← HerMoney with Jean Chatzky
HerMoney with Jean Chatzky
Ep 456: Struggling To Find Your Purpose? This One’s For You
00:49:09
Finding your purpose doesn’t have to feel so anxiety-inducing.
Loading summary
Transcript54 lines
- [00:00]
Ryan Reynolds
Hey there, Ryan Reynolds here. It's a new year and you know what that means. No, not the diet resolutions. A way for us all to try and do a little bit better than we did last year. And my resolution, unlike big wireless, is to not be a raging and raise the price of wireless on you every chance I get. Give it a try@mintmobile.com switch $45 upfront.
- [00:21]
Voiceover Announcer
Payment required equivalent to $15 per month new customers on first 3 month plan only taxes and fees extra speed slower above 40 GB on unlimited. See mintmobile.com for details. You know what's smart? Enjoying a fresh gourmet meal at home that you didn't have to cook meat. Factor your loophole in the laws of mealtime. Chef crafted meals delivered with a tap, ready in just two minutes. You know what's even smarter? Treating yourself without cheating your goals. Factor is dietitian approved, chef prepared and you plated. Pretty smart, huh? Refresh your routine and eat smart with factor. Learn more@Factor Meals.com.
- [01:04]
Jean Chatsky
Hey everyone, thanks so much for joining us today on HerMoney. I'm Jean Chatsky and today we're diving into a question that has sparked both inspiration and, let's just say, existential angst for centuries. How do we find our purpose? It is a daunting question, a daunting idea. Purpose can feel abstract. It can feel elusive. It can feel ever shifting. It's something that many of us feel like we're constantly chasing but we're rarely confident that we have fully grasped. For example, and this could very well be an example pulled from my own life. Maybe you are thriving at work, but you feel disconnected at home. Or maybe you adore your family life but feel stifled professionally. I've often said I have gone through periods in my life where I felt good at one or the other, but rarely at both. And maybe you're just wondering if the path that you're on is the path or is it just the path that you happen to stumble upon. Here's the good news. Purpose isn't a fixed destination. It's actually a journey. It evolves as we evolve. And living with purpose isn't just an inspiring concept. It actually has a tangible benefit to our well being. A 2023 study found that having a strong sense of purpose can significantly reduce both depression and and anxiety. That's from Wiley. Meanwhile, research from the NIH shows that a purposeful mindset can even influence our physical choices, like exercising more often. Not just because it's good for us, but because we genuinely believe that we can. So how do we begin this journey? How do we uncover what drives us, realign our priorities and. And start to live a life where we are always revisiting the question, what is my purpose? My guest today, Dr. Jordan Grummet, has answers. And thankfully they're not as complicated as you might think. In his latest book, the Purpose how to Unlock Meaning, Maximize Happiness, and Live a Lasting Legacy, Doc G offers what he calls a purpose prescription, a practical, heartfelt guide to help us find clarity, fulfillment and joy. And he is, by the way, uniquely qualified to take us on this trip. As a hospice doctor, he has spent countless hours reflecting on life's most profound questions. He's also an award winning personal finance podcaster and has spent years helping people align their money with their values. If you think the name sounds familiar, you're right. Jordan's been with us before. And if you missed our conversation about the biggest financial regrets people face before the end of their lives, we'll link to it in the show notes. It's a really, really important show, but today, today we are looking ahead. And with that, let me welcome Jordan to the show.
- [04:37]
Dr. Jordan Grummet
Jean, thank you so much for having me. And if we can make purpose less elusive today and lower the stakes, then I think we've accomplished what we set out to do.
- [04:47]
Jean Chatsky
Well, let's make that question a little bit easier for people to wrap their hands around by defining it. What do we mean by purpose and what do we mean by finding our purpose?
- [05:04]
Dr. Jordan Grummet
Well, I think first and foremost, this is one of the places we really get it wrong colloquially. Purpose basically is the why of doing what we do. But I think that really sets us up because I don't think that's a purpose question. Here's one of the ways I think we get it wrong. Purpose is about the present and future, and it's all about actions. So purpose is being involved in actions that we find highly fulfilling. And so I think this is where one of those places we stumble because a lot of times we're trying to solve our life issues with purpose, which is more of what I call a meaning problem. A lot of people think meaning and purpose are the same thing, but meaning is more about our past and about our thoughts. And so a lot of what we derive in a sense of meaning is the stories we tell ourselves about ourselves. And that actually has more to do with the why of what we do, whereas purpose is more about actions. And I like to really make that distinction. Therefore, we don't really find our purpose. We generally build or create it. And I think this is another place where people get really anxious because they feel like there's this one version of purpose that either fits them and they find it and life is great, or they miss it and everything is lost. And the problem with that is it really takes away agency because we feel like this thing's going to hit us over the head and life is going to be perfect or it's going to miss us. And really, I'd like to give people more agency by helping them realize that you build purpose into your life.
