Why Traditional Budgeting Fails and What’s Missing from Your Money Plan

Summary

NerdWallet's Smart Money Podcast Episode: Why Traditional Budgeting Fails and What’s Missing from Your Money Plan
Release Date: February 17, 2025

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Introduction to the Episode

In this insightful episode of NerdWallet's Smart Money Podcast, hosts Shawn Pyles, CFP®, and Kim Palmer delve into the limitations of traditional budgeting methods and explore what might be missing from contemporary money management plans. The episode features special guests Jen Smith and Jill Sirianni, authors of the book Buy What You Love Without Going Broke and hosts of the Frugal Friends podcast. Together, they unpack the nuances of personal finance, emphasizing the importance of aligning spending habits with personal values and addressing common financial blind spots.

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Main Discussion: Why Traditional Budgeting Fails

Personal Experiences and Motivations

Jen Smith opens the conversation by sharing her personal journey, highlighting the pitfalls of strict, conventional financial advice. “[00:43] Jen Smith: ...we followed the traditional financial advice that really said, spend on nothing, earn as much as you can, wear yourself out so that you can pay off your debt, and then all your problems will be solved. And lo and behold, all of my problems were not solved...” She recounts paying off $78,000 in debt over two years, only to experience a “debt hangover” that left her unprepared for unforeseen financial challenges, such as job loss before the birth of her first son.

Jill Sirianni adds depth to this narrative by emphasizing the complexity of personal finances beyond mere numbers. “[03:45] Jill Sirianni: ...our finances are so much more nuanced than what traditional personal finance advice is going to look let on... Our financial decisions are intertwined with who we are as individuals, our experiences, and our current contexts...” She critiques the overly mathematical approach to budgeting, advocating for a more holistic view that incorporates personal values and emotional well-being.

Introduction to Values-Based Spending

The guests introduce the concept of values-based spending, which seeks to align financial decisions with one’s core values and life goals. Utilizing Maslow’s hierarchy of needs, they propose a framework where spending is categorized not just by necessity but by the fulfillment of higher-level needs such as family, friendships, and fulfilling work.

“[06:22] Jill Sirianni: ...our entire book is about how values-based spending can really be the key to feeling really confident about the decisions that we make...” She explains that by prioritizing spending based on personal values, individuals can create a more flexible and personalized budget that accommodates both essential needs and personal aspirations.

Jen Smith echoes this sentiment, emphasizing the importance of integrating values into financial planning. “[08:02] Jen Smith: ...if you focus first on the values, focusing first on those four [family, friends, fulfilling work, and faith] and then anything else, they'll fall somewhere on Maslow's hierarchy of needs...” This approach contrasts sharply with traditional budgeting, which often emphasizes stringent limits and sacrifices.

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Exploring Financial Regrets and Impulse Spending

Understanding Financial Regrets

Kim Palmer introduces a compelling statistic from a NerdWallet study: “[08:40] Kim Palmer: Almost 7 in 10 Americans said they had financial regrets in 2024... younger Americans were even more likely to say they had financial regrets.” The discussion pivots to the root causes of these regrets, with a focus on impulse spending and the psychological impacts of financial decisions.

Identifying and Addressing Impulse Spending

Jill Sirianni breaks down impulse spending into various categories, helping listeners identify their triggers:

• Habitual spending
• Emotional spending (e.g., stress or happiness)
• Deal hunting and social influences

“[09:04] Jill Sirianni: If we can start to identify which one of these impulse spending areas are we kind of falling into it can help to then inform the next steps...” By recognizing the specific nature of their impulse spending, individuals can implement targeted strategies to mitigate unnecessary expenditures.

Jen Smith offers a motivational perspective, encouraging listeners not to internalize financial mistakes as personal failures. “[10:41] Jen Smith: Your identity is not in the things that you do buy... You can learn the skill of spending... It's never too late to learn from mistakes and to learn new skills to improve.” This approach fosters a healthier relationship with money, focusing on growth and learning rather than shame.

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Practical Tips to Improve Financial Management

Three Key Steps to Better Money Management

When asked for actionable advice, Jen Smith provides three practical tips that diverge from traditional budgeting:

1. 90-Day Transaction Inventory “[11:47] Jen Smith: Look back at all of your transactions for the last 30 to 90 days to start seeing patterns in your spending.” This step helps individuals understand their current financial behaviors by analyzing past spending habits.

2. No Spend Challenge “[11:47] Jen Smith: Plan out when you're going to start a 30-day no spend challenge...” Instituting periods of restrained spending can reset financial habits and reduce decision fatigue.

