1 00:00:06,600 --> 00:00:11,879 Speaker 1: Tonight the true definition of wealth after retirement. You're listening 2 00:00:11,880 --> 00:00:14,120 Speaker 1: to simply money presided by all Worth Financial on Bob 3 00:00:14,200 --> 00:00:17,639 Speaker 1: Sponseller along with Brian James. Well, if you ask ten 4 00:00:17,720 --> 00:00:21,919 Speaker 1: people what the word wealth really means, you'll probably get 5 00:00:21,960 --> 00:00:25,320 Speaker 1: at least twelve to fifteen different answers. Some define it 6 00:00:25,360 --> 00:00:29,360 Speaker 1: as just that proverbial number, that net worth number. Some 7 00:00:29,520 --> 00:00:32,120 Speaker 1: define it as never having to worry about money again. 8 00:00:32,800 --> 00:00:35,880 Speaker 1: Others put it in the form of an image being 9 00:00:35,920 --> 00:00:39,479 Speaker 1: at the beach, a pick a ball habit and making 10 00:00:39,520 --> 00:00:43,440 Speaker 1: sure the adult children are finally off the payroll. What 11 00:00:43,479 --> 00:00:45,839 Speaker 1: it really is, which is the point of what we 12 00:00:45,920 --> 00:00:48,200 Speaker 1: want to talk about tonight, And this is a great topic. 13 00:00:48,360 --> 00:00:52,479 Speaker 1: It's the point where your resources can reliably support a 14 00:00:52,600 --> 00:00:57,720 Speaker 1: life that truly brings meaning and purpose and intention to you. 15 00:00:58,400 --> 00:01:01,080 Speaker 1: I love this topic, Brian. It's really what you and 16 00:01:01,120 --> 00:01:03,920 Speaker 1: I talk about more often than not, you know, all day, 17 00:01:03,920 --> 00:01:06,000 Speaker 1: every day with clients. So let's get into it. 18 00:01:06,400 --> 00:01:10,399 Speaker 2: Yeah, And as we say all the time, the financial 19 00:01:10,400 --> 00:01:13,080 Speaker 2: planning is much more I spend much more time begging 20 00:01:13,160 --> 00:01:16,160 Speaker 2: people to go spend their own money than actually solving 21 00:01:16,200 --> 00:01:19,160 Speaker 2: financial problems, you know, which I think that's a financial 22 00:01:19,160 --> 00:01:21,920 Speaker 2: problem in itself that urge to stare at a pile 23 00:01:21,959 --> 00:01:24,560 Speaker 2: of money and not actually take advantage of it. So 24 00:01:25,080 --> 00:01:26,600 Speaker 2: what are the steps that we need to go through 25 00:01:26,600 --> 00:01:29,720 Speaker 2: to kind of not get trapped in this endless routine 26 00:01:29,760 --> 00:01:32,400 Speaker 2: of looking at our money? So step one. First off, 27 00:01:32,440 --> 00:01:34,319 Speaker 2: you want to start with your life, not the portfolio. 28 00:01:34,360 --> 00:01:35,880 Speaker 2: Figure out what it is that you want to do. 29 00:01:36,480 --> 00:01:39,319 Speaker 2: You know, oftentimes we simply focus on the financial questions 30 00:01:39,319 --> 00:01:42,240 Speaker 2: do I have enough money? How when will I run out? 31 00:01:42,520 --> 00:01:44,920 Speaker 2: And I always think of it this way. People get 32 00:01:44,959 --> 00:01:47,520 Speaker 2: stuck looking at the finances, and then after we have 33 00:01:47,600 --> 00:01:50,400 Speaker 2: beaten that to death and they realize the finances are okay, 34 00:01:50,680 --> 00:01:53,920 Speaker 2: there's a much larger, scarier hurdle right behind the money, 35 00:01:54,120 --> 00:01:55,960 Speaker 2: that is, oh my gosh, when I have enough, what 36 00:01:56,000 --> 00:01:57,520 Speaker 2: am I going to do with all my free time? 37 00:01:58,040 --> 00:02:00,840 Speaker 2: That can be positively terrifying. A lot of us hide 38 00:02:00,840 --> 00:02:02,400 Speaker 2: behind the money so that we don't have to think 39 00:02:02,440 --> 00:02:04,520 Speaker 2: about that. So a better question is what is a 40 00:02:04,560 --> 00:02:07,280 Speaker 2: good and meaningful life for me in retirement? That's gonna 41 00:02:07,280 --> 00:02:09,520 Speaker 2: be different for every single question. No advisor can help 42 00:02:09,560 --> 00:02:11,679 Speaker 2: you answer that one. So think about this. It's a 43 00:02:11,760 --> 00:02:14,200 Speaker 2: random Tuesday in retirement, you know, not the not the 44 00:02:14,280 --> 00:02:17,280 Speaker 2: dream vacation version, just the just a regular old Tuesday. 45 00:02:17,320 --> 00:02:18,959 Speaker 2: What time are you going to get out of bed? 46 00:02:19,120 --> 00:02:20,960 Speaker 2: Who do you spend time with, who's the first person 47 00:02:21,000 --> 00:02:22,760 Speaker 2: you're going to talk to, who's the second person you're 48 00:02:22,800 --> 00:02:25,280 Speaker 2: gonna talk to? What do you do all day that 49 00:02:25,360 --> 00:02:27,720 Speaker 2: gives that day meaning? What do you try not to do? 50 00:02:27,800 --> 00:02:29,519 Speaker 1: And what if you don't want to talk to anybody? 51 00:02:29,520 --> 00:02:32,360 Speaker 2: Brian, Well, then there's Bob's version of it. This is 52 00:02:32,400 --> 00:02:36,480 Speaker 2: Bob's dream Tuesday, waking up and not making eye contact 53 00:02:36,600 --> 00:02:38,560 Speaker 2: until maybe the evening if he's lucky. 54 00:02:40,160 --> 00:02:43,239 Speaker 1: All right, No, I think this is a great question, 55 00:02:43,480 --> 00:02:46,639 Speaker 1: and we ask this sometimes, you know, that typical Tuesday question. 