- [06:31]
Jean Chatsky
So when we think. When I think about building tasks and doing things, I think about goals, right? And when I think about goals, I know enough about the research to know that the best way to accomplish any goal is to break it down into a series of small steps that you actually can accomplish on a regular basis. Is that how you think about the actions associated with purpose?
- [07:07]
Dr. Jordan Grummet
Well, in my book, I differentiate between two different types of purpose. What I call big P purpose and little P purpose. And first, let me say that I think in American society and culture, we tend to dream big. If you can think it, you can build it. So we have these big, audacious goals. The problem with those is usually those are really hard to achieve. A lot of times you have to be the right person at the right time, saying the right things with the right genetics and the right luck. So if you want to cure cancer, become a billionaire, or become president of the United States, those are all really hard things to do. And most of them are all or nothing. And most likely the grand majority of people who set out to do these things are going to fail. So I think if we focus on goals, especially big, audacious goals, we're setting ourselves up for disappointment. I think a better version of purpose is what I call little P purpose, which is much more process oriented. And I think in a sense, this is what you mean when you say, well, you think about a goal, but then break it into smaller goals. What you're really doing is saying, what are the things I can do on a daily basis that light me up, that feel exciting, and I feel like I'm accomplishing something? And so if we can enjoy the process of doing what we're doing, in a sense the goal becomes less important. We either reach it and it's great and we're happy, or. Or we don't reach it. But because we're enjoying the process of doing what we're doing, it still is worthwhile. And so I think we have to think about it in those terms. The problem with these big audacious goals is a lot of times we spend all of our day doing things we don't actually enjoy. We don't like the process of doing in order to reach these goals. But if you spend 95% of your time doing things you don't like for the 5% of the time where you're reaching that goal and you're excited, guess what happens? We tend to get used to reaching that summit pretty quickly. And the next thing we're looking for more summits. And so again, we're setting off to do all these things that if we don't enjoy the process of doing them, we're really serving these goals that only really keep us happy for a very short period of time.
- [09:10]
Jean Chatsky
In the book, you actually define the big P purpose as goal oriented, which you said, but also being associated with a scarcity mindset, highly fallible, lacking agency and causing anxiety, Little P purpose, as you said, process oriented abundance mindset, impossible to fail, incremental gains associated with longevity, health and happiness. And listening to you talk about them, I'm wondering, do we need both? Do we need a big P kind of a process and then a lot of little P and what's the right, what's the right mix?
- [10:01]
Dr. Jordan Grummet
I don't think we need any big P purpose. And here's the thing about it. It's not that goals are bad, and I think you can have goals. We just need to be a little more goal agnostic. It means that you can want. And I always talk about my podcast because this is a perfect example. I can have the big audacious goal of having a million downloads a week or a month on my podcast, and that's exciting to me. But if I start doing things I don't like to do in order to get there, for instance, I don't love social media. So if I spend all day on social media to get more downloads, to get more listeners, and I find that I'm really dreading my daily activities to get to that goal. Even if I reach that goal, I've kind of spent most of my time doing things I don't want to do. On the other hand, podcasting for me is very much little P purpose. I love getting behind the microphone and every moment I'm interviewing someone or involved in it is exciting regardless of if anyone downloads it or not. So that's more little P purpose. So I don't think we need big audacious purpose. I think we can have big audacious goals, but we have to learn to be more agnostic towards them so we can incorporate them into our little P purpose. Because again, if you're spending all of your time doing things you don't like to do in service of a big goal, then I think we should be rethinking those goals.
- [11:18]
Jean Chatsky
Is it the big P purpose that is responsible for the statistic that you cite in your book that 91% of people suffer from purpose anxiety at some point in their life? Does that tend to go along with the big P rather than the little P?