3. Curate Your Environment “[11:47] Jen Smith: Curate your physical and digital environments to support your financial goals.” This includes creating a comfortable home space and limiting exposure to tempting advertisements or social media influences.

These strategies emphasize behavioral change and environmental adjustments over rigid financial constraints, fostering a more sustainable approach to money management.

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Listener Q&A: Jeremy's Financial Blind Spots

Introduction to Jeremy’s Financial Journey

The episode transitions to a listener question from Jeremy, a 31-year-old talent agent from New York City, who outlines his financial situation:

• No major debt aside from a mortgage
• A robust emergency fund (6-9 months)
• Investments primarily in a Roth IRA ($74,000)
• Additional savings (~$80-90,000) in high-yield accounts

“[16:07] Jeremy: I feel like overall I'm doing pretty well... I'm looking for that next level.”

Analyzing Retirement Savings

Shawn Pyles commends Jeremy’s current savings, stating that he’s on a solid path, especially for his age. “[21:18] Shawn Pyles: Based on Fidelity's benchmark, you're doing well in terms of saving for retirement...” However, Jeremy expresses anxiety about potentially missing out on additional financial strategies, particularly due to the absence of a current 401(k) plan.

Expert Advice on Retirement Planning

Elizabeth, an investing writer on the podcast, provides tailored advice:

• Exploring Alternative Retirement Accounts: Suggesting IRAs, taxable brokerage accounts, and solo 401(k)s for the self-employed.
• Considering Fees and Goals: Emphasizing the importance of low fees and alignment with long-term objectives.

“[34:10] Elizabeth: It really does depend on your goals... the main thing to consider are fees and how they align with your long-term goals.”

She also explains the differences between a Robo Advisor account and a traditional taxable brokerage account, highlighting the automated investment strategies of Robo Advisors.

Addressing Jeremy’s Concerns

Jeremy shares his aspiration to retire or reduce full-time work hours by age 58, seeking balance between financial security and personal freedom. The hosts encourage him to utilize retirement calculators to fine-tune his savings goals and consider life and disability insurance for added security.

“[25:08] Jeremy: ...in my current job we do not have a 401k plan...”

Shawn emphasizes the importance of estate planning, urging Jeremy to consider setting up a will or beneficiary designations to ensure his assets are managed according to his wishes.

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Concluding Remarks

As the episode wraps up, Shawn and Kim reiterate the importance of personalized financial planning that goes beyond traditional budgeting. They encourage listeners to reach out with their money questions and continue exploring strategies that align with individual values and life goals.

“[35:23] Elizabeth: ...money is here to create security, but also to bring joy in your life as well.”

The episode underscores the podcast’s mission to provide clear, actionable financial advice tailored to diverse personal circumstances, empowering listeners to build wealth and achieve their financial aspirations.

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Notable Quotes

• Jen Smith on Traditional Financial Advice: “[00:43] Jen Smith: ...all your problems will be solved. And lo and behold, all of my problems were not solved...”

• Jill Sirianni on Financial Nuances: “[03:45] Jill Sirianni: ...our finances are so much more nuanced than what traditional personal finance advice is going to look let on...”

• Jen Smith on Values-Based Spending: “[08:02] Jen Smith: ...if you focus first on the values... they'll fall somewhere on Maslow's hierarchy of needs...”

• Jill Sirianni on Impulse Spending: “[09:04] Jill Sirianni: If we can start to identify which one of these impulse spending areas are we kind of falling into it can help to then inform the next steps...”

• Jen Smith on Financial Identity: “[10:41] Jen Smith: Your identity is not in the things that you do buy...”

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Final Thoughts

This episode of NerdWallet's Smart Money Podcast offers a refreshing take on personal finance, challenging the efficacy of traditional budgeting and introducing a more holistic, values-driven approach to money management. By addressing common financial blind spots and providing practical, actionable advice, the hosts and their guests equip listeners with the tools needed to create a balanced and fulfilling financial life.

Remember, for personalized guidance, you can reach out to the NerdWallet team via voicemail or text at 901-730-Nerd (6373), or email at podcastnerdwallet.com. Follow the podcast on your favorite platform to stay updated with future episodes packed with expert financial insights.

Transcript

[Shawn Pyles]

The Buy button is one of the greatest inventions of our time. Also one of the worst.

[Kim Palmer]

Yes, the convenience is great, but the ease of spending money is not so great.

[Shawn Pyles]

So let's get some advice for managing that spending and feeling good about making a budget. Welcome to NerdWallet's Smart Money podcast. I'm Shawn Pyles.