56 00:02:46,720 --> 00:02:49,520 Speaker 1: What's a typical day in the life looks like? And 57 00:02:49,600 --> 00:02:52,080 Speaker 1: if we get that deer in the headlights look, which 58 00:02:52,120 --> 00:02:55,200 Speaker 1: means they've never really thought about it. Folks might be 59 00:02:55,400 --> 00:02:59,440 Speaker 1: financially able to retire, but they're not ready to retire, 60 00:02:59,560 --> 00:03:03,360 Speaker 1: you know, from psychological or really happiness or meaning or 61 00:03:03,400 --> 00:03:07,440 Speaker 1: purpose standpoint. So oftentimes we say, hey, let's table this. 62 00:03:07,560 --> 00:03:09,800 Speaker 1: You need to go home and do a little homework 63 00:03:09,840 --> 00:03:13,560 Speaker 1: and think about it, you know. But again a lot 64 00:03:13,600 --> 00:03:16,000 Speaker 1: of times too, when people they can talk about how 65 00:03:16,000 --> 00:03:18,440 Speaker 1: they're going to spend their time. But let's be real, 66 00:03:18,520 --> 00:03:21,000 Speaker 1: let's be honest. Most people when they come in to 67 00:03:21,000 --> 00:03:23,560 Speaker 1: see a financial advisor, they want to talk about money, 68 00:03:23,960 --> 00:03:27,480 Speaker 1: and they want to define what's enough. And so, you know, 69 00:03:27,600 --> 00:03:31,919 Speaker 1: it usually breaks down to three categories. One is essential spending. 70 00:03:32,400 --> 00:03:34,760 Speaker 1: This is kind of the non negotiable part. You know, 71 00:03:34,840 --> 00:03:38,800 Speaker 1: your housing costs, utilities, groceries, insurance, healthcare which is a 72 00:03:38,800 --> 00:03:43,920 Speaker 1: big one. Basic transportation and taxes. And if the market 73 00:03:44,000 --> 00:03:46,680 Speaker 1: is going you know, up or down or sideways or 74 00:03:46,680 --> 00:03:50,560 Speaker 1: doing cartwheels or throwing tariff tantrums or whatever, these bills 75 00:03:50,600 --> 00:03:53,640 Speaker 1: are still going to show up every day, every month. 76 00:03:53,760 --> 00:03:56,000 Speaker 1: And we got to make sure that what i'll call 77 00:03:56,040 --> 00:03:59,400 Speaker 1: the basic blocking and tackling is taken care of. If 78 00:03:59,400 --> 00:04:03,080 Speaker 1: we can't even afford that, it's not time to retire, 79 00:04:03,120 --> 00:04:07,240 Speaker 1: that's the first layer. Then we get into the second layer, 80 00:04:07,320 --> 00:04:10,800 Speaker 1: which is an important category. Let's face it, you retire 81 00:04:10,920 --> 00:04:14,960 Speaker 1: because you want to enjoy doing something other than work. 82 00:04:15,280 --> 00:04:18,000 Speaker 1: And so we'll just call this enjoyment spending. What do 83 00:04:18,040 --> 00:04:19,279 Speaker 1: we mean here, Brian. 84 00:04:19,480 --> 00:04:23,400 Speaker 2: Well, enjoyment spending This is what makes retirement feel like retirement, Bob, Right. 85 00:04:23,440 --> 00:04:26,440 Speaker 2: So I'm not just going to the grocery store and 86 00:04:27,160 --> 00:04:29,240 Speaker 2: going through the routine. I'm doing things that I have 87 00:04:29,320 --> 00:04:31,320 Speaker 2: not had time to do before. And some of those 88 00:04:31,320 --> 00:04:33,320 Speaker 2: are obvious. That might be travel, and for some people 89 00:04:33,360 --> 00:04:36,880 Speaker 2: it's simply more travel, going more places more often during 90 00:04:36,880 --> 00:04:41,600 Speaker 2: the year. It can be dining out a little more often, hobbies, memberships, gifts, experiences, 91 00:04:42,360 --> 00:04:45,880 Speaker 2: and maybe just even charity, a budget for being spontaneously generous. 92 00:04:46,200 --> 00:04:48,159 Speaker 2: These are just things where that you've had time to 93 00:04:48,160 --> 00:04:51,080 Speaker 2: think about now and you want to take advantage of it. 94 00:04:51,080 --> 00:04:52,640 Speaker 2: This is where, of course, we have to build it 95 00:04:52,640 --> 00:04:54,839 Speaker 2: into the financial plan, but the point is to build 96 00:04:54,839 --> 00:04:58,000 Speaker 2: that around your values. It's no longer around It doesn't 97 00:04:58,040 --> 00:04:59,960 Speaker 2: only have to be around what keeps our ship aflow 98 00:05:00,120 --> 00:05:01,560 Speaker 2: and how do we only pay the bills and then 99 00:05:01,600 --> 00:05:04,120 Speaker 2: just sit home and continue to worry about money. It's 100 00:05:04,360 --> 00:05:06,440 Speaker 2: what are my values and how can I support them 101 00:05:06,440 --> 00:05:09,040 Speaker 2: with the resources I built for myself over the years. 102 00:05:09,040 --> 00:05:11,719 Speaker 2: So this isn't frivolous spending. It's the reason that you saved. 103 00:05:11,960 --> 00:05:14,279 Speaker 2: You don't have to feel guilty about this. You know, 104 00:05:14,279 --> 00:05:15,719 Speaker 2: a lot of times I'll have people come in and 105 00:05:15,720 --> 00:05:18,599 Speaker 2: they'll they'll kind of sheepishly say, without being able to 106 00:05:18,600 --> 00:05:21,200 Speaker 2: make eye contact. Some of these dreams that they've had, well, 107 00:05:21,240 --> 00:05:23,000 Speaker 2: I've kind of always wanted to have this old camaro, 108 00:05:23,080 --> 00:05:24,919 Speaker 2: or I've always wanted to give more to this, to 109 00:05:24,760 --> 00:05:27,200 Speaker 2: this such and such charity. But I've just never felt 110 00:05:27,240 --> 00:05:29,000 Speaker 2: like I've had enough. And that's the whole point of 111 00:05:29,000 --> 00:05:31,320 Speaker 2: a financial plan. Let's figure out what is enough, and 112 00:05:31,360 --> 00:05:33,240 Speaker 2: if there's a surplus, what can you get away with, 113 00:05:33,320 --> 00:05:35,520 Speaker 2: and then you can do those things without guilt and 114 00:05:35,600 --> 00:05:37,560 Speaker 2: go forward into retirement with confidence. 115 00:05:38,560 --> 00:05:40,760 Speaker 1: All right. And then a third level of spending. We're 116 00:05:40,839 --> 00:05:44,359 Speaker 1: just gonna call that legacy and I'll call it optional. 