeah, exactly.

SPEAKER_03 17:08

Yeah, I feel like we see that a lot, um, whether it's on the caregiving side for older parents or even, you know, stuff with you know, kids. But uh yeah, I feel like we see that all the time.

SPEAKER_04 17:19

I I mean I don't I don't obviously someone said I'm gonna just want to work longer. That's fine. I don't, I wouldn't want to build that into a financial plan as a necessity. Just like this people say, Yeah, I'm gonna retire at 65, but I always want to work, so I'm gonna do part-time work for five years. Yeah. It's like, okay, that's great. That's just a bonus, but we're we're gonna make sure you can retire at 65, or I'm gonna make sure you can retire at 60 and there's no extra work. A lot of times the extra work doesn't really matter that much anyway.

SPEAKER_03 17:43

Or sometimes it doesn't materialize. So maybe somebody plans on it and then they go on a few trips and they're like, uh, wait a minute. I don't know if I want to do that anymore.

SPEAKER_04 17:50

I'm I'm done, I'm done doing this. Yeah. Um,

High Income Still Living Paycheck

SPEAKER_04 17:54

another another confidence phrase that we also often hear is my income will carry me. And and what that means is is that uh we have high earners who are building wealth, um, and they think that they're just gonna keep working harder and longer, and they'll just keep making more and more and more. And it doesn't really sometimes it works that way for business owners, maybe, because there's a liquidation event at some point, but for people working W-2 jobs, I I don't know that I would assume that your income keeps climbing. It's not even that unless it's contractual, yeah. Right.

SPEAKER_03 18:32

I feel like sometimes it hides um spending problems too, because like you can be, you know, have a high income and still have spending problems. And so I I think that you know, it also sets the bar really high for what you're planning on spending in retirement too. And that's something that's important. So when we look at, you know, your spending today versus what you're spending in retirement, if there's a big gap there, that's gonna, you know, that'll hit pretty hard, probably. Yeah. Um, so understanding that is important.

SPEAKER_04 19:00

High earners, which the study didn't really uh clarify who that is. I assume high earners are anybody over 150, uh suggests that 30 to 40 percent uh are still living paycheck to paycheck, even though they're making more money. Yeah. That that's where I tell my kids, uh, those are rich people. Right. You can be rich or you can be wealthy. Wealthy, wealth is hidden. You're saving, you're saving quite a bit. Uh rich is you make a lot of money, but it you don't know where it is at the end of the month.

SPEAKER_03 19:26

Yeah. Yeah. And and yeah, I would say some people hear that and they think we're telling you to be like a miser or something. But it's like true. That's not true. It's it's being responsible with what you're given, uh is how I look at it. And it's it's not again, it's not we don't do these things, we just write that off. We never do, you know, the nice trip or whatever it is for you.

SPEAKER_04 19:46

Um, but you still have to be taking care of yourself. Actually, I think my my client meetings are polar opposite of of that, actually. I'm usually telling people you need to need to be spending money. Yeah. And they're like, what? I don't, I don't understand, I don't understand. You know, you have to be saving money. It's like, no, you're 72 years old, you're still saving money.

SPEAKER_05 20:04

Yeah.

SPEAKER_04 20:04

What were you saving it for? Retirement. Well, you've been retired for, you know, eight to ten years. Yeah. So go go live your best life. This is what you saved it for. And and there's also a fine line, too. I mean, you you you have to understand that we've we've worked with so many families, the firm's 25 years old this year. Yeah. We've worked with so many families that I've I have done, I can think of three plans where we we achieved the goal. We got to the finish line, and then uh one of the spouses died of cancer. And it it just hurts because, oh my gosh, we did everything we were supposed to do, right? Exactly. And so that that is a lesson of there's a fine line between living beyond your means, but also enjoying life, right? Yeah. So you have to make sure you're taking these opportunities to do things with your family. Yep. Um, or you want to do something for everybody, but then you don't have good health, or if you're a younger person and you're kind of toting the line for your family, meaning that you're the top of the pyramid when it comes to income and you can help others out. Right. Well, if you don't stop and maybe do something that's important with them, yeah, you help them, but you didn't spend quality time. Yeah. And then you're gonna miss that once they're gone. Yeah. So it there's there's there's a fine line there. You do have to stop and do fun things. Yeah. Uh, but at the same time, you have to protect yourself in the long run that that you're not in a position where you have to find employment.