[Kim Palmer]

And I'm Kim Palmer. This episode, we're answering your money questions about financial blind spots. Do you have any of those, Sean?

[Shawn Pyles]

Kim, need I remind you that I am a certified financial planner professional, and I do not have any financial blind spots? Just kidding. I certainly have financial blind spots. I think everyone does really well.

[Kim Palmer]

Not me. I don't have any.

[Shawn Pyles]

Oh, of course. Of course.

[Jen Smith]

Yeah.

[Kim Palmer]

Just kidding. But we are going to hear from you about some of the ways we can all better manage those blind spots.

[Shawn Pyles]

But first, we are tackling a question that each of us faces every day. How can we be better at spending our money? Kim, in her role as the host of our regular book club series, is here to guide the conversation. So, Kim, who are you talking with?

[Kim Palmer]

I'm talking with Jen Smith and Jill Sirianni. They are the authors of the new book Buy what yout Love Without Going Broke. And they're also the hosts of the Frugal Friends podcast. And they have a lot of really interesting ideas about how we can all be smarter spenders.

[Shawn Pyles]

Sounds great. We also want to remind listeners that you can enter for a chance to win our book [e-mail] bookclub for our book club pick. And with that, take it away, Kim.

[Kim Palmer]

Great. Thank you. Jen and Jill, welcome to our show.

[Jill Sirianni]

Thanks for having us.

[Jen Smith]

Yeah, lovely to be here.

[Kim Palmer]

Let's start with why you wrote this book. Because your personal finance advice is a little different from what we hear every day. What gap in the money world were you trying to fill?

[Jen Smith]

This gap for me, Jen, came out of personal experience. My husband and I, when we got married, we decided to pay off all of our debt, and we paid off $78,000 of debt in two years. We followed the traditional financial advice that really said, spend on nothing, earn as much as you can, wear yourself out so that you can pay off your debt, and then all your problems will be solved. And lo and behold, all of my problems were not solved. Afterwards, I had this debt payoff hangover where I had spent all of my energy and time and thought into this one goal, and I didn't know how to manage money. I thought I knew how to manage money because I'd done this one thing, but I realized I really didn't. And so to compensate, I didn't look inside myself and figure out where those feelings were coming from. I just decided to pursue financial independence and invest as much as possible. And then I lost my job seven or eight weeks before I gave birth to my first son, and I was unable to do any financial goals. And that's when I had to look at what is the difference between this traditional money management advice that people are giving us and the reality of my life is that I spend money. I like to spend money, but I also don't want to go broke. I want to be able to save for the future. There's got to be some radical middle between these extremes. That's what Frugal Friends, our podcast, has truly been an exploration of and like helping other people come alongside us in this journey.

[Kim Palmer]

Well, that sounds great. One thing you talk about in the book is how badly a lot of people feel similar to that hangover that you're describing, the debt hangover. I mean, people feel badly often when they hear traditional financial advice. So what do you think is the problem there? What is going on that so much financial advice does make people feel badly about themselves?

[Jill Sirianni]

This is Jill I think that really our finances are so much more nuanced than what traditional personal finance advice is going to look let on. We so often want to approach it with a math first approach, when in reality, our financial decisions, the way that we spend, our ideas about money, are so intertwined with who we are as a person, our experiences growing up, our current context, and kind of how all of these things end up informing the ways that we understand money, approach it, steward it as a resource, along with all of our other resources. There's this gap in really combining those two things. We often kind of treat money as if it's this separate entity where we just have to understand spreadsheets to be good at it. In reality, we realize, no, I've got a spreadsheet over here. And yet I'm still not quite making the decisions that I want to be making. I still am impulse spending, or maybe I'm spending money in areas that I don't feel ashamed about. But society or other people are telling me I should, that there are things I should and shouldn't be spending money on. And I think we really wanted to approach this in a manner of recognizing those nuances, our humanity, how dynamic we are, and creating some more freedom and flexibility in the way that we understand and approach money. That is far less shameful because it's not about shoulds and shouldn'ts, right and wrong and these binaries that we've been sold, but the fluidity of it and the spectrum of what can be a really wise, sound decision for one person might not be for another because of the context or season of life that they're in. And so this is kind of meeting that reality of saying you are a whole person and your money decisions fit within that context. And how can we help you develop spending as a skill?

[Jen Smith]

And we don't blame the voices that came before us that focused on these extremes and left out the nuance. We understand it's easier to market and sell extremes, but we are at a place in time where it's time to start recognizing those nuances and really looking into them and embracing them and holding space for them.