117 00:05:44,520 --> 00:05:47,400 Speaker 1: Nice to have. These are things like, you know, perhaps 118 00:05:47,480 --> 00:05:52,400 Speaker 1: making larger gifts to charity, helping adult children, maybe a 119 00:05:52,400 --> 00:05:55,719 Speaker 1: second home. And the point you already brought up those 120 00:05:55,800 --> 00:05:58,960 Speaker 1: someday purchases. You know, I've always wanted to have one 121 00:05:59,000 --> 00:06:01,479 Speaker 1: of these, you know, whether it's a car, a piano, 122 00:06:01,640 --> 00:06:05,600 Speaker 1: or whatever. These goals can be deeply meaningful, but they're 123 00:06:05,760 --> 00:06:09,159 Speaker 1: usually more flexible in terms of timing and amount, and 124 00:06:09,160 --> 00:06:11,520 Speaker 1: that's why we'd like to at least quantify it, get 125 00:06:11,560 --> 00:06:14,440 Speaker 1: it on paper to make sure the plan's going to work. 126 00:06:15,240 --> 00:06:19,000 Speaker 1: Regardless of when you decide to pull the trigger. And often, Brian, 127 00:06:19,040 --> 00:06:22,760 Speaker 1: when people feel anxious about having enough, it's often because 128 00:06:22,880 --> 00:06:27,440 Speaker 1: these three layers are fuzzy. They really haven't gotten any clarity. 129 00:06:27,880 --> 00:06:31,160 Speaker 1: And the cure here, or the solution, is to separate 130 00:06:31,279 --> 00:06:34,919 Speaker 1: and prioritize some of these spending goals. And once you 131 00:06:35,120 --> 00:06:38,800 Speaker 1: know and separate what must be funded versus what you 132 00:06:38,960 --> 00:06:41,600 Speaker 1: want to fund or what would be great to fund, well, 133 00:06:41,600 --> 00:06:43,839 Speaker 1: then you can build a plan that actually fits you. 134 00:06:43,880 --> 00:06:45,560 Speaker 1: And I'm going to call out one of these and 135 00:06:45,600 --> 00:06:49,760 Speaker 1: it's a whole helping adult children thing. You know, we 136 00:06:49,839 --> 00:06:52,760 Speaker 1: put it in that optional nice to have category, Brian. 137 00:06:53,000 --> 00:06:56,240 Speaker 1: More and more folks are coming in, and it's an 138 00:06:56,400 --> 00:06:59,840 Speaker 1: unknown number. They just have not gotten their kids off 139 00:06:59,839 --> 00:07:02,800 Speaker 1: the proverbial bank of mom and dad yet, and it 140 00:07:02,839 --> 00:07:04,039 Speaker 1: can cause some problems. 141 00:07:04,600 --> 00:07:07,000 Speaker 2: Yeah, that's absolutely true. But these are things that that 142 00:07:07,000 --> 00:07:09,159 Speaker 2: that can go a lot better if there's discussion in 143 00:07:09,200 --> 00:07:11,720 Speaker 2: advance in terms of, yes, we can help you out, 144 00:07:11,720 --> 00:07:13,720 Speaker 2: but here's the limit, we need to be done with 145 00:07:13,760 --> 00:07:15,920 Speaker 2: this by this time frame, or here's the absolute most 146 00:07:16,000 --> 00:07:17,960 Speaker 2: we can do on a monthly basis. And again, this 147 00:07:18,120 --> 00:07:20,960 Speaker 2: all this all comes from knowing what you need to 148 00:07:21,040 --> 00:07:22,880 Speaker 2: begin with, and then you can figure out what is 149 00:07:22,880 --> 00:07:24,880 Speaker 2: your surplus. That could be the money that you're you're 150 00:07:24,920 --> 00:07:27,360 Speaker 2: planning to travel with. Maybe you sacrifice that for years 151 00:07:27,400 --> 00:07:30,200 Speaker 2: you can help the kids. But again having that end 152 00:07:30,200 --> 00:07:32,680 Speaker 2: to point out there rather than just anchoring yourself to 153 00:07:32,720 --> 00:07:34,640 Speaker 2: something for the rest of your life and and that 154 00:07:34,680 --> 00:07:36,640 Speaker 2: does This doesn't mean your kids aren't hard workers, they're 155 00:07:36,680 --> 00:07:39,240 Speaker 2: not doing the right things, although it can meet that. 156 00:07:39,240 --> 00:07:41,480 Speaker 2: That's that's you know, things for you to pay attention to. 157 00:07:41,560 --> 00:07:43,480 Speaker 2: But it's just hard to get started. So it's nothing 158 00:07:43,520 --> 00:07:45,640 Speaker 2: to feel guilty about that. Somebody needs a you know, 159 00:07:45,760 --> 00:07:48,760 Speaker 2: kind of a boost for the beginning of their adult lives. 160 00:07:49,080 --> 00:07:51,080 Speaker 2: So once you've gone through this, now you can go 161 00:07:51,160 --> 00:07:53,880 Speaker 2: through the third step here, which is identifying these these 162 00:07:53,920 --> 00:07:56,520 Speaker 2: things that anchor you to happiness. Right, so what are 163 00:07:56,520 --> 00:07:58,520 Speaker 2: the These aren't the flashy things. These are just the 164 00:07:58,560 --> 00:08:01,720 Speaker 2: simple things that maybe you've done that you realize at 165 00:08:01,720 --> 00:08:03,240 Speaker 2: the end of the day, hey, this was a good day. 166 00:08:03,240 --> 00:08:04,720 Speaker 2: Maybe in the morning it didn't look like it was 167 00:08:04,760 --> 00:08:06,520 Speaker 2: going to be a great day, but by the end, 168 00:08:07,120 --> 00:08:08,640 Speaker 2: it's one of those days where you felt like this 169 00:08:08,760 --> 00:08:10,360 Speaker 2: was this is kind of what I want to be about, 170 00:08:10,880 --> 00:08:12,560 Speaker 2: you know, and this might just be a nice day 171 00:08:12,600 --> 00:08:14,720 Speaker 2: with your family where no what he was rushed, or 172 00:08:14,760 --> 00:08:17,240 Speaker 2: a weekly routine that includes, you know, making sure you're 173 00:08:17,240 --> 00:08:19,680 Speaker 2: getting out there, getting exercise and out there in the community. 174 00:08:20,000 --> 00:08:22,720 Speaker 2: The ability to choose the right opportunities, Yes to the 175 00:08:22,720 --> 00:08:24,440 Speaker 2: good ones and know to the ones that are just 176 00:08:24,520 --> 00:08:26,800 Speaker 2: you're saying, you know the other that you're feel guilted 177 00:08:26,800 --> 00:08:30,080 Speaker 2: into doing. You know, even confidence in healthcare. You know 178 00:08:30,120 --> 00:08:32,240 Speaker 2: that you're in you're in a good spot. You understand 179 00:08:32,240 --> 00:08:34,240 Speaker 2: your your issues and you know what to do about them. 180 00:08:35,080 --> 00:08:37,440 Speaker 2: And so these these are none of these are big, 181 00:08:37,480 --> 00:08:40,240 Speaker 2: flashy things that people point to in terms of this 182 00:08:40,280 --> 00:08:42,240 Speaker 2: is exactly what I need for retirement. These are the 183 00:08:42,240 --> 00:08:44,679 Speaker 2: more subtle things that keep us happy on a day 184 00:08:44,720 --> 00:08:47,199 Speaker 2: to day basis. So think about what. The other way 185 00:08:47,200 --> 00:08:48,640 Speaker 2: to think about this is what are you afraid of 186 00:08:48,720 --> 00:08:52,040 Speaker 2: losing in retirement? That often will point directly at those 187 00:08:52,080 --> 00:08:54,160 Speaker 2: things that anchor you in your contentment space. 