- [11:37]
Dr. Jordan Grummet
I certainly think it does. And here's the thing about purpose is there's really a paradox. As you mentioned in your introduction, there are tons of studies that show that having a sense of purpose in life is associated with health, longevity and happiness. There are tons and tons of studies. On the other hand, as you also mentioned, there are other studies that show that up to 91% of people at some point in their life have a sense of purpose anxiety, this frustration, depression, anxiety, that there's this big thing out there, but I haven't found it yet. And so I think that's a really nice explanation of why we have this paradox. I do think these big audacious goals are giving us anxiety. And if you look at society today, especially here in America, we are really pushed towards having big P purpose, big audacious goals. If you look at social media, we see these influencers. And what are the influencers showing us? They're showing us images of traveling to every country in the world. They're showing us images of running eight figure businesses. They're showing us images of wearing the nicest clothes. All of these things are very hard to achieve. And a lot of times they're showing these images to us to sell us something. Marketing is the same advertising. They want to show us images so that we buy their products, but what they're really selling is a lifestyle that's hard to achieve. Our families do the same thing when we grow up. Our parents tell us we should be an accountant or a lawyer or a doctor. All these big societal visions of what purpose should look like in our life. And a lot of times we kind of grab it hook, line and sinker and we co opt those versions of purpose as our own. But as you and I know, different things light different people up. And especially if we want to enjoy our daily activities, we don't want to just get hooked on this one big idea, but we want to like what we're doing from moment to moment.
- [13:27]
Jean Chatsky
I want to come back to that notion of work because we've had several guests on this show in the past year who have talked about work life balance and burnout and this trend of de centering work in our lives. And I'm wondering if putting less emphasis on a job as something will provide us with purpose leads to overall higher life satisfaction. And if so, how do you suggest that people start to decenter work a little bit more in our lives?
- [14:07]
Dr. Jordan Grummet
First, I want to say this idea of burnout, I think often is people shooting for big P purpose and falling short. And so what happens is they have these big audacious goals, especially in the work life, and they feel thwarted in reaching them and therefore start feeling burnt out. Here's how I would look at the picture of winning the game, because I really like to talk about winning the game and how purpose and happiness fit into this. So basically we know that you're born one day and you die another. And the amount of time, we don't know how much that's going to be. And I would almost say it's kind of set. Yes, you can exercise and wear seat belts and do things that basically help you live longer, but you have a set amount of time on this earth and time passes no matter what you do. You can't buy it, you can't sell it, you can't exchange it. Basically the only thing you can do is change the activities you're busy doing as time passes. So what is winning the game? Winning the game is spending as many of those time slots, whether we call them days, months, years, whatever, spending as many of those time slots doing purposeful things you love and as few of those time slots doing things you loathe. And so let's talk about how your daily activities fit into them. We all have to work, there's no question about it, unless we're lucky enough to be born rich and we don't have to get a job and we don't have to get paid, but everyone else has to. A lot of people say, well, I make really good money being an accountant, but I realize I don't love being an accountant anymore, but I can't just walk away from this thing that's paying the bills. And I would say, you don't have to. I'm not kind of Pollyanna about this, that we should be pursuing passion and purpose every moment of the day. What we really want to do is look at our schedules and look at that calculus of our weekly schedule. And as time goes on, as we get older, we want to spend more time doing things we love. Unless we loathe. And so we have some different tools and levers that we can use to improve that calculus and improve our schedules. What are those tools and levers? Well, money is one. So if you have lots of money, you can step away from that job you don't like or de center that job to a point where it makes enough money to help you keep going, but that you can spend a lot of your other time doing things of purpose. Another thing is you can find a job you love. If you're lucky enough to have enough money or can make money doing something you love, you're filling up that time with more things that excite you. And so have. When I talk about tools, we not only have money, but we have our relationships, our youth, our energy, our passions, our skills. And so maybe I don't love my job, but I live close to my parents, and I'm 22 years old, and I could move in with them and not have to pay rent. And therefore I could spend less time at a job I don't like. That's an example of a tool we have. We also have levers. The levers I call the joy of addition, the art of subtraction and substitution. And this is where I really want to talk about our work life. Even if you don't like your job and you have to be doing it 40 or 50 hours a week, that doesn't mean you can't live a life of purpose. It just means you have to use the joy of addition. Maybe on weekends, maybe at nighttime, you have to start adding joyful, purposeful activities to your life. That's something you can control. The art of subtraction. Maybe you don't love your job, but you can get rid of those tasks that you loathe the most. Maybe you can switch positions within your job. Maybe you can trade off with another employee and try to do more things you like at work and less things you don't like. That's the art of subtraction. Then there's substitution. Maybe if all else fails, you change jobs, change bosses, change change positions. You substitute one activity for another. But all of those levers help us bring more purpose into our life. Does that mean decentering your job? Well, for people who really don't like their job, it might mean that. It might mean making money in other ways. It might mean just pursuing purpose on nights and weekends. It might be changing things around at your job so you're spending more time doing things you like there. But using these tools and levers, we can continuously improve what our schedule looks like. And that's what I think we really have to do. So the answer's gonna be different for every person, depending on their job, their financial situation, and what really feels like purpose to them.