[Kim Palmer]

Absolutely. I think that's been such a positive trend in the personal finance world in recent years. You also encourage people to really dig into their values when it comes to deciding how to spend money. How can we start that? What does that look like?

[Jill Sirianni]

This is a big question and it is essentially what our entire book is about and how values based spending can really be the key to feeling really confident about the decisions that we make. And how we came to this is really through Maslow's hierarchy of needs. If you're familiar with that, it's a triangle. And you've got your basic needs at the bottom as far as your physiological needs and safety needs. In the middle you have your self esteem and belonging needs. And at the tippy top we've got self actualization needs. This is finding purpose, engaging in creativity, recognizing that our needs are not just physical, which I think is where most traditional personal finance advice stops. It's food, shelter, clothing, done. How do we do that and say no to the rest? And we're really recognizing there is more beyond that. We want to achieve an experience in our lives like having friendship and family. This led us to what we call the four faith, family, friends and fulfilling work. They meet those higher level needs on that hierarchy of needs. Now, the four Fs shouldn't cost us money, but we do need money in order to pursue these higher needs. And so values based spending is recognizing these core values inside of ourselves and then being able to start identifying, okay, if this is the case, how can I align my spending more with these areas?

[Kim Palmer]

I think when we talk about budgeting, that piece often gets left out. So I love that you highlight that so much and basically wrote a whole book about it.

[Jen Smith]

I just felt like when I was budgeting. I was making perfect budgets, right? I was making them. I knew exactly how much money I had and how much money I could spend, but I could never follow through with this perfect budget I had made. And then I would feel guilty. And I just realized what I really want are the things that money can't buy, but I still need money to pursue them. If we focus first on the values, focusing first on those four and then anything else, if you can't fit them in there, they'll fall somewhere on Maslow's hierarchy of needs. It's like the 8020 rule. These four are the 80 and the other 20%, it's going to fall somewhere on that hierarchy.

[Kim Palmer]

One number that really jumped out at me from a recent NerdWallet study that we did is that almost 7 in 10Americans said they had financial regrets in 2024. And actually, younger Americans were even more likely to say they had financial regrets. Why do you think financial regrets are so common? And how can we just set ourselves up better to feel good about the spending choices we're making?

[Jill Sirianni]

I think a lot of regrets are tied to the decisions that we've made, usually decisions that maybe we didn't have all the information that we needed or we were kind of influenced to choose something that was not in our best interest. And so I think where these things combine, of course it's going to impact our finances. What comes to mind for me most often here is impulse spending. We hear from a lot of people that this is a big area of contention when it comes to their finances and can hold a lot of that regret, that shame, that what's wrong with me? Why do I keep doing this? Why can't I make different decisions? I think the key with that then becomes let's identify what kind of impulse spenders we are. When is it that I am impulse spending? Is it out of habit? Is it that I'm shopping as an activity so I'm of course, just finding myself with things in my cart? Does it usually happen when I'm stressed or overwhelmed or feeling super anxious? Or maybe if I'm feeling happy and celebratory, I just need a little treat all the time? Is it that I love to hunt for things and I love deals and I constantly am drawn to the red sticker or maybe the social influence of being on Instagram or around others in our community who have certain things that feel like, yeah, they're going to solve our problems? If we can start to identify which one of these impulse spending areas are we Kind of falling into it can help to then inform the next steps. How might I then shift some of the behaviors around those spending decisions?

[Jen Smith]

And I just want to encourage young people who are making quote unquote financial mistakes, or maybe older millennials, and who are still paying for some quote unquote mistakes we made as young people that a lot of us will then, because we've made these decisions, internalize them and take on the identity that, okay, I'm just bad with money, I'm a spender, I don't save, I can't save, I will never make enough money. We take on these identities as a result of some of these financial mistakes. I just want to encourage people that your identity is not in the things that you do buy, do not buy, did buy, did not buy, took out debt on whatever these financial mistakes are. You can learn the skill of spending, the skills around earning. It's never too late to learn from mistakes and to learn new skills to improve.

[Kim Palmer]

If someone is just feeling really overwhelmed with all the money tips coming at them, what would you say are three of the most important things they can do today to start feeling better about how they're spending and managing their money?