188 00:08:55,120 --> 00:08:57,480 Speaker 1: And a lot of times, Brian, the things that folks 189 00:08:57,480 --> 00:09:01,000 Speaker 1: are afraid of losing in retirement have nothing to do 190 00:09:01,440 --> 00:09:05,720 Speaker 1: with money. It's all about having connection with people, having community, 191 00:09:06,080 --> 00:09:09,400 Speaker 1: having some influence, you know, a sense of helping people 192 00:09:09,400 --> 00:09:11,839 Speaker 1: in the world. You know, none of those things. They 193 00:09:11,880 --> 00:09:16,040 Speaker 1: involve time, they involve energy, they involve your acquired expertise 194 00:09:16,200 --> 00:09:19,240 Speaker 1: over years and years, if not decades, but they very 195 00:09:19,440 --> 00:09:24,640 Speaker 1: rarely actually involve money. Okay, once we combine the money 196 00:09:24,760 --> 00:09:28,880 Speaker 1: with the purpose, now we can actually build a spending plan. 197 00:09:29,040 --> 00:09:31,560 Speaker 1: And this is where the rubber meets the proverbial road. 198 00:09:31,640 --> 00:09:36,319 Speaker 1: The values we've identified, you're inspired by them. We've clarified 199 00:09:36,360 --> 00:09:39,760 Speaker 1: the cash flow, We've made sure there's enough money, and 200 00:09:40,000 --> 00:09:43,040 Speaker 1: you're now in a position to support your best life 201 00:09:43,120 --> 00:09:47,600 Speaker 1: today as well as protect your future self. And we 202 00:09:47,800 --> 00:09:51,000 Speaker 1: always have to leave room for change, Brian. That's another 203 00:09:51,040 --> 00:09:54,280 Speaker 1: thing we emphasize all the time is you know, let's 204 00:09:54,280 --> 00:09:58,520 Speaker 1: say you retire at sixty two and everything looks great 205 00:09:58,600 --> 00:10:02,000 Speaker 1: and you got a perfect plan, and life has a 206 00:10:02,040 --> 00:10:04,760 Speaker 1: way of creeping up. The kids are always going to 207 00:10:04,880 --> 00:10:07,800 Speaker 1: do something different. They might move. We don't know how 208 00:10:07,840 --> 00:10:11,200 Speaker 1: many grandchildren you're gonna have. You know, family members could 209 00:10:11,240 --> 00:10:15,360 Speaker 1: have health challenges, educational challenges. You gotta leave some room 210 00:10:15,760 --> 00:10:20,560 Speaker 1: for change because life does continue to evolve even after retirement. 211 00:10:20,760 --> 00:10:24,240 Speaker 1: And that's okay, that's the reason why it's important to 212 00:10:24,320 --> 00:10:29,480 Speaker 1: just update that plan, you know, every year and account 213 00:10:29,480 --> 00:10:30,520 Speaker 1: for some of those changes. 214 00:10:31,320 --> 00:10:33,839 Speaker 2: Yeah, and again this is all this all points back 215 00:10:33,880 --> 00:10:35,680 Speaker 2: to what we always beat to death, which is the 216 00:10:35,760 --> 00:10:38,320 Speaker 2: value of having a financial plan behind all this, whether 217 00:10:38,320 --> 00:10:41,000 Speaker 2: you're doing it on your own, with your spouse in 218 00:10:41,040 --> 00:10:43,600 Speaker 2: a notepad, just talking about here's what's important to us. Now, 219 00:10:43,640 --> 00:10:45,840 Speaker 2: here's our resources, Here's what we're trying to do with them. 220 00:10:46,400 --> 00:10:48,800 Speaker 2: It's not all about numbers. That's an important part of it. 221 00:10:48,840 --> 00:10:50,400 Speaker 2: That that's the guts of it. But at the same time, 222 00:10:50,400 --> 00:10:52,640 Speaker 2: you're gonna spend much more of your energy talking about 223 00:10:52,640 --> 00:10:55,400 Speaker 2: those value things, those human thoughts we all have in 224 00:10:55,480 --> 00:10:57,680 Speaker 2: terms of how do I make this all work? So 225 00:10:58,240 --> 00:11:00,760 Speaker 2: again that that is the core of the portfolio and 226 00:11:00,800 --> 00:11:03,520 Speaker 2: then or of your portfolio of thought, I should say, 227 00:11:03,800 --> 00:11:05,959 Speaker 2: and that gives you something to always come back to 228 00:11:05,960 --> 00:11:08,280 Speaker 2: to address whatever changes come along the way. Here's where 229 00:11:08,280 --> 00:11:10,400 Speaker 2: we were a year ago, two years ago, here's where 230 00:11:10,440 --> 00:11:12,200 Speaker 2: we are now with all the new concerns that we 231 00:11:12,280 --> 00:11:14,920 Speaker 2: have and maybe new resources. Who knows, how should we 232 00:11:14,920 --> 00:11:17,040 Speaker 2: be adjusting on the way. As long as you're if 233 00:11:17,080 --> 00:11:20,680 Speaker 2: you're having these conversations, you know, even if it's just yourself, 234 00:11:20,720 --> 00:11:22,839 Speaker 2: if you're having once a year sit down and kind 235 00:11:22,840 --> 00:11:24,839 Speaker 2: of put some plought into what is important to me 236 00:11:24,880 --> 00:11:26,160 Speaker 2: and what am I doing about it to make sure 237 00:11:26,160 --> 00:11:27,920 Speaker 2: I'm doing more of that and less of the other stuff. 