The Year That Almost Broke Them Financially (And What Fixed It)

From Good Habits to a Real Plan: Clarity and Flexibility in the “Messy Middle”

Hunter Kelly, CFP and founder of Palm Valley Wealth Management, explains why many high-income young families feel behind despite doing “everything right”: their financial decisions are disconnected habits without a cohesive plan. He shares the story of Tom and Lisa, whose 2024 job loss during a home move, two mortgages, a serious car accident, and drained savings nearly forced a 401(k) withdrawal, revealing a lack of structure. Kelly outlines planning as an ongoing process focused first on emergency funds and cash-flow stability, then organization around near-term changes like a new baby, followed by long-term questions about retirement, savings targets, account “buckets” for flexibility outside retirement, and proactive year-round tax planning to reduce lifetime taxes. He calls this life stage the “messy middle” and encourages listeners to define 12-month goals, assess systems and flexibility, and stop guessing by building an evolving plan.

00:00 Feeling Behind Anyway
02:13 Tom and Lisa Story
02:38 Life Hits Hard
03:41 Habits Without Structure
04:51 From Survival to Clarity
05:48 Next Step Mindset
06:41 Planning Is a Process
07:18 Build the Foundation
07:57 Organize the Year Ahead
08:50 Answer the Big Questions
09:49 Flexibility Beyond Retirement
11:04 Tax Planning Unlock
12:07 The Messy Middle
13:39 How to Start Today
15:01 Work With Me
15:47 Disclaimer