[Jen Smith]

None of them are going to be budgeting. Okay, I'm going to give three tips and none of them are make a budget. So get excited. The first one would be to do a 90 day transaction inventory. If 90 days feels like too much, try 30. We just want to look back at all of your transactions for the last 30 to 90 days so that you can start to see patterns. First we're looking at the past spending, then we're thinking about current spending. And so for that, I love to start a no spend challenge or at least plan out when to do one. I have read a lot of books and articles about people who do these year long no spend challenges. I think 30 days is enough because there's a lot of research that says your dopamine receptors can start to kind of change the way the amount of dopamine or things that give you a dopamine release after just four weeks. I would say plan out when you're gonna do a 30 day no spend challenge, because what that can do for you is it gives you 30 to say automatic nos to any discretionary spending. And what that does is it just gives your brain space, takes away some decision fatigue, and it gives you space to get creative in how you meet your needs. The goal is to not want less, it's to want different. So that would be the second is to plan out when you're going to start that and then the third would be start to curate your environment. We're looking at our physical space. How does it make us feel? If one of the ways that I want to hang out with people instead of going to a bar or restaurant is to hang out at home, is my home a place that I feel comfortable inviting people in? Is it a physical problem or an internal problem? Too much time on social media problem looking at that stuff in order to curate your environment to set yourself up to succeed with this stuff.

[Kim Palmer]

Jen Smith and Jill Sirianni, thank you so much for joining us on Smart Money.

[Jill Sirianni]

Thanks for having us.

[Jen Smith]

Yeah, thank you.

[Shawn Pyles]

Great conversation, Kim. Thanks so much for doing that. We've got more on the way, but here's the part where we ask you to take a second and think about where you need some guidance with your money.

[Kim Palmer]

Maybe you're feeling a little lost, like you don't even know what your financial goals should be, or you're trying to break yourself out of a bad financial habit, but you just can't seem to do it. Whatever your money question, we nerds are here to help. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-Nerd.

[Shawn Pyles]

And a reminder that one of our goals on Smart Money this year is to talk with more of you live on the podcast to help you with your money questions. So if you want to hang out with us for a bit and get some nerdy wisdom, let us know one more time. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730- nerd. Alright, let's get to this episode's Money question segment. That's up next. Stay with us.

[Jeremy]

We're back.

[Shawn Pyles]

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[Elizabeth]

Jeremy, welcome to Smart Money.

[Jeremy]

Thank you so much for having me. I'm so excited to be here.

[Shawn Pyles]

So Jeremy, before we get into the conversation, I want to remind you that everything we are about to discuss is just for educational purposes and is not individual financial advice. Make sense?

[Jeremy]

Absolutely.

[Shawn Pyles]

Perfect. So to start, can you give us a high level overview of your finances ranging from like savings to debt to investing? How are you doing?

[Jeremy]

I feel like I should knock on wood while I say this, but I feel like overall I'm doing pretty well. I have no major debt aside from my mortgage. I do have a good amount of savings, including about a six to nine month emergency fund. I am currently investing mainly in my Roth IRA that I have that I've been investing in for the five or six years that I've had it open. So I feel like most of the check the box, hey, do ABCD are pretty well maintained and now I'm kind of looking for that next level.

[Elizabeth]

So how do you manage your money on a regular basis? Do you have a budget? Do you contribute to savings accounts?

[Jeremy]

I feel like I'm kind of old school in this way. I still write out a paper budget. That's what works best in my head. And being so I literally go purchase by purchase and every month kind of tally in terms of how far over or under for total expenses and total income. I do also do an automatic transfer. Usually it's about $100 into my savings account at the beginning of every month and then at the end of every month whenever I have a surplus, I usually say, okay, so much of this goes toward savings, so much of this goes toward charities. So much of this goes goes toward something else that I'm saving up for.

[Shawn Pyles]

How long does that take you to write all of your purchases out?

[Jeremy]

I still am that person who asks for a receipt every time that I'm out shopping in person. So it's usually like at the end of the night I'll come back and I'll write down the two additional expenses that I have there. And then usually weekly I'll go through and just double check my credit card statements or double check if there's anything that I missed for some reason. And I have all my automatic payments already written down as like a fixed expense for lack of a better term.

[Shawn Pyles]

I like that analog approach. So on paper, quite literally, it seems like you're doing all of the right things financially, but you seem to have this nagging feeling that something is missing. Tell us about that.

[Jeremy]

I feel like when it comes to personal finances, there's always the potential boogeyman of what are you not prepared for. I look to the again, check the box things of like maxing out your Roth IRA and having a emergency fund. But I always, always keep thinking to myself, is there something else I'm missing? Is there something more I should be doing? And getting a little bit caught up in that anxiety. The other thing that I think adds a little bit to that is in my current job we do not have a 401k plan. So I have a 401k from a previous employer. But I also don't have that extra security blanket that comes with a lot of occupations that says like, hey, 4 to 6% of your income is already going to be saved for this other thing. And instead it's a much more manual process that I have to be cognizant of. So I think between that fail safe and the general anxiety of what else am I missing? Do I just have that nagging suspicion.