238 00:11:28,520 --> 00:11:30,959 Speaker 2: Then you'll always have the ability to make the right 239 00:11:31,000 --> 00:11:33,520 Speaker 2: decisions and be confident when you do. I think that's 240 00:11:33,559 --> 00:11:36,000 Speaker 2: the scariest part. People tend to try to make these 241 00:11:36,040 --> 00:11:39,160 Speaker 2: decisions when they are forced to, when with regard to retirement, 242 00:11:39,200 --> 00:11:40,760 Speaker 2: and sometimes we don't get to call our shot. 243 00:11:41,679 --> 00:11:44,160 Speaker 1: Well. In speaking of having to make decisions when you're 244 00:11:44,200 --> 00:11:46,760 Speaker 1: forced to, I mean that brings up the elephant in 245 00:11:46,800 --> 00:11:50,920 Speaker 1: the room literally, and that's healthcare. It's somebody. You know. 246 00:11:51,120 --> 00:11:54,160 Speaker 1: People rarely want to talk about this, Brian, unless we 247 00:11:54,240 --> 00:11:56,400 Speaker 1: make them talk. Well, we don't make them do anything, 248 00:11:56,480 --> 00:11:59,679 Speaker 1: but we encourage them to talk about it. Not only 249 00:11:59,720 --> 00:12:02,280 Speaker 1: am I the spouses, but amongst family members, and what 250 00:12:02,320 --> 00:12:05,240 Speaker 1: I'm talking about here is future health care costs and 251 00:12:05,320 --> 00:12:09,120 Speaker 1: potential long term care exposure. You gotta at least have 252 00:12:09,280 --> 00:12:13,400 Speaker 1: the conversation of what if this happens, what if that happens. 253 00:12:13,800 --> 00:12:17,120 Speaker 1: Build those contingencies not only into the how the finances 254 00:12:17,160 --> 00:12:19,959 Speaker 1: gonna are gonna work, but how the day to day 255 00:12:20,000 --> 00:12:24,080 Speaker 1: management of your affairs are gonna work. And Brian, I've 256 00:12:24,120 --> 00:12:27,240 Speaker 1: seen this way too many times. At this point, people 257 00:12:27,400 --> 00:12:30,559 Speaker 1: just put this off, never talk about it, and then 258 00:12:30,720 --> 00:12:34,120 Speaker 1: something major happens and everybody has to drop everything and 259 00:12:34,160 --> 00:12:37,400 Speaker 1: swing into action. And it's unfortunate. These are folks that 260 00:12:37,440 --> 00:12:40,800 Speaker 1: have done all the right planning and state planning, investments, taxes, 261 00:12:40,840 --> 00:12:44,960 Speaker 1: all that, but they never talked about what happens if 262 00:12:45,040 --> 00:12:50,200 Speaker 1: my health care needs change substantially and oftentimes, Brian, this 263 00:12:50,280 --> 00:12:55,600 Speaker 1: can happen quickly and cause major change, not just financially 264 00:12:55,720 --> 00:12:57,680 Speaker 1: but amongst the whole family dynamics. 265 00:12:58,240 --> 00:13:00,760 Speaker 2: Yeah, and again, I think the most important thing you 266 00:13:00,800 --> 00:13:02,720 Speaker 2: can do is have that touch base once a year, 267 00:13:02,920 --> 00:13:05,200 Speaker 2: sit down, figure out what's important and what's not. 268 00:13:05,960 --> 00:13:08,920 Speaker 1: Here's the all Worth advice. Wealth and retirement isn't just 269 00:13:08,960 --> 00:13:12,680 Speaker 1: about chasing that bigger number. It's about designing a life 270 00:13:12,800 --> 00:13:17,720 Speaker 1: you genuinely want, then building the financial structure, not just 271 00:13:17,840 --> 00:13:21,840 Speaker 1: money to support it through good markets and bad ones, 272 00:13:22,040 --> 00:13:26,400 Speaker 1: good health and challenging health. All right. Coming up next, 273 00:13:26,440 --> 00:13:28,880 Speaker 1: it's a question we get all the time, should I 274 00:13:28,960 --> 00:13:32,840 Speaker 1: take the pension lump sum or lock in some monthly 275 00:13:32,920 --> 00:13:35,160 Speaker 1: income for life. We'll get into that. Next, you're listening 276 00:13:35,160 --> 00:13:37,880 Speaker 1: to Simply Money presented by Allworth Financial and fifty five 277 00:13:37,960 --> 00:13:45,960 Speaker 1: KRC the Buck Station. You're listening to Simply Money presented 278 00:13:46,000 --> 00:13:49,320 Speaker 1: by all Worth Financial on Bob Spuntseller along with Brian James. 279 00:13:49,960 --> 00:13:52,640 Speaker 1: If you can't listen to Simply Money live every night, 280 00:13:52,720 --> 00:13:56,480 Speaker 1: subscribe and get our daily podcasts. Just search Simply Money 281 00:13:56,720 --> 00:14:00,600 Speaker 1: on the iHeart app or or wherever you find your podcast. 282 00:14:01,440 --> 00:14:08,080 Speaker 1: Executor duties uneven retirement spending, umbrella insurance and moving in retirement. 283 00:14:08,120 --> 00:14:10,720 Speaker 1: We're gonna tackle all of those questions you had for 284 00:14:10,880 --> 00:14:15,160 Speaker 1: us straight ahead at six forty three. All right, time 285 00:14:15,240 --> 00:14:19,520 Speaker 1: for a what we'll call a choose your own adventure segment. 286 00:14:19,680 --> 00:14:22,480 Speaker 1: You know, we'll call this the financial version of that. Tonight, 287 00:14:23,040 --> 00:14:26,480 Speaker 1: we've got a listener scenario that he actually submitted that 288 00:14:26,560 --> 00:14:30,120 Speaker 1: comes up more often than you'd think, especially for people 289 00:14:30,160 --> 00:14:34,120 Speaker 1: about to retire from big employers, you know, say like 290 00:14:34,200 --> 00:14:36,520 Speaker 1: a general Electric Brian, let's get into it, and it's 291 00:14:36,560 --> 00:14:39,080 Speaker 1: that age old question. Do I take the lump sum 292 00:14:39,600 --> 00:14:44,560 Speaker 1: or do I take a regular guaranteed income pension during retirement. 293 00:14:44,600 --> 00:14:47,840 Speaker 1: It's a nice option to have. Most folks retiring today 294 00:14:47,880 --> 00:14:48,960 Speaker 1: don't even have that option. 295 00:14:49,320 --> 00:14:52,360 Speaker 2: Yeah, obviously Kevin's worked a we're gonna call him Kevin. 