SPEAKER_03 21:22

Yeah. Yeah. And I think again, it goes back to just making sure that you're saving the amount that's appropriate for you, which you know, some sometimes takes a professional, sometimes you can just use, you know, rough numbers to calculate that. But um, you know, we always kind of say it depends on, you know, retirement depends on, you know, how much you're saving now, what you're gonna spend in retirement, and then you know, when you want to retire. And the combination of those three things is really important. Um you know, but sometimes when we're building plans, if somebody has a very high income and then we're like, you can live on 60,000 a year, that that doesn't really work, kind of like just going back to what I said. So So that's something that I would pay attention to if you're somebody that's you know in a similar situation.

SPEAKER_02 22:06

Not

Insurance Protects Wealth And Options

SPEAKER_02 22:07

all financial advice is created equal. Coming this summer, everything your financial advisor won't tell you. An eye-opening book that reveals what's really happening inside the financial industry and what it takes to build a plan that actually works. Because what you don't know could be costing you.

SPEAKER_04 22:27

So if you're uh watching the podcast, I have a uh draft copy. This is not for resale across the front. This is our this is our new book. Uh myself and Shauna and Andrew Pratt all contributed to it. Everything your financial advisor won't tell you. Uh so I say this because inside this book, I have a whole chapter on the insurance industry and and how I have disdain for uh whole life insurance and annuities. However, insurance is not a bad investment. Uh maybe not investment. I know that's what it says, but it's like insurance insurance should never be an investment. Yeah, it should be there for protection. Uh and the bottom line is overconfidence can reduce your ability to see risk. It's no different than you're 22 years old and you think you're invincible, right? Yeah. And then you get in your 40s, you're like, maybe I'm not as invincible as but you need you need to have insurance. You need to make sure that you have a term policy or a group policy through work in place to protect your family. You need to think about the real cost of long-term care. People go, Oh no, I'd be fine. I don't believe in that. That's what I hear that's I don't believe in long-term care.

SPEAKER_03 23:44

Well, if you how many different things I've heard from clients about how they're not going into a home, their plan, if you know what I mean, it's like I can't tell you how many times I've heard that.

SPEAKER_04 23:53

Yeah, I got a bolt in my drawer for that.

SPEAKER_03 23:55

Yeah, no one does that.

SPEAKER_04 23:56

No, no, nobody does that. Um so so there's yes, there are long-term care policies that you buy and you pay every month. And if you don't use it, you lose it. But for for those that can afford it, there's also long-term care policies that you can buy a policy. If you don't use it, your your uh beneficiaries will get the premiums back. Right. Uh, it's a life insurance, so you're there, it's not the exact premiums. It could be a little less than what you paid in, could be a little more too, depending on when you passed away. But there are ways that you can you can kind of um make make long-term care almost a non-event. Uh and so so for families that go, I want to protect my assets and make sure the next generation receives what I received, then sometimes long-term care will help you with that.

SPEAKER_05 24:45

Yeah.

SPEAKER_04 24:45

Um, for those who don't really care and they won't go to zero, yeah, we can calculate whether or not you can handle an event like that. But um, and a lot of times people never calculate their house. So if the uh last surviving spouse is alive, you'd sell the house and you could use that. So there's a lot of self-funding ways, but don't discount the ability to have long-term care insurance. Probably another one too is um, they say, you know, insurance is a bad, bad purchase, uh, is disability insurance. Yeah. So people we have we've seen people deny their long-term disability from their corporation who's almost paying the entire premium. Right. Uh, you don't want to do that. No. And then for this is a hard pill to swallow, but for small business owners, it is really expensive to have disability policies uh for us. That's one of the reasons I have it, I pay for it for everybody at the firm because if I had just do it by myself, it'd be so much more expensive. Yeah. But thinking about you're more likely to be disabled than you are to be dead.

SPEAKER_03 25:42

Well, early. Yeah, early. Right. But yeah, it's uh yeah. I mean, we have a stat here from Social Security administration that says one in four out of today's 20-year-olds will be disabled at some point during their working years. Yeah. Um, you know, and I I think we've seen that borne out. I mean, we have clients that are, you know, aviation and you know, working in commercial aviation that are disabled, which is a huge risk to them. Yep. Um, you know, but I mean, we have other people as well that have gone through that as well, you know, in terms of just being on dis long-term disability. Um, you know, and having those having those policies in place is very important. And if you have the option of carrying it through your employer, then you probably should.