- [18:15]
Jean Chatsky
I have some follow up questions as I'm sure you're expecting, but before we do that, let's take a very quick break.
- [18:21]
Voiceover Announcer
My dad works in B2B marketing. He came by my school for career day and said he was a big roas man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laugh at me to this day.
- [18:35]
Dr. Jordan Grummet
Not everyone gets B2B, but with LinkedIn you'll be able to reach people who do get $100 credit on your next ad campaign. Go to LinkedIn.com results to claim your credit. That's LinkedIn.com results. Terms and conditions apply. LinkedIn the place to be to be.
- [18:52]
Jean Chatsky
We are back with Dr. Jordan Grummet. We're talking about his new book, the Purpose how to Unlock Meaning, Maxim Happiness and Leave a Lasting Legacy. So you just laid out a very elaborate prescription for dealing with work and the levers that we have to pull on in order to figure out ways to maneuver our work lives. If our work lives don't bring us a lot of purpose in order to get purpose in other ways, I'm wondering, what other parts of our lives should we be applying the same methodology to? I mean, do we look at weekends this way? Do we look at evenings this way? Should we look specifically at friendships or relationships? Like, how do you use this lens? Because I think work is maybe not an easy example to accomplish, but it's certainly an easy example to understand.
- [20:03]
Dr. Jordan Grummet
I think these levers and these tools work for almost any part of your life. And again, winning the game is making that calculus better of your schedule. Just spending more time doing things you love and less time doing things you loathe. That applies to your weekends. Are you spending all your whole weekend cleaning the house? Maybe you have no choice. Maybe you have no extra money. Maybe you have no extra time. Maybe you have no extra help. But how can we look at this and say, okay, maybe I can break this down into my husband does the things I hate the most and I do the things he hates the most, but we don't mind them. And already we're improving that calculus and at least not doing as many things we loathe. Same thing with relationships. What friendships fill you up? What don't fill you up? Maybe you spend less time with certain friends or do activities that are better with that friend. We should always be looking at that calculus because, again, time is passing no matter what we do. We kind of want to get the most value out of that time as it passes.
- [21:01]
Jean Chatsky
I think these are very difficult things, in particular for women. When we look at the desire that so many women have to please people other than ourselves, whether we're talking about children, whether we're talking about spouses or partners or bosses or colleagues or friends, we often say yes to things that, from your definitions, we really should be saying no to. So how do you adjust your attitude in a way that you can feel okay about that?
- [21:46]
Dr. Jordan Grummet
I think we have to change our mindset. Let's look at it this way. When you are doing things that feel purposeful to you, things that really excite you, they light you up. And when they light you up, that attracts people to you. You form communities and connections, and you are giving the best of yourself in those moments. So the mindset shift is if you're doing lots of things that don't light you up, you're actually not showing up for these people in your life in the best of ways. On the other hand, when you show up doing things that really are exciting to you, you provide a model, let's say, to your children, which gives them permission to pursue things that excite them, especially as adults. But you also become a better member. You connect with people like you who have similar interests and needs as you. You become teacher and student, mentor and mentee. It's a way of actually creating these deeper connections. And a big purpose for this or a big reason is I talk about purpose a lot in its connection to happiness. But the truth of the matter is, and here's a big secret of the book, I don't even think purpose brings happiness. If you look at some of the bigger studies, it's actually interpersonal connections. But pursuing your little P purpose is a great conduit to community and connections. And that's because when you are involved in little P purpose, it's almost like a state of flow. You show up as your best self. And when you're giving your best self to other people, you're actually showing up in a much different and a better way than when you're kind of being bullied or forced or feel like you have to do something that doesn't really light you up.