296 00:14:52,400 --> 00:14:54,600 Speaker 2: That's a fake name for a real situation here. But 297 00:14:54,680 --> 00:14:57,120 Speaker 2: he's worked a long career and he's built himself up 298 00:14:57,160 --> 00:14:58,760 Speaker 2: a pretty good nest eg. But now he's got a big, 299 00:14:58,840 --> 00:15:02,080 Speaker 2: terrifying choice. So none of these are black and white, right, 300 00:15:02,080 --> 00:15:04,360 Speaker 2: So we need more details about Kevin to really kind 301 00:15:04,400 --> 00:15:07,080 Speaker 2: of get into this. So he's married, there's no debt, 302 00:15:07,080 --> 00:15:10,120 Speaker 2: recently paid off the mortgage right around retirement, and he's 303 00:15:10,160 --> 00:15:12,680 Speaker 2: got these two choices. Seven hundred and twenty five thousand 304 00:15:12,720 --> 00:15:15,440 Speaker 2: dollars lump sum he can roll into an IRA or 305 00:15:15,720 --> 00:15:19,320 Speaker 2: thirty eight hundred dollars before per month for life, with 306 00:15:19,440 --> 00:15:21,880 Speaker 2: no cost of living increases, no survivor benefit. 307 00:15:22,080 --> 00:15:22,400 Speaker 1: All right. 308 00:15:22,440 --> 00:15:24,640 Speaker 2: Option one, So Kevin can take this lump sum of 309 00:15:24,640 --> 00:15:26,800 Speaker 2: seven hundred and twenty five thousand dollars and invest it 310 00:15:26,840 --> 00:15:29,280 Speaker 2: conservatively by mix of you know, maybe stocks and bonds, 311 00:15:29,280 --> 00:15:31,560 Speaker 2: maybe a sixty to forty mix something like that, using 312 00:15:31,640 --> 00:15:34,240 Speaker 2: exchange traded funds, maybe he would. He might mix some 313 00:15:34,280 --> 00:15:36,440 Speaker 2: buffer detfs in there to bun to smooth out some 314 00:15:36,480 --> 00:15:38,920 Speaker 2: of the bumps of the market. If he pulls out 315 00:15:38,960 --> 00:15:41,440 Speaker 2: around four percent of that. He could match or maybe 316 00:15:41,440 --> 00:15:44,000 Speaker 2: even exceed that thirty eight hundred dollars a month and 317 00:15:44,280 --> 00:15:46,360 Speaker 2: keep control of the principle. What this means is it's 318 00:15:46,400 --> 00:15:48,920 Speaker 2: his money, it's an IRA, he's named beneficiaries on it, 319 00:15:49,640 --> 00:15:52,640 Speaker 2: and whatever that grows to after he's taken out, whatever 320 00:15:52,680 --> 00:15:54,920 Speaker 2: he needs to pay his bills, we'll go to somebody 321 00:15:54,960 --> 00:15:57,080 Speaker 2: in the future. That can be very important because remember, 322 00:15:57,600 --> 00:16:00,960 Speaker 2: his pension did not offer a survivor benefit. Most of 323 00:16:01,000 --> 00:16:03,000 Speaker 2: them do, but in this particular case, he didn't have 324 00:16:03,040 --> 00:16:05,880 Speaker 2: that option available to him, and a lot of people 325 00:16:06,000 --> 00:16:09,880 Speaker 2: choose this because of that ability to maintain control. A 326 00:16:09,920 --> 00:16:12,320 Speaker 2: pension is a guaranteed payment as long as the pension 327 00:16:12,320 --> 00:16:14,920 Speaker 2: itself is in good shape. Pensions can go bankrupt, just 328 00:16:14,920 --> 00:16:17,440 Speaker 2: like anything else, if they're not managed properly. There is 329 00:16:17,440 --> 00:16:20,880 Speaker 2: something called the Pension Benefit Guarantee Corporation that is a 330 00:16:20,920 --> 00:16:24,640 Speaker 2: government entity that will step in, but it doesn't guarantee you. 331 00:16:24,680 --> 00:16:26,200 Speaker 2: It'll give you maybe a third of what you were 332 00:16:26,200 --> 00:16:27,880 Speaker 2: supposed to get. Otherwise, it just means there will be 333 00:16:27,960 --> 00:16:31,240 Speaker 2: something there, but nothing's guaranteed about that, so that that's 334 00:16:31,240 --> 00:16:34,240 Speaker 2: a risk there versus the IRA. If you are comfortable 335 00:16:34,240 --> 00:16:36,880 Speaker 2: with the ups and downs of investing. Then you have 336 00:16:36,960 --> 00:16:39,440 Speaker 2: a lot more control over that money, including taking it 337 00:16:39,480 --> 00:16:43,440 Speaker 2: to your family. So that's option one. So the second option, 338 00:16:43,520 --> 00:16:45,680 Speaker 2: of course, he can take that pension thirty eight hundred 339 00:16:45,680 --> 00:16:48,040 Speaker 2: dollars a month guaranteed, as long as the pension's in 340 00:16:48,080 --> 00:16:50,680 Speaker 2: good shape, which he doesn't have any concerns about this 341 00:16:50,720 --> 00:16:53,360 Speaker 2: company that's behind it, no market risk, It doesn't have 342 00:16:53,400 --> 00:16:55,840 Speaker 2: to decide anything. It's just set it and forget. However, 343 00:16:56,080 --> 00:16:58,400 Speaker 2: the big scary thing built it into that, Bob. Remember 344 00:16:58,400 --> 00:17:01,200 Speaker 2: what we said, no cost of living increases. Most pensions 345 00:17:01,200 --> 00:17:03,560 Speaker 2: these days do not have if they exist. First of all, 346 00:17:03,560 --> 00:17:06,399 Speaker 2: most pensions are gone. But the ones that do remain 347 00:17:06,560 --> 00:17:09,000 Speaker 2: do not have cost of living built built into them. 348 00:17:09,080 --> 00:17:11,280 Speaker 2: So in fifteen years, that thirty eight hundred bucks isn't 349 00:17:11,280 --> 00:17:14,000 Speaker 2: going to go nearly as far. And if he dies early, 350 00:17:14,200 --> 00:17:16,159 Speaker 2: there is no more money on a monthly basis. 351 00:17:16,840 --> 00:17:18,800 Speaker 1: Yeah, there's a lot of lever. You know, there's a 352 00:17:18,840 --> 00:17:21,320 Speaker 1: lot of things to look at here when making this decision, 353 00:17:21,440 --> 00:17:23,760 Speaker 1: and I'm just going to throw out a couple things 354 00:17:23,800 --> 00:17:26,399 Speaker 1: for consideration here. You know a lot of people in 355 00:17:26,440 --> 00:17:29,000 Speaker 1: our industry, Brian, Let's face it, they just want to 356 00:17:29,040 --> 00:17:31,159 Speaker 1: get their hands on the money, whether they want to 357 00:17:31,200 --> 00:17:33,879 Speaker 1: generate a commission or fees or what have you. So 358 00:17:33,920 --> 00:17:37,120 Speaker 1: they're always going to tell everybody, you know, do the rollover, 359 00:17:37,240 --> 00:17:39,480 Speaker 1: do the rollover, roll it over to me, We'll make 360 00:17:39,520 --> 00:17:41,440 Speaker 1: you more money. Blah blah blah blah blah. It's not 361 00:17:41,600 --> 00:17:44,920 Speaker 1: that simple. And I can remember an example I dealt 362 00:17:44,920 --> 00:17:49,000 Speaker 1: with just a few months ago. You know, somebody came 363 00:17:49,040 --> 00:17:51,520 Speaker 1: to me and they were trying to make this decision. 