SPEAKER_04 26:22

Yeah, it's just this is all risk management and risk management protects your plan. And so it needs to be there in some form or fashion. It's not all gobbledygook.

SPEAKER_03 26:32

Right. We don't want to be doing hardship withdrawals from the 401k because we didn't have long-term care insurance or or sorry, long-term disability insurance.

SPEAKER_04 26:39

And if you did have long-term disability insurance, it's probably going to cover 50 to 65% of your income. Yeah. So that's a whole nother problem. So even the people who have it, you're not going to get the same paycheck. Right. And your medical expenses have probably gone up because of that too. Yeah. So you you have to uh and if you're not working, who's paying the healthcare premium? You're gonna end up on Cobra? Yeah. So these these are all things uh that you have to kind of piece together that could derail your life uh financially speaking, yeah, if you had to go through it. So again, um risk management is is uh is something that should be a part of every every plan. Um

Avoiding Money Talks Creates Chaos

SPEAKER_04 27:15

you know, some something else that uh I I see sometimes with couples is uh our phrase here is I don't need to talk about money. So if you if you make it disappear, or if you avoid uncomfortable conversations about sp spending habits or what we need or don't need as a as a family financially speaking, that that's gonna create a lot of um confusion in relationships. Uh you're gonna have estate issues for sure. If you didn't talk about money, no one knows where what to do if you if you if you're gone. Yeah. It creates it creates even problems. And also it creates decision-making gaps where uh there's just a period where no one's making any decision about anything, you're just kicking the can down the road.

SPEAKER_03 28:01

Yeah. I heard I heard I I'm probably gonna butcher this, but I heard somebody recently say uh it was something like the those who refuse to face an uncomfortable reality have are guaranteed an uncomfortable future. Like if yeah, if you're that person that's just not looking at it because it's uncomfortable, then you know, this is me telling you that you need to look at it. You need to just, you know, it's gonna probably stink, whatever that, you know, if you're in a situation where you're not wanting to look at it, that's probably not good. Um, or or maybe it's not as you know what you want. Um, but the longer you go without paying attention to it, it's just gonna get worse. So you you do have to kind of rip the band-aid off and and pay attention to it.

SPEAKER_04 28:45

I I was sent a client's son and daughter-in-law recently, and they said, uh, would you talk to him about money? Said sure. Didn't know really what I was walking into. And it was it was a bad situation. Um they had just all kinds of debt. Income was okay, went horrible. Uh working, I I told them they were too rich to be this broke, which is it, which is a Dave Ramsey quote. Yeah. Uh but in the end, I I remember saying, okay, look, you can pretty much do anything over an 18-month time span. Uh 18 months seems like a long time, but it's really not. But you got to buckle down. Here's a debt elimination strategy, putting it to this together all on the fly. And the I remember the wife, my wife goes, as I get older, I get more blunt. But the wife goes, So you mean we can't take a vacation this summer? And I was like, I'm mean that if you if you you can, but that vacation couldn't be what sprawl spirals you into bankruptcy, and you'd have a hard time taking a vacation for for a long time. Yeah. You know, um, sometimes people just need to be told the truth. And yeah, you in almost all the situations, the two people I'm talking to, you can tell there's tension. Like, oh yeah, like either one's being drug in or one's coming in out of fear or whatever. But you're you're sitting there talking to them and you're like, uh, I'm here to you're first of all, you're not even paying me. I'm volunteering 30 to 45 minutes of my time to help you through this. Uh, but my job is to tell you the truth, and that goes for even people who are paying us. Uh sometimes the truth is not pleasant. Yeah. But do you need to hear the truth? And this and then, but I don't present problems out solutions. Right. So I was presenting the solution to the problem, uh, but they didn't they didn't particularly like that too much. Yeah. But you could tell that they knew that they're in a bad situation, but they didn't know what to do and they weren't really discussing it with each other.

SPEAKER_03 30:41

Yeah, and that's one of those things where I mean, along these same lines, uh, I feel like some people they're looking for a shortcut. And sometimes there's one way out and it's through. Yeah. Especially in a debt situation. Yeah. It's like, you know, there's really not a shortcut here.

SPEAKER_04 30:58

It's not refinancing it, it's not taking equity out of your house. Yeah. I mean, if you take equity out of your house and then you pay off your debts, you feel better, but then the debt's just somewhere else. And if you screw up again and you have another $80,000 in credit card debt, and now your house is fully um remortgaged, but then what do you do? Yeah. So you you have to just kind of address it where it is. Yeah, there's some common sense things like, hey, I'm paying 30%. I'm gonna refinance this into five or eight or nine or ten, even. Right. Uh, but then you still have to go at get after that. You still have to be aggressive.