[Shawn Pyles]

And it's almost like you don't know what you might be missing? That's kind of the question mark.

[Jeremy]

Exactly.

[Elizabeth]

Well, this feels like a good segue into retirement savings since you're talking about 401 and the like. So let's talk about your retirement savings. How much do you have saved and also how much are you saving at the moment?

[Jeremy]

I have in retirement savings? I have about 33,000 ish in a 401k from a previous employer. I have about 74,000 in my Roth IRA that I look to max out every year. And then right now post pandemic, I have a large high yield savings account that honestly I kind of treated as my makeshift 401k because interest rates were high. But as interest rates are coming down, I'm now trying to think of what would be a better use for that money as well. And that's closer to around the 80 to $90,000 range.

[Elizabeth]

That's really interesting and it leads me to a next question because I know when I first started saving for retirement, I didn't actually have a goal in mind. I just was thinking, you know, let me max out everything I can and save as much as I can. But it really helped me to put things into perspective when I realized I should probably have a number that I'm saving towards. So with that said, have you used a retirement calculator to get an estimate of how much you may need to save for retirement?

[Jeremy]

I did. I think it's probably like three or four years ago, to be honest, at this point. And I think the number I came up with was in the range of like 1.3 million. But I have not done it recently and that probably would be a helpful thing for me to do.

[Shawn Pyles]

Yeah, I would encourage you to play with that. We have a great retirement calculator on Eard Wallet's website, so that's a pretty handy thing to pull up. Just Google like NerdWallet retirement calculator. But as it relates to your retirement savings, I want to throw out a couple of benchmarks here because there are some that can be handy in terms of gauging how well you're doing saving for retirement. So one question. How old are you, Jeremy?

[Jeremy]

I am 31.

[Shawn Pyles]

31. Okay. And can I ask what your salary is?

[Jeremy]

It is just from my full time job or I have a couple other streams of income from part time work as well. So total income, I guess.

[Shawn Pyles]

Annual income?

[Jeremy]

Yeah, annual income is looking around a little above 130 a year.

[Shawn Pyles]

So one common benchmark that's put out and Fidelity recommends this, which is to save at least one times your salary by age 30 and then three times by age 40. And it just grows exponentially as you get closer to retirement. And that's in part because of your compound interest and your continued contributions to retirement account. So based on that, you're doing well in terms of saving for retirement. You're not quite at that 100% mark, but having $100,000 between two retirement accounts a little north of that actually is really solid for anyone in general, but especially for someone who's just 31 years old. So pat yourself on the back for that. And that's especially impressive considering that you don't have access to a 401k right now.

[Jeremy]

I will take that compliment. Thank you.

[Shawn Pyles]

Yeah, of course. But yet you still have this nagging feeling of okay, what's going on? Where am I missing? Where can I improve things? And I think with that in mind, it might be helpful to zoom out and talk about what your life goals are like. Do you know what you want to do with the rest of your life? Do you want to travel? Do you want to retire early, maybe increase your charitable giving?

[Jeremy]

I hope this doesn't sound too much like a PBS special, but I want to try and have what is as much comfort and ease of mind as possible. What I think that looks like more for me is that in an ideal, ideal world, I currently have a home in New York City and I would love to own a second property, ideally closer to family, just because most of my family lives in the same area and to have that be somewhat consolidated, I would love to do more traveling. That's not the top priority, but it's something there. And then in my ideal world, I feel like I work a few different avenues and I'm hard pressed to believe that I will ever fully retire completely from working because I'd probably keep myself busy in some way. But if I could have the opportunity to retire from full time employment a little earlier than the 62, 65 range, I would love, if that's possible.

[Shawn Pyles]

Do you have an age in mind where you think, okay, maybe when I'm 55, I'll want to step away from 9 to 5 work.

[Jeremy]

I've always had the goal, with not a lot of evidence to back it up, of 58, but generally late 50s is when I would love to say I don't need to continue working 40 to 50 hours a week full, full time.

[Shawn Pyles]

Well, that's helpful to know too. So 58 might sound like an arbitrary number and it may well be, and that's fine. But I would encourage you, when you play with a retirement calculator, to put in that number of years that you have until 58 and then how many years you might need to be living off of your savings afterward. Because obviously if you're retiring earlier, you'll have to have a larger nest egg to fund those post retirement years, even if you are still working somewhat.

[Jeremy]

Yeah, absolutely.