364 00:17:51,960 --> 00:17:53,800 Speaker 1: They said, hey, I got a quick question for you, 365 00:17:54,400 --> 00:17:57,080 Speaker 1: and they were treating this like whether to buy a 366 00:17:57,119 --> 00:18:00,199 Speaker 1: medium roast or dark roast coffee, you know, making the 367 00:18:00,560 --> 00:18:02,359 Speaker 1: you know, Bob spit this out, get back to me 368 00:18:02,400 --> 00:18:04,679 Speaker 1: in an email in ten minutes. And I didn't get 369 00:18:04,720 --> 00:18:06,919 Speaker 1: back to them, and they're hounding me about it. I'm like, listen, 370 00:18:07,440 --> 00:18:10,040 Speaker 1: there's a lot that goes into this decision. And you 371 00:18:10,119 --> 00:18:12,399 Speaker 1: got to look at taxes, as you've already mentioned. You 372 00:18:12,480 --> 00:18:15,320 Speaker 1: got to look at other sources of income. You got 373 00:18:15,320 --> 00:18:17,960 Speaker 1: to look at investment risk, you got to look at 374 00:18:18,040 --> 00:18:20,800 Speaker 1: how your surviving spouse or airrors are going to be treated. 375 00:18:20,840 --> 00:18:23,840 Speaker 1: There's a lot of moving parts here. My point is 376 00:18:24,280 --> 00:18:27,840 Speaker 1: it should be thoroughly thought of. Nobody's putting a gun 377 00:18:27,880 --> 00:18:30,560 Speaker 1: to your head to make a decision today, or they 378 00:18:30,600 --> 00:18:34,520 Speaker 1: shouldn't be. You got to sit down, run some different scenarios, 379 00:18:34,880 --> 00:18:37,399 Speaker 1: factor all the things in that I just talked about, 380 00:18:37,680 --> 00:18:40,120 Speaker 1: and then make a good sound decision that you. 381 00:18:40,119 --> 00:18:41,000 Speaker 2: Have peace about. 382 00:18:41,480 --> 00:18:44,399 Speaker 1: And we actually did this for that person that was 383 00:18:44,760 --> 00:18:46,760 Speaker 1: on my case a little bit, and we actually came 384 00:18:46,840 --> 00:18:50,280 Speaker 1: up with an option that none of us had thought about, 385 00:18:50,320 --> 00:18:52,080 Speaker 1: you know, kind of a third option, kind of a 386 00:18:52,160 --> 00:18:54,840 Speaker 1: hybrid approach. So there's a lot of ways to go 387 00:18:54,920 --> 00:18:57,480 Speaker 1: about this, but you really do need to sit down 388 00:18:57,520 --> 00:19:01,159 Speaker 1: with a good fiduciary advisor, run the numbers, run the 389 00:19:01,200 --> 00:19:03,920 Speaker 1: different scenarios, and then make a good sound decision. 390 00:19:05,320 --> 00:19:07,280 Speaker 2: I think that's the way to look at it. And 391 00:19:07,560 --> 00:19:10,840 Speaker 2: there are many, many moving parts. Every situation is unique. 392 00:19:10,880 --> 00:19:13,720 Speaker 2: But at the same time, exhale, look at all the 393 00:19:13,720 --> 00:19:16,320 Speaker 2: different options, and make confident decisions once you've got all 394 00:19:16,359 --> 00:19:16,840 Speaker 2: the information. 395 00:19:17,359 --> 00:19:19,920 Speaker 1: All right, here's the all Worth advice. Your pension decision 396 00:19:20,119 --> 00:19:24,000 Speaker 1: isn't just about math. It's about flexibility, risk and how 397 00:19:24,040 --> 00:19:28,959 Speaker 1: much control you want over your own financial future. All right, 398 00:19:29,000 --> 00:19:31,880 Speaker 1: Coming up next, you built the business, you poured your 399 00:19:32,000 --> 00:19:35,040 Speaker 1: life into it all to leave it to your kids. 400 00:19:35,160 --> 00:19:38,240 Speaker 1: But let's say your daughter instead wants to go teach 401 00:19:38,320 --> 00:19:41,919 Speaker 1: yoga in Arizona. What happens when no one wants the 402 00:19:42,000 --> 00:19:45,040 Speaker 1: empire you've built. We'll walk through that next. You're listening 403 00:19:45,040 --> 00:19:47,600 Speaker 1: to Simply Money presented by Allworth Financial on fifty five 404 00:19:47,680 --> 00:19:56,080 Speaker 1: KRCD talk station. You're listening to Simply Money presented by 405 00:19:56,119 --> 00:20:00,240 Speaker 1: all Worth Financial on Bob Sponsala along with Brian James. Now, 406 00:20:00,280 --> 00:20:03,920 Speaker 1: for a lot of business owners, especially those listening right now, 407 00:20:04,000 --> 00:20:06,680 Speaker 1: who have built something from the ground up, put their 408 00:20:06,880 --> 00:20:11,720 Speaker 1: life into it, literally, that dream has always been this. 409 00:20:11,880 --> 00:20:14,760 Speaker 1: You hand over the keys one day to your son, 410 00:20:15,160 --> 00:20:19,119 Speaker 1: to your daughter, maybe both, and you know your dream 411 00:20:19,240 --> 00:20:21,720 Speaker 1: is for them to take the reins, keep this thing 412 00:20:21,800 --> 00:20:24,640 Speaker 1: going on for the next two or three generations, keep 413 00:20:24,680 --> 00:20:28,400 Speaker 1: that name on the building. It's legacy time. But more 414 00:20:28,440 --> 00:20:32,520 Speaker 1: often than not, and I'm seeing this happen often these days, Brian, 415 00:20:33,040 --> 00:20:36,160 Speaker 1: the kids are saying, hey, I love you, I respect you, 416 00:20:36,840 --> 00:20:39,520 Speaker 1: but I want to be a wildlife photographer. Let's say 417 00:20:39,520 --> 00:20:43,119 Speaker 1: in Costa Rica, I do not want to run this 418 00:20:43,600 --> 00:20:46,320 Speaker 1: business and spend my life doing that. It's coming up 419 00:20:46,359 --> 00:20:49,600 Speaker 1: a lot, and sometimes that can be a culture shock 420 00:20:50,119 --> 00:20:53,879 Speaker 1: to the parents that built this, you know, supposed empire 