SPEAKER_03 31:29

It's not buying you time necessarily. It's like you still have to be just as aggressive as if it was at 30%. Yeah.

SPEAKER_04 31:35

Refinancing is not solving the problem. It's just, it's just, it's just covering the problem up with a blanket going.

SPEAKER_03 31:41

It's maybe it's making it a little less worse over time. Right. But yeah.

SPEAKER_04 31:45

Right.

SPEAKER_03 31:45

Yeah.

SPEAKER_04 31:46

And I don't want that to sound judgmental. Um, stuff happens. People get medical expenses. Uh they live, they have uh low-paying or or I should say underpaying jobs or out of work for a little while. Things happen. Yeah. I don't really care how he got here. Uh, it's just in that particular conversation, it was like we want to keep living our best life and just not address one one spouse didn't want to address the issue. Right. I was like, you've got you have to address this, or else you're gonna be, you know, 60 years old in 10 years, still with the same issue, and that you're gonna be working the rest of your life. Yeah. Yeah. So it it you know, again, um communication is important. This is what's in this is what's important to us. Uh yeah, and and also it's a source of a lot of contention in marriages. So it's always good to have a plan, put everybody on the same, on the same uh same page. Yeah. What we do is a lot like uh counseling. We sometimes I wonder if I should have majored in psychology, minored in finance. Yeah.

SPEAKER_03 32:45

It's a lot of aspects of that for sure.

Career Success Does Not Equal Wealth

SPEAKER_04 32:48

Um I and another overconfidence uh kind of top or phrase, I guess, is success in my career means I'm good with money. It doesn't necessarily mean you're good with money, it just means you're really good at something else that makes you money.

SPEAKER_03 33:02

Yeah, maybe this is anecdotal, but I feel like this is also I feel like this is very true of people with high stress jobs too, or or jobs that they know they have a lot of weight on them. Yeah. And I I may I'm not gonna name them, but you can kind of put you know, two and two together with that. There's there's a lot of that with people that have they're high performers, they have a lot of pressure on them. A lot of people depend on them, and they're just like, I don't know, there's a little bit more to to those types of people. Um, you know, but at the end of the day, what we've already said still applies here. It's like income isn't wealth, and it's it's not, it can end very quickly. So that's again, taking the steps that we've already talked about are are very important.

SPEAKER_04 33:44

Yeah, I think common issues we see with super high earners is typically they're overpaying on taxes. Um, they're concentrated, they have concentrated stock positions because they chose the stock or they work at a company and they receive the stock. And sometimes you do have to carry a lot of company stock because the company knows you own the stock and you have to show that you're a team player.

SPEAKER_03 34:02

Right, or it's a exactly it's a private company, which is even different more different or more layered.

SPEAKER_04 34:07

And and that's okay, but if you're making good money, you should be able to help try to diversify that in other ways. Right. You keep buying the company stock or you keep receiving it. You're not gonna sell it because that makes you look like you don't believe in the mission. Right. Right. Um, but but there's other ways to get uh diversification. Um so I don't know. This is kind of fun. We we put some of these things together. These are things that I think we butt up against all the devices here on a on a weekly basis. Uh,

Second Opinions And Stress Testing

SPEAKER_04 34:32

how do you break these patterns? So how do you how do you get out of? I'm doing just fine. I think one, this sounds a little self-serving. I don't do the podcast to be self-serving, but it sounds a little self-serving. Uh you should get a second opinion.

SPEAKER_03 34:44

Yeah.

unknown 34:45

Right.

SPEAKER_03 34:46

Yeah. It could be a fee-only financial advisor, but yeah, you can go to nappa.com or.org.

SPEAKER_04 34:52

You can find uh fee-only financial advisor. It does not count, maybe for really basic things, but um but yeah, you you can find a fee-only planner and pay for a one-time plan and and see if uh if your strategy is correct. Um you you want to build a coordinated strategy, not just accounts. So I think what that what that means is like you have a risk management strategy, you have a portfolio management strategy, you have estate planning. Yes, estate planning strategy. All these things kind of work together uh in in sync. Uh so that's really important. And then also to uh stress test. Uh we actually have software that does this. So it'll show, hey, what happens to this portfolio if there's a major market downturn. Um early retirement, again, you can do that in our in our uh second planning meeting of three that we do, or four, depending on which plan uh which plan you're on. Right. Um you you can actually show you, hey, if you retire at 60 or 55 or 50, this is what can happen. Yeah. I I was did a uh plan with a couple last week that I was a review meeting, it wasn't a full-fledged plan. Um, but uh the review meeting was basically having them their number looked low for what they made. And I realized they were both retiring at 50.

unknown 36:03

Yeah.