[Shawn Pyles]

Another thing that I think you might want to consider as you decide or mull over what your goals are and what you might want to do with your finances and how you can shore up your financial life is the question of what do I want to do? Which we kind of talked about. And then also to your point earlier, where am I vulnerable? So that can provide an opportunity for introspection and evaluation of how you can shore up your finances. And on the subject of being vulnerable or preventing vulnerability, insurance comes to mind for me. Have you looked into life insurance or disability insurance?

[Jeremy]

I do currently have a life insurance plan. I do not have a further disability insurance plan.

[Shawn Pyles]

I mentioned disability insurance because it's something a lot of people overlook. And the chances of becoming disabled before normal retirement age is 25%, at least according to the latest information from the Social Security Administration. And that's for those who were born in the year 2000. But that 25% number has been pretty steady for a number of years. So a lot of people may not realize that they actually have disability insurance through their workplace. Evaluate your benefits. You may currently have this coverage, but if not, it's worth doing some research and looking into a policy because I don't know about you. I'm pretty risk averse. And hearing that I have a 25% chance of not being able to work or potentially earn an income through my job makes me a little bit nervous. And I try to do what I can to prevent that, that risk from happening.

[Jeremy]

Yes, I feel very similarly and feel that same risk aversion. So this is very helpful.

[Elizabeth]

All right, so something that piqued my interest in terms of a question you asked us was that at what point do you take advantage of your time over the pursuit of more income? So can you tell us a bit about that?

[Jeremy]

Yeah, absolutely. And I almost feel like I should have my partner like yelling into the camera in the background here. Right now I feel a lot of comfort and frankly a lot of joy in work. But I think on paper I could absolutely be seen as a workaholic. I work a job that currently I think it's on average I pull between 45 to 50 hours a week. And just the nature of the work also is very on call. There's a lot of times when you're reacting to scenarios or you're working unique hours because of that. And in addition, another thing that I really love doing is that I love teaching. So I work as adjunct faculty at actually my ALMA material and then I do some different teaching around the city as well. At some point I can feel myself in the worst times when I'm at that point of potentially burnout or being extremely tired of thinking like, do I really need to put in this extra time for X amount of dollars that may or may not be actually making an impact? And that thought and just kind of, for lack of better term strategies around even this general anxiety of what are ways to help quantify when the opportunity cost of your time is valuing more than the money you would be earning Is something that kind of rings in my head a lot since we can always buy more stuff but you can't buy more time.

[Elizabeth]

This was the story of my life last year and the year prior. I was also juggling multiple gigs because I wanted to get ahead financially. I am someone who believes a bit in the fire movement, so I was looking at early retirement. Still am saying I was burnt out was an understatement. I will say using a calculator, as Sean mentioned, to see how far I was from my retirement goal, both if I continued working and saving at the same pace I was, and also looking at it if I had dropped a few gigs helped me tremendously. For one, it helped me to remember that compound interest will begin to fast track my growth in a few years. I started late, so I am a late starter when it comes to retirement savings. And also the calculator helped me to see that I'm doing pretty good, just as we've given you a pat on the back for doing earlier. And then the last thing I'll say is that reassessing my money values helped me too. So in the end, I did choose to drop a few gigs because while money is important, enjoying my time is equally important and I was putting too much pressure on myself. Money was starting to cause me more stress than it was creating ease in my life.

[Jeremy]

That makes a lot of sense and I really appreciate that.

[Shawn Pyles]

Another area I wanted to touch on kind of quickly because it does go back to the idea of security that you seem pretty focused on is estate planning. Have you talked with your partner and your family around estate planning and set up anything like a will?

[Jeremy]

So, not for me personally, funny enough. We're having a lot of conversations about that with my parents right now, but I have not started that process for myself.

[Shawn Pyles]

Well, it's something that I suggest everyone look into, regardless of their age, is making a will. Or at the very least, having your beneficiary designations set up on your financial accounts and double checking that they currently reflect who you would want the assets in those accounts to go to upon your death. Because doing that helps ensure that your finances and other property are managed according to your wishes. And it also makes the lives of your loved ones a little easier during a really difficult time if you were to pass away, knock on wood. And you know, it seems like you've done a really great job of building a strong financial foundation. So setting up a will can help ensure that your assets go where you want them to and that your loved ones are supported.

[Jeremy]

Yeah, that's a really great point, and.

[Shawn Pyles]

I'm going to stop harping on estate documents in a second here. But there's one last one that I want to talk about because you are living with your partner. You're not married.

[Jeremy]

Correct.