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Transcript

0:00

And welcome back to the Retire Earlier Timeout podcast. I'm your host, hunter Kelly, certified financial planner and founder of Palm Valley Wealth Management, where we help high income earning families stop guessing about money and start making intentional decisions that actually move their life forward. Lemme start this episode off with a question today. Have you ever had the feeling where on paper everything looks like it should be working properly. you've got a good income, you're saving, you're contributing to your 401k, you bought a nice house, you're growing a family, and yet there's a little voice in the back of your head that says, are we actually doing this right? Should we be further along than we actually are? What are we missing? Because I can tell you that feeling is more common than you think. This is not because you're doing anything wrong. It's because no one has ever sat down with you and showed you how this is all supposed to work together. So what ends up happening, you make a great, you make a bunch of great financial decisions, but they're all disconnected. And when life throws you a curve ball, like a, like a job loss, a big expense, a transition. All of a sudden it feels like everything is more fragile than it should be. and that's exactly what we're diving into today. I am going to walk through a real story of a couple that I met with a few weeks ago. Tom and Lisa, who from the outside looked like they were doing everything right, but one tough year, exposed something bigger. They didn't have a plan, they just had a collection of habits. And once we started working together through their situation, the goal wasn't to overhaul everything. It was to create clarity, structure, and direction. So if you're in this stage of life, young family, growing income, trying to balance today with the future, this episode is going to hit home. And real quick, if you value this episode, if you'd like this episode, share this with your spouse. Share this with a friend, someone that you think is in this phase of life. These are conversations that can completely change the trajectory of a family. Alright, so let's get into it. Like I said, a few weeks ago, I sat down with, uh, old high school classmate, I'll call him Tom, just for the sake of identity protection. Tom and his wife Lisa, are exactly the type of demographic that I work with every day. They're a young family. they have established their career. They have a great income. They're homeowners, and they have one child and another one on the way. On paper, you probably say they're doing great, but when we started talking, the tone shifted a bit because behind the scenes in 2024, that year, just punched them straight in the face. Tom lost his job right in the middle of buying and selling. a home. So they ended up paying for two mortgages for an extended period of time. Tom was in a serious car accident and their savings was almost completely wiped out to the point where they were very close on having to pull money out of their 401k And so things did, really hit them in the face, if you will. Right? And, now here's what's interesting. Tom didn't come to me to ask about investments. That's rarely the case with most people. He didn't ask what, ETF or stock or bond that he should be invested in. He said something that was way more honest. In my opinion, I feel like we've been managing things. But not very well. We just want to know what we should be actually doing. That right there is the real problem that most high income earners face. It's not, that they're doing nothing. It's that they're doing a lot without structure. Their lives are busy. Again. They have kids, their kids have activities. They have a busy career, and so they're, they're piecemealing together what they think is a financial plan. And so they're making good decisions, but it's not always working together in unison. So why does this happen? If you're listening to this, you're probably, you have probably experienced some version of this. You make good money, you save something, you contribute to your 401k, you pay your bills, and yet you still feel like you should be further along than you actually are. Why is this? Because life doesn't happen in a straight line. Tom's situation is a perfect example of this. Had a job loss. They were buying and selling a home at the time, unexpected car accident. They have a growing family. Now, that's not a bad financial plan. That's just life happening faster than your system can handle it. And so here's where it gets dangerous. Most families go through a year like Tom and Lisa had in 2024, and they say, okay, let's just rebuild back to normal. But here's the problem. What is normal? Random savings, guessing on retirement contributions, having no plan for taxes. No clear timeline. That's not a plan. That's just survival mode. get back to being able to have a little bit of money in your savings account. And if you stay there too long, you'll end up 10 years into your career and still be guessing. So here's the shift. What Tom and Lisa really needed wasn't better investments, higher returns, a new account. They needed clarity and structure because once you stabilize that situation, once you have clarity, once you have. structure. The next question becomes, what should we be doing this year and next? And so, one of the things that I like to do in my personal life, just as a side note real quick, is I like to start the day on what can I do today to thank myself later on down the road? I have a, a good friend right now going through, a quite a bit of life change. not to get too specific in a situation, but he's basically com combining two families, right? So he's divorced. His, his soon to be wife has two kids as well. and that's a difficult situation to navigate, right? And so he sometimes he feels overwhelmed with all the things that are having to happen to, to make this kind of work together, right? And so what do I tell'em? I say, Hey. What's the next step? What is the next step to get us to the next step, right? So, whatever that easy step is, just focus on that next step and then we can work on the bigger plan at hand later on, right? So what a real plan actually looks like. So back to Tom and Lisa. So I walked through the, I walked them through how to think about this. It's not a one time event. Financial planning is a process, right? Life happens. If you think about Tom and Lisa's situation, in 2024, they had a lot of life that happened, right? and if you, and if they look at their life five years from now, it's probably gonna look a little bit different. So it's always a process. Your goals and your values may stay the same. But there's life that's gonna happen, and you're gonna have to make adjustments along the way. So that first step is to just get them some clarity and some structure. So first priority is to make sure they have a proper emergency fund, clean up their cash flow, and make sure there are no leaks or no, unnecessary spending going on. Because if your foundation isn't solid, obviously nothing else matters, right? And so. The foundation of every financial plan is not investments, as most people probably think, is making sure that your cash flow and your emergency fund is taken care of, right? If we don't have good cash flow, if we don't know where our money's going, if we can't weather any emergencies, well then there's no foundation there, right? The next step would be to get organized. So now we zoom out a bit. What's coming this year? So this year his wife, Lisa. Is having a baby. So that will increase