SPEAKER_04 36:04

Like, oh, you're retiring, that's right. You're retiring at 50. Uh, there's no way these people retire at 50. They're they're too just engaged in in their careers and what they're doing. Right. I don't see them walking away. But I thought, well, that's good to know that they could they could retire at 50. Exactly. Um, and what and we they all they know what that what that looks like. Yeah. Uh another thing too is is stress testing is your a health event. So if you're disabled and you had to be out of work for a while. Yep. Um, think for for men, especially, think uh, you know, heart, heart conditions, things like that take you out of the yeah.

SPEAKER_03 36:37

Again, especially high performers, if you're in a high, you know, high stress role. You know, that's that could be more of a factor for you, honestly.

SPEAKER_04 36:44

Yeah, absolutely. And then you should always involve your spouse and partner in planning. Uh, and to be honest with you, I'm very reluctant to do plans when it's just when it's just one person uh in the in this in the family that's doing it. A lot of times it's husbands like, oh, my wife's just not involved in this. Well, she should be involved in this because that will show understand what the mission is, and we all need to be held accountable. Yep. So she's like, hey, this doesn't seem like you know, buying this portion out of love it didn't seem like that was part of the overall plan. And maybe maybe maybe it's the man that doesn't want to hear that. Right. He doesn't want that accountability. So I I want to kind of figure that out at the beginning of any relationships. Hey, we need to be doing this together. We need to be stronger as a unit, yeah. Uh at the at the end of these meetings. Um yeah, so you know, a written plan. Uh, we we we have uh our written plans are actually a client portal you log into and you can see and manipulate the plan yourself. Yeah, but they they typically have um people with a written plan uh report better outcomes. That's a schwab uh and a CFP board study that um that showed that. Um really the biggest financial mistakes aren't necessarily math problems. I would say that they're mindset problems. So we're we have a way of thinking about something. Uh we're gonna take social security as early as we can at 62 because it won't be there for us. Right. That's that's false. And we have lots of uh we have lots of podcasts on that you can search for. Yeah.

SPEAKER_03 38:08

Um what's a let's say what's another which is ultimately like fear, you know, you're like fear dictated. You're in fear, yeah. That's true.

SPEAKER_04 38:14

Trying to think of another um another thing that people often come in and and and state as a is a fact. Um, I would say that that there's gonna be a recession this year. Yeah, we've heard this for 10 years, and there's well over the last 10 years, I think there was a recession for three days, maybe something like that. Something like that. Yeah. Uh there is so much fiscal stimulus happening with the government right now. I don't know if we'll ever have a real technical recession ever again. Because anytime we we the politicians have figured out that if a recession starts occurring, that they can print more money and put it flood the system, and that recession won't happen. Yeah. And sometimes we're we need a healthy recession. Yeah. So um, but yeah, the recession's coming this year, the market's gonna be down. Um no, you don't know that. And what data would could you show me which data? Because Black Rock Vanguard is just a gut feeling, too. It's a gut feeling, yeah. Or yeah, it's it's just that I have a gut feeling it's not gonna be good this year. It's like, well, BlackRock, Vanguard, and State Street, I'll say you're wrong. Yeah.

unknown 39:13

Right?

SPEAKER_04 39:14

Or or they let politics, that's another one. Yeah, yeah. Oh, X so and so is elected. It's this person's gonna, yeah, this this person's gonna just tank the economy. Yeah, there's very little correlation between the president and the economy. Yeah, uh, a little more correlated with the current administration, uh, just because the people in the administration are from Rawl Street. I don't know, I don't know when the last time that happened. I can't I can't think of a time that that they were super connected like they are right now. Yeah. Uh, but they they this is the first administration that I remember remember in modern times, and they have a look back in history that that keeps an eye on the value of the stock market. Yeah. Right? The ones in the past were like, oh, we can't control any of this, we can't control any of this. If it's good, they try to claim it, but it's not correlated. Uh, and this this this one this administration has figured out they can say things to manipulate it, even. Yeah. Uh so that's that won't be forever though. No, that'll probably end with this administration, quite honestly. Yeah. So it it's it's but anyway, for the uh the data, even even with the current administration, when they were in the first time, um, the data between the market and the present it just is not correlated. If if you like to show me research on that, you can. But I've I've read probably a thousand pages worth of data research data on this, and it's there's just not there's just no correlation. It's in our heads. Yep. It's all in our heads. Yep. So uh I don't know. What I I think you know the question is which of these beliefs do you think cost people the most over time?