- [23:19]
Jean Chatsky
I know that when you went about finding your purpose, you used the magic of subtraction to help you do it. And I think that's what we're talking about here. When we're talking about women who have overloaded plates and who say yes to too many things, can you get really specific with us about how you subtracted things from your life in order to get to that happier state?
- [23:48]
Dr. Jordan Grummet
So one thing I realized is I was going after that big, audacious purpose by becoming a physician. In fact, one of my big reasons for becoming a physician was my father died when I was seven years old. He was a doctor. And I think as a seven year old, I cosmically thought I could fix him dying and everything that happened to me by becoming a doctor like him. That was big, audacious purpose. I didn't really have agency I did to become a physician, but not to fix all the problems of my childhood. And I found that it led to burnout. I was on a treadmill, I was seeing more patients. I was trying to get better and better, being the best doctor I possibly could be, but it wasn't really solving my issues. And so it led to burnout. I was lucky in a sense that I also was building a financial framework around my life. And so when I got to the point where I got to maximal burnout, I also found that I had enough money to mostly support myself. And so that gave me a little space in my job. And a lot of people don't have this space, but I had a huge amount of space because I knew I could get rid of things I didn't like. And yet I wasn't ready to walk away from that identity of being a physician. I just wasn't there yet. It was many years ago. I had never been anything but a doctor. So I started subtracting in my own life. I was a very busy, general practicing physician. I had my own office. I was seeing patients in the nursing home, in the hospital. And I started getting rid of things. I got rid of my practice. I eventually got rid of nursing homework. I pretty much got rid of almost everything. But the one thing that I really loved, there was something in medicine that I would do. I would do it even if I wasn't being paid to do it. And it still brought me joy and felt purposeful. And that was hospice work, which was dealing with the terminally ill and dying. And so as I started subtracting things out, I kept that because it was meaningful and purposeful to me. And I ended up doing that 10 hours a week. Now, maybe you're not in the same position. I'm in the privilege of having enough money and having a good financial framework, but I can tell you, even if I Had hit this epiphany at a time where I was much younger, didn't have as much money, I certainly could have built a life of purpose around being a full time hospice physician. And that would certainly have paid my bills. And so that's how subtraction clarified for me what really felt purposeful in my life at the time, in my career, and what was extraneous. And I had learned to loathe. You know, when you're waking up, you know, Monday morning and feeling that dread and that stomachache because you're going to work, you know that something's wrong.
- [26:10]
Jean Chatsky
Your financial framework was built using tenants of the fire movement. It's been a long time since we've talked about fire on the shelfire stands for financial independence, Retire early. A lot of people these days focus much more on the financial independence part of it, not the retire early part of it. But for people who are thinking, well, if I could have a financial framework, maybe I could start subtracting things in my life, would you suggest fire to them?
- [26:49]
Dr. Jordan Grummet
So I think financial independence makes a lot of sense because it's just a good framework of financial modeling. So I often tell people it wasn't the fire movement that actually helped me build wealth. It was the fire movement that helped me realize how to utilize that wealth to live the life I wanted to live. The modeling that helped me build a great financial life came from my parents, who had never heard of the fire movement. But they did really smart, savvy things, like they saved 50% of their income. They owned their own businesses, they bought real estate and were landlords. They understood the stock market and invested there. And so all of these things were things my parents modeled for me. And I unwittingly did the same things. And only later did I start understanding my finances enough to realize how to use that framework and use that money to support the life that I wanted to live. So I think the tenants of fire, especially financial independence, are just good investing tenants. The difference for me is learning about the fire movement gave me the courage to start transitioning my life away from a job that I didn't love towards something I do. And I again want to really remind people and be very clear on this. You don't have to be financially independent to start improving your life and building a life of purpose, because you have those other tools and other levers. So it's really important that money is a tool, but it is not the only tool. And this is why, especially young people who have the great tool of youth and time Right. They don't have a mortgage. A lot of them don't have kids yet. This is a great time to go. Start doing purposeful things on your nights and weekends. Maybe build some of them into a business. Maybe create some economic margin. Make sure you're using that joy of addition to start filling more of your time, that precious time that we have so little control over, with things that really feel purposeful and that you enjoy. Use those other tools. Don't just assume that money is the only way you're going to get there.