some expenses, whether that's hitting their out-of-pocket backs through health insurance, daycare, uh, all the things that are involved in having a new child. Right? Uh, income stability. So how confident are they in their income? Right? We haven't had that conversation yet. but we will here soon as we start working more and more together. But he does have a new job at this point. He feels confident in that. we'll have more deeper conversations on that and what that outlook looks like, This is where most people start realizing we've never actually connected all of this before. All of this income, all these working parts moving and working toward one particular goal or plan, right? And so now we answer the big questions, the ones that. Are more long term? Are we on track for retirement? How much should we actually be saving? Where should these dollars go? What is flexibility for us and our specific situation look like? Is that getting off early, so that we can get to our kids earlier or sports or whatever that may be, right? So once we get everything organized. And show them how all of this works together. Now, the question we want to answer are the big ones, right? Can we retire? Are we on track for that retirement age? Whatever that age is that we want it to be, how much should we be saving toward that? How much should we be saving outside of retirement? What are those dollars? Where do those dollars go? Is it our 401k? Is it IRAs? Is a brokerage account? Is it 5 2 9 plans? Where does this money go? Right. Um, and then what does flexibility look like for us? How can we start building that flexibility? Because remember, Tom and Lisa almost tapped into their 401k because they were hit pretty hard with life, right? So, which tells me something important. They didn't have enough flexibility outside of their retirement accounts, to feel like they were still on track, right? And so maybe a brokerage account would've helped them. In the long run or in that short term, more so than just cash on hand, right? And so we'll take a look at that. so one of the biggest takeaways I see, and this is something I see all the time. High income earners do a great job of saving, but they save way too much in the wrong place, right? And I've talked about this over the last handful of weeks. a lot of times it's all in retirement, which leads to no flexibility. And this, and when life happens, that's where you feel stuck. That's where you feel behind, that's where the anxiety starts to build. How am I going to pay for this? I know I'm not supposed to pull from my 401k, but we literally don't have cash. Or maybe we've maxed out our credit cards for the month. how do we handle this? And so, making sure that you have money in the proper buckets to be able to reach your goals, is. is paramount and giving you the flexibility to do that as well, because again, life will happen. And so the next thing we'll touch on, This is a big part of financial planning, especially for high income earners, and that is tax planning. So this is another big unlock for families like Tom and Lisa. Taxes are always, especially once you get into the higher income levels. Taxes are always gonna be your largest expense every single year. So how, what can we do to mitigate this long term, right? Not just this year, not just a standard deduction versus itemized, but what can we do to make sure that our lifetime tax bill is as low as we possibly can make it? Because when income fluctuates, even temporarily, you get o opportunities. Right? So maybe he wants, maybe Tom wants to take a sabbatical or Lisa wants to stay home with kids for a while, whatever that looks like. Right. we'll take a look at how can we help with taxes. and if you're not proactively looking for tax planning strategies, you'll certainly miss it. Right? We talk about how tax planning is always a year round, year round thing. It's not just, February through April type planning strategy there. Tom and Lisa are in a stage that I like to call the messy middle. they got young kids, they're established, but they're still growing their income. They have big life transitions, recently in the past, and then one coming up with their, baby being born here this year. and what do you do in this phase, right? It compounds not just financially, but in terms of stress, confidence, optionality. And so what you do in this messy middle, this 30 to 40 or 45, really is gonna determine, can I retire early? Can I retire when I want to? Am I gonna have that flexibility later on in life? Especially as my kids grow older and they don't need me as much. Being able to make good decisions and have a sound plan even when things are difficult. In this time where, where life is certainly busy and chaotic, will make a huge difference long term. And so by the end of the conversation, nothing in their life had changed yet. No accounts move, no investments change, but something did change. They finally felt like they were getting to a point where they're going to have some direction. So I'm excited to work with them moving forward, showing them how, all of their pieces of their financial world is gonna work together so that when life hits them again. that they will have hopefully less anxiety, at least about money and where they're at financially, and can focus on getting through whatever that life, stage is, right? And so if you've seen, if you see yourself in this story. Here's where I would start. Ask yourself, what are we actually doing or trying to accomplish here in the next 12 months? Right? Take small bites out of what your overall goal is so that it can seem more manageable. Check your structure. Do you actually have systems? Do you have a plan, or is it just random habits that you've heard from Dave Ramsey or X, Y, z? A financial guru that, hey, is getting you toward the right place. But I don't actually know. Do I have a system that makes everything work together? Look at your flexibility. Is if something went wrong, do you have flexibility to pay for an emergency? Do you have flexibility to take time off? Do you have flexibility to do the things that you want to do? And then lastly, zoom out. Are we on track or are we guessing? So you don't need to be perfect. You don't need to optimize every little thing, but you do need to have a plan that evolves with your life because, these plans shouldn't be an end point. It's certainly a process as life happens because life will change and life will happen, right? Jobs change, expenses will change. Your goals will change eventually, and if your plan doesn't involve with it, you're always going to feel like you're playing catch up. So if this episode hit home. And you're thinking, yeah, we do need to figure this out. That's exactly what I do at Palm Valley Wealth Management. I help families get clarity, get structure, and get a plan in place. You can always go to my website, Palm Valley wm.com, check out my process, the Palm Valley Pathway on how I help families get their clarity and structure and implement a plan. you can get to that website either through my show show notes or@palmvalleywm.com. You can schedule a call with me and we can see if we'll work well together. So if you got value outta this episode, share this with a friend. Share this with someone that's in this stage of life that you think it would help, because chances are they're filling it too. And we'll see you in the next one. This podcast is for educational purposes only. It's not meant to be investment or. Financial planning and advice do not make decisions solely based on this podcast alone. Please seek help when considering your own situation. I.