SPEAKER_03 40:47

Not looking at it is to me the the most not not looking at your friends. Yeah, because I think all the other ones, at least you're thinking about it maybe to a degree, but I think not looking at it is probably the worst one. Um, especially if you have a certain you know lifestyle that you want to maintain, and maybe your assets don't actually match that. So that's that's to me, that's the the worst one.

SPEAKER_04 41:09

The whole social security thing just costs people so much money, but I would say most people that are paying us money to to educate them and and to shoot create a plan for them, that I'd say 90 percent, 90 percent, 95% are listening. So maybe that's not necessarily costing the money. Yeah. Um I I I would say uh for the people we haven't met yet, then then yeah, probably the cost of not having a not having a plan. That's probably the you just by chance, you're just hoping by chance things work out. Right. And it's it doesn't you can you know maybe there's a maybe there's a 50-50 chance. But if you have a plan, uh you you can get much closer. It's not gonna never be a hundred percent. Um, there's always the zombie apocalypse or yeah. What are they the black swan? Black swan events that can happen for sure. Yeah. But even a great financial crisis again, I know that with confidence that our clients could survive that, it wouldn't be pretty. Yeah. It'd be hard work to keep everybody moving the same direction as far as uh what to do in that case.

SPEAKER_03 42:15

And yeah, it's one of those things that may change behaviors at some point. Yeah, meaning you may decide to keep working, but we know that you could retire if that happened. So it's again, it goes back to this discussion, making sure that you know what your options are.

SPEAKER_04 42:28

Oh,

Mortgage Payoff And Retirement Cash Flow

SPEAKER_04 42:29

I know another one that that people, you know, people think they're really smart when they say this. And and the math probably uh works in their favor, is that they're not going to pay off their house. They don't pay off their house because their house is a 2.75% mortgage, and they can get way more than that in the market. Yeah. So it's better to leave it in the market. But any plan you run, it's better to pay off the debt and eliminate all the market risk. Because of the cash flow. Because of the cash flow. So retirement, retiring is about cash flow. It's not about necessarily rate of return. It's about it's about the cash flow. So the less cash flow you have going out, the less that you need, yeah, which means more stays in the portfolio and you can make more money.

SPEAKER_03 43:08

Um, and there's less less withdrawal requirement on the portfolio, which means in the the simulation that we're running, you have basically less risk that's tied up in the market. Yep. From the perspective of your daily cash flow.

SPEAKER_04 43:21

Yep. Yeah, it almost looks like it's like a it treats it like a guaranteed pension payment payment if you're paying off that house in in terms of not having to pay that money out anymore. Right. So yeah, that that's that's probably a big one. But I don't feel like we have to convince people to do that very often.

SPEAKER_03 43:37

I think most people are like, oh, got it. And our rates are higher too. So it's a little less of a discussion. But I I did see one recently that was under 2%. It was like one point something, something, something. And I was like, wow, okay, you're never getting that again.

SPEAKER_04 43:49

Yeah, it just it just comes down to cash flow, uh, having peace that your house has paid off. Your primary home. No, second, third um investment property. Properties, that's a little different. But yeah. Yeah. All right.

Closing And How To Reach Us

SPEAKER_04 44:03

Well, thanks for the conversation, William. Uh, thanks for listening to today's episode. If you're interested in learning more about wiser wealth management or want to schedule a consultation and meet with one of our fiduciary financial advisors, you can do so by going to wiserinvestor.com. You can click the link in the episode notes as well. Uh see you guys next week.

SPEAKER_00 44:20

Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to WiserInvestor.com and reach out. This podcast is strictly for informational purposes only and is not to be considered as investment advice or solicitation to buy or sell any financial products, securities, digital assets, or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guest may personally own securities, digital assets, or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation, and no referral fees are paid to or received by any host or guest for clients, listeners, or similar interests. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional, andor legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.