- [28:45]
Jean Chatsky
When we talk about not having a lot of time, that's an equation that changes when people retire. And over the past couple of years, I've. I've had a lot of discussions about this concept of purpose in retirement. Retirement. And I know we need a different word for it because it's not exactly what many people are doing these days. They're slowing down a little bit. They're working a little less, they're phasing in whatever you want to call it. Retirement is this incredibly scary concept to me personally, because I feel like I take a lot of satisfaction out of my work. To me, my work is purposeful. I feel like it's helpful. And so I don't want to not do it. And this idea that at some point in the future I'm going to have to not do it is. Is not fun. But as we look at entering that phase of life that we now call retirement, what are your suggestions for bringing purpose along with you?
- [30:00]
Dr. Jordan Grummet
So here's the question I want to ask everyone, especially people like you. Would you do your job even if you weren't being paid for it? If the answer is yes, you really shouldn't stop your job until you're forced to. Cause what you're really saying is, work is purpose. I derive joy from it. I really love the process of doing it. It lights me up. It connects me to people. That's purpose. That's wonderful. All of us are gonna do some kind of work. Even retirement, we are gonna do some type of activity that could be classified as work. Whether you get paid for it or not is really an external. And so I think it's really important to focus on that idea and on that question. Now, there are a lot of people who would say, no. There's no way I would do the same work if I wasn't being paid for it. And if that is the answer, and you don't understand any other version of purpose in your life, then you've probably de facto made work your purpose. And the idea is to start really thinking about little p purpose. So I say we don't find our purpose, we create it. But we do need to understand these inklings, these beckonings of important things that we can build a life purpose around. So it's really time to start thinking about those purpose anchors what kind of lights you up. And you can use that as a base to start building a life of purpose around.
- [31:17]
Jean Chatsky
Last question, Jordan. Three things. We have talked about a wide swath of purpose related concepts over the last 30 minutes. But if you were to send people out of here and say, okay, no matter what stage you're at, do these three things and that'll set you on your way, what would they be?
- [31:36]
Dr. Jordan Grummet
I think it's simple. One is to realize that purpose is abundant. So purpose is everywhere. And all we have to do is find the things we love. So that's number one. Number two again is to realize purpose isn't going to fall on your head. You don't find purpose, you create it. So you want to start creating that life you want to live. And last but not least, don't forget, money is just one tool. And an important tool, but not the only tool. We all have time, energy, resources, community, passions, all sorts of other things that we can use today, even in the absence of money, to start building a.
- [32:19]
Jean Chatsky
Life of purpose for those of our listeners who want more of you. Of course they can find it in the book the Purpose how to Unlock Meaning, Maximize Happiness and Leave a Lasting Legacy. But if they want your podcast, where should they go?
- [32:34]
Dr. Jordan Grummet
The easiest place is to go to jordangrumit.com J O R D A N G R U m et.com There you can find links to both of my books, the Purpose Code and Taking Stock, as well as all the places I create content, including the Earn and Invest podcast, the Purpose Code substack, as well as my old financial and medical blogs, all@jordan grummet.com thank you so much for.
- [32:56]
Jean Chatsky
Doing this with us today. Great way to kick off the year.
- [32:59]
Dr. Jordan Grummet
Thank you so much for having me.
- [33:01]
Jean Chatsky
Before we dive into our mailbag, a quick word from our sponsor and we're back for Mailbag with Kelly Haltgren. Hey, Kel.
- [33:12]
Kelly Haltgren
Hey, Jean. How are you?
- [33:14]
Jean Chatsky
I'm okay. I'm all right. I'm having a little bit. It's weird. It's cold out, but my allergies are like off the chart and so I keep quieting my microphone when I have to sneeze or cough. Maybe that's TMI for People. But you asked how I'm feeling. That is I'm feeling allergic.
- [33:30]
Kelly Haltgren
It sounds pretty human.
- [33:32]
Jean Chatsky
I'm feeling allergic.
- [33:33]
Kelly Haltgren
I have a confession on my allergies too. I'm allergic to the love of my life.
- [33:38]
Jean Chatsky
Oh, no, Peanut, we're not talking about your husband.