[Shawn Pyles]

The last thing I want to mention is a living will, which is a legal document that directs the kind of medical treatment that you would or would not want to get in the event that you're incapacitated. And you can also direct a medical power of attorney that could be your partner who could help execute this stuff. That way you can ensure that if something does happen where you or your partner has something happen medically, that you will be there, there for each other and you can help get the care that you want and not get the care that you don't want. It's pretty important. You probably want to talk to an attorney to get this sorted out. But I think given where you are with your assets and the savings that you have, it'd be well worth the money you would spend doing this.

[Jeremy]

Yeah, absolutely.

[Elizabeth]

And then I don't know how much this will resonate, but something else that comes to mind is I know we can get hung upon. It is important retirement savings as a long term goal, but there are also short and medium financial goals that you can work towards and they don't all have to be retirement focused. So I know you mentioned buying a second house. For some people it may be as simple as going on a vacation or buying a new car. So it's important to remember that money is here to, you know, create security, but also to bring joy in your life as well.

[Jeremy]

Yeah, I think that I sometimes while I feel empowered by money, I feel also inhibited by money sometimes. So I think that that reminder, Elizabeth, is very helpful because we should also make money to have some fun. And while I do think I do have fun, it sometimes is only in moderation when I can allow myself a little more freedom.

[Shawn Pyles]

You said that you feel inhibited by money. What do you mean by that?

[Jeremy]

I grew up in a very money conscious household and with two parents who worked incredibly, incredibly hard. Like my mom was in a similar position where she worked a full time job and my first ever job was in Planet Fitness with her as her part time job because I at 14 could work the same shifts as her so we could both make part time money money and my dad always worked six days a week growing up. So I think that we grew up in a very scarcity mentality household of always wanting to have as much of a security blanket as possible. So while I now have more freedoms because of having more income and having more things at my disposal, I still always feel that tinge in the back of my head of you aren't as far as long as you think you might be or there might be a boogeyman around the corner. So it's been both a learning lesson of allowing some of that freedom while also trying to use the numbers that, as Sean astutely pointed out, that I kind of rely on as a means of defending myself in trying to find this freedom and more openness in my decisions around money.

[Elizabeth]

Thank you for sharing that.

[Shawn Pyles]

Well, Jeremy, we've covered a lot of ground over the past however many minutes we've been chatting here. I'm wondering if you have any other questions or thoughts for us based on what we've discussed.

[Jeremy]

I think my only main other question to pivot a little bit back to the retirement conversation is while the 401k is a little bit in flux, if I'll be able to get one with my current employer thinking about other means or vehicles to act as a replacement 401k for lack of better terms or other vehicles to consider when thinking about saving for long term. Wanted to also get your thoughts on that in terms of if I would look at like a regular brokerage account versus a Robo Advisor account and just thinking about what else I can be doing, especially considering that I have this chunk of money in a high yield savings that I don't think it's getting its best use out of anymore.

[Shawn Pyles]

Elizabeth, do you want to dive in? You were an investing writer for many years.

[Elizabeth]

The first thing I will say I know this can be a frustrating response, but it really, really does depend on your goals. There are several accounts that you can use in place of a 401K. An IRA is a good account that you could consider. A taxable brokerage account is also one that you can consider and probably the easiest one to go with. You would just shop around a bit, find the right one for you, and then make regular contributions to that account. There's also a solo 401k if you happen to be self employed that you could contribute to as well. So yeah, there are different options. Aside from 401ks. I think the main thing to consider are fees. So you just obviously want to contribute to the account that has the lowest fees and that's going to get you closest to your long term goals.

[Jeremy]

This is all very helpful, thank you.

[Shawn Pyles]

And Jeremy, you mentioned a Robo Advisor account that's essentially a type of taxable brokerage account where your investment allocations are automatically sorted based on your specific goals and perhaps the type of account or investments that are within the account. So it's not that different from a taxable brokerage account. Upon selling the assets in that account to get your money out, it would be taxed at either short term or long term capital gains basis, depending on how long you held the investments for. Well Jeremy, I hope this has been helpful and given you some things to think about and maybe consider on an existential and financial level what you might want to do with your money and your life.

[Jeremy]

Yeah, thank you both so much. I truly cannot thank you both enough for the time and the conversation and and I'm just so grateful.

[Shawn Pyles]

Thank you. We're happy to do it. That's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the Nerds and call or text us your questions at 901-730-6373. That's 901730, nerd. You can also email [e-mail] Remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts and iHeartRadio to automatically download new episodes.

[Elizabeth]

And here's our brief disclaimer. We are not financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes and it may not apply to your specific circumstances.

[Shawn Pyles]

And with that said, until next time, turn to the Nerds.

[N/A]

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