- [33:41]
Kelly Haltgren
Well, we knew about that one. No, but we have another one, Peanut. And I've always known that I have an allergy to dogs, but, you know, it's really setting in now that we've had him for over two years. And fortunately, it's not bad, and I think it's worth it. But I too, am feeling allergic is why I'm bringing that up. I'm just empathizing with you and I'm here with you in solidarity.
- [34:08]
Jean Chatsky
Do I need to get you a furminator?
- [34:11]
Kelly Haltgren
Tell me more.
- [34:12]
Jean Chatsky
Well, peanut sheds, right?
- [34:14]
Kelly Haltgren
Yes, thankfully not too much. But what is this product?
- [34:17]
Jean Chatsky
It's like a brush, I think it can attach to the vacuum and it supposedly. And you know, I've had non shedding dogs for the past couple of years, but my ex husband has shedding dogs and they swear by the furminator also.
- [34:34]
Kelly Haltgren
Amazing name, right? I'm gonna look it up after we get off this recording. Thank you. You're welcome. Already giving great advice before we even go to our questions. I'll go to those now. Our first question comes from Amy, who's asking about whether to prioritize meeting her retirement benchmarks or other financial goals. First, she writes. Hi, Jean. I love your podcast. Longtime listener, first time writer, and I had a question about retirement savings benchmarks as you move through your career. I'm 47 years old, working in finance, and lately I've been thinking about hitting my retirement benchmarks. I've been fortunate to have several promotions over the last 10 years, and my question is this. If your salary increases rapidly, how do you recalibrate your benchmarks without feeling instantly behind? Ooh, good question. In 2014, I was making $85,000 a year with an $8,000 bonus, which was only 10 years ago, and now I'm making 250,000 with a $60,000 bonus. I feel super fortunate to be in this position, but I can't help feeling that I'm always woefully behind on my retirement, and I'm not sure how to catch up. I am married and my husband is currently freelancing, but was employed in a corporate job until this year. I have 330,000 in my 401k. He has 290,000. I also have about 75,000 in a brokerage robo investing account and 20,000 in a savings account. I am almost granted 50,000 RSUs annually with a 3 year cliff vesting. Side note, but not part of my question. My in laws passed away recently and left us 400,000 and each of our children 100,000. So that makes up for some of the gap. But I didn't want to rely on inheritance to make our retirement benchmarks. I have always maxed out my 401k contributions and set a little extra aside for investing in my brokerage. We also contribute to both of my son's 529 accounts. By the common retirement benchmarks. We're almost 50 and should have six times our income saved. That would be 2.3 million and we are nowhere near that. We live in an older home and a higher cost of living area. And it's time for a total kitchen reno which is going to cost about 110,000. We can fund that, but there's an opportunity cost. We feel guilty that we haven't saved enough for retirement yet, but we also need a more functional kitchen now for our family. How do I reconcile that we're so far behind our savings benchmarks and balance that against life priorities like an updated kitchen and other things.
- [36:57]
Jean Chatsky
So I don't know that you're as far behind as you think, Amy. And let me just, let me just ask a couple of questions. Try to poke a couple of holes in this, but first lay out the benchmark. So I've been talking about the benchmarks for years because I find them really helpful. Essentially you want to aim to have one times your current salary put away for retirement by the time you're 33 times by 46 times by 58 times by 60 and 10 times by the time you actually retire. And the goal of this is that when combined with Social Security, you'll have enough to replace about 80% of your pre retirement income in retirement. Now, to give full credit where credit is due, these benchmarks were developed by Fidelity Investments and they're based on people who make between $50,000 and $300,000 a year. When you think, think about it, the thing that you don't need to replace in retirement, the big thing is your savings rate. And the more you make, the higher that amount of money that you save is actually going to be. So depending on how you're living and depending on how much you're actually spending, you may not be as far behind as you think. Now, Social Security for people who make a lot of money is also not going to replace as big a chunk of your pre retirement spending. So you have to factor that in. But I would encourage you to do two things. One is take a really good look at where your money is going right now. How much are you actually saving year in and year out? Has that money continued to rise with your salary increases? Are you continuing to put away a good 15% of whatever it is you and your husband are earning year in and year out? That's usually a pretty good barometer. I also would look at your husband's earnings. He is now freelancing and you didn't mention what he is now making. So depending on his income producing ability potential right now, that shifts your benchmarks around. The point, as I said, of these benchmarks is to get you to a point where you can comfortably live in retirement. And because they're benchmarks, they're not personalized. And you, when you do the work, may discover you need more or you need less. Either way, that's okay. You just need to set yourself up with a plan to work toward that. Right now would be an excellent time for you to go see a financial advisor, in part because you need to figure out what to do with that $400,000 inheritance and how far toward college that 100,000 to each of them is going to get them if that is what you intend to use the money for. You also need to look at the equity in your home, when the mortgage is likely to be paid off and how you should finance that kitchen renovation. I am a fan of not waiting until retirement to enjoy your life. If you believe, and it sounds like you do, that this kitchen reno is not just necessary, but it's actually going to improve your quality of life for the next 5, 10, 15 years in the area in which you live. It's also going to improve the value of your house. And so I would talk to a financial advisor with the idea of this is something that we want to do. Let's figure out how to pay for it and use the next 10 years to achieve our retirement goals at the same time.
- [41:39]
Kelly Haltgren
Wonderful. Thank you, Jean. And we'll do one more. Our next question comes from Lewis, who is wondering about rebalancing their assets as they near retirement. They write, hi, Jean, Would you explain in more detail how rebalancing works when the assets sit in various tax account types? Currently, 70% of my retirement funds are in pre tax 457, 401, 20% in a Roth IRA and 10% in brokerage. The four accounts have aggressive portfolios 90:10 asset allocation. As I get closer to retirement and want to make changes, I'm trying to figure out which accounts to rebalance so I'm closer to 8020 asset allocation or even 7525 overall. Do I rebalance every account type to 8020 because of the different tax implications, or do I adjust so that one or two accounts that hold 70 to 80% of assets are the entire equity bucket and the smaller dollar accounts hold bonds and cash? I hope to pull very little from my Roth and retirement so I can leave it to my kids. Does that warrant leaving the Roth account more aggressive? I'm not sure if it matters, but I will have a pension lifetime with cola, including health care and Social Security. Together these will cover all essential spending. I will pull from my accounts only for discretionary spending and can hopefully control withdrawal amounts year after year. Appreciate your insights. Two exclamation points. What do you think?
- [43:08]
Jean Chatsky
So I'm going to talk about the last part of the question first, and then we'll get to this issue of asset location, which is a little bit different than asset allocation, which is what kind of investments to put in what kind of accounts when you have a pension or when you have an annuity that when coupled with Social Security, will cover all of your essential spending that behaves like the bond component of your portfolio. It's a lot less risky and it does allow you, as you suspect, to take more risk with the other elements of your portfolio. So for anybody who's thinking, wow, this person is getting so close to retirement and they've got 90% of their assets in stocks and they're thinking about rebalancing but only down to 80% or 75% in stocks. That sounds so risky. Ordinarily you would be right. But in the case where somebody has their essential expenses paid for, they can just afford to take more risk. They can afford to try to make more money in those other accounts. In general, we want to keep our highest risk assets in the accounts that we expect to keep the longest. So that will argue for keeping a very aggressive mix in the Roth because you're not planning on touching it, you're planning on leaving it for your kids, which means it has decades to run and you can take a little bit less risk in other places. I don't love the strategy of taking smaller risk in smaller balance accounts. That doesn't really make sense to me. But otherwise I think that your thinking is right on track and good. Going for thinking about this part of the equation?
- [45:10]
Kelly Haltgren
Yeah, absolutely.
- [45:12]
Jean Chatsky
Thank you Kelly.
- [45:12]
Kelly Haltgren
Thank you Jean.
- [45:14]
Jean Chatsky
If you've got any other money related questions we'd love to hear from you, just send them our way by emailing us@mailbaghermoney.com thanks so much for joining me today on Hermoney. If you love this episode, please give us a five star review on Apple Podcasts. We always value your feedback and if you want to keep the financial conversations going, join me for a deeper dive. HerMoney has two incredible programs, Finance Fix, which is an eight week program designed to give you the ultimate money makeover, and Investing Fix, which is our investing club for women that meets bi weekly on Zoom. With both programs we are leveling the playing fields for women's financial confidence and power. I would love to see you there. We'd like to thank our sponsor Edelman Financial Engines. Her money is produced by Haley Pascalides, our music is provided by Video Helper and our show comes to you through Megaphone. This podcast is also part of the Airwave Media Podcast Network. You can find us and other shows like us at airwavemedia. Com. Thanks for joining us and we'll talk soon.