421 00:20:53,920 --> 00:20:54,600 Speaker 1: for their kids. 422 00:20:54,920 --> 00:20:57,240 Speaker 2: Yeah, this is happening more and more, and in fact, 423 00:20:57,280 --> 00:20:59,760 Speaker 2: only about one in three family businesses make it to 424 00:20:59,800 --> 00:21:02,760 Speaker 2: that second generation and less than one in ten makes 425 00:21:02,760 --> 00:21:05,280 Speaker 2: it to the third, meaning the second generation couldn't quite 426 00:21:06,000 --> 00:21:08,240 Speaker 2: keep it going and things didn't didn't go so well. 427 00:21:08,280 --> 00:21:11,119 Speaker 2: But that's not because these businesses aren't profitable. It's because 428 00:21:11,119 --> 00:21:13,800 Speaker 2: the passion isn't there. It's hard, it can be hard 429 00:21:13,800 --> 00:21:16,120 Speaker 2: to pass that passion down. You know. It's one thing 430 00:21:16,160 --> 00:21:19,080 Speaker 2: to have built something from scratch. Well that's your baby. 431 00:21:19,320 --> 00:21:21,639 Speaker 2: You've been there since the start, and you put it 432 00:21:21,680 --> 00:21:24,680 Speaker 2: together and you have seen every success and every failure, 433 00:21:25,400 --> 00:21:28,359 Speaker 2: and it's just that it's another thing entirely for somebody 434 00:21:28,400 --> 00:21:30,520 Speaker 2: to take over a machine that already works pretty well 435 00:21:30,840 --> 00:21:33,919 Speaker 2: and not having that background and wanting to wanting to 436 00:21:33,960 --> 00:21:36,560 Speaker 2: keep things going. So not every child wants to inherit 437 00:21:36,600 --> 00:21:38,800 Speaker 2: that job that made you wealthy, and that you shouldn't 438 00:21:38,800 --> 00:21:41,040 Speaker 2: take that as a rejection of you. It's just reality. 439 00:21:41,520 --> 00:21:43,840 Speaker 2: They grew up seeing the sacrifices that you made, and 440 00:21:43,880 --> 00:21:45,679 Speaker 2: maybe they're the ones who noticed that you couldn't make 441 00:21:45,680 --> 00:21:47,720 Speaker 2: the baseball games and all that other stuff, the seventy 442 00:21:47,720 --> 00:21:49,960 Speaker 2: hour weeks and the stress, and maybe they want something 443 00:21:50,000 --> 00:21:52,000 Speaker 2: else for them and their family, And that's their of course, 444 00:21:52,000 --> 00:21:55,240 Speaker 2: their prerogative to choose that. But here's the actual danger. 445 00:21:55,720 --> 00:21:58,760 Speaker 2: Assuming they'll take over without that hard conversation, you might 446 00:21:58,800 --> 00:22:02,160 Speaker 2: be thinking, well, they'll come around and eventually they'll see 447 00:22:02,200 --> 00:22:04,119 Speaker 2: the magic of all this, just like I did. Well 448 00:22:04,119 --> 00:22:06,880 Speaker 2: what if they don't. If you wait until you're sixty eight, 449 00:22:06,920 --> 00:22:09,280 Speaker 2: burned out and desperate to go away, you may not 450 00:22:09,320 --> 00:22:11,480 Speaker 2: get that outcome you want for yourself or the business. 451 00:22:11,880 --> 00:22:13,840 Speaker 2: So it's a good idea to figure out what is 452 00:22:13,920 --> 00:22:15,760 Speaker 2: Plan B. If it's not going to be the family, 453 00:22:15,840 --> 00:22:17,119 Speaker 2: well then who or what is it? 454 00:22:18,200 --> 00:22:21,760 Speaker 1: Yeah? I My thoughts on this is you better be 455 00:22:21,840 --> 00:22:25,720 Speaker 1: having these conversations with your with your kids when they're 456 00:22:25,720 --> 00:22:29,560 Speaker 1: in their early twenties the mid twenties, not assume that 457 00:22:29,640 --> 00:22:32,480 Speaker 1: they're going to quote unquote come around in their forties. 458 00:22:32,560 --> 00:22:37,399 Speaker 1: Because the passion, the lifestyle, all that stuff, you know, 459 00:22:37,520 --> 00:22:40,200 Speaker 1: people form these kind of habits. And I would ask 460 00:22:40,320 --> 00:22:43,639 Speaker 1: business owners to think back to when you started the business, 461 00:22:43,880 --> 00:22:46,280 Speaker 1: how you built it in the first place, you were 462 00:22:46,320 --> 00:22:49,720 Speaker 1: putting in the seventy eighty ninety hour weeks when you 463 00:22:49,760 --> 00:22:52,439 Speaker 1: were in your twenties, and that just became part of 464 00:22:52,480 --> 00:22:55,600 Speaker 1: your lifestyle. It was how you built. You were built, 465 00:22:55,640 --> 00:22:59,439 Speaker 1: it was your DNA. It's hard to take somebody in 466 00:22:59,520 --> 00:23:03,400 Speaker 1: their earth to mid to late thirties and stay say, yeah, 467 00:23:03,520 --> 00:23:05,880 Speaker 1: you're gonna go from a forty hour job where you've 468 00:23:05,920 --> 00:23:09,159 Speaker 1: got this you know, quote unquote work life balance that 469 00:23:09,200 --> 00:23:12,440 Speaker 1: everybody likes to talk about today, and now you're gonna 470 00:23:12,480 --> 00:23:16,080 Speaker 1: go run this business. I ran the kids that a 471 00:23:16,080 --> 00:23:17,800 Speaker 1: lot of them don't want to do that. I think 472 00:23:17,800 --> 00:23:20,479 Speaker 1: the other part, and and some of it's for reasons 473 00:23:20,520 --> 00:23:23,439 Speaker 1: that you've already said. They have seen the price of 474 00:23:23,520 --> 00:23:26,400 Speaker 1: doing that, and a lot of people, I think, make 475 00:23:26,440 --> 00:23:29,480 Speaker 1: a decision, and it might be for great reasons. Hey, 476 00:23:30,200 --> 00:23:33,040 Speaker 1: I don't want all that money. I want some balance, 477 00:23:33,119 --> 00:23:36,040 Speaker 1: I want more experiences. I want time with my kids. 478 00:23:36,520 --> 00:23:39,360 Speaker 1: I want an extra you know, twenty hours a week 479 00:23:39,400 --> 00:23:42,560 Speaker 1: to do other things other than work. So the sooner 480 00:23:42,640 --> 00:23:45,720 Speaker 1: you can have that conversation with your kids, the better. 481 00:23:45,840 --> 00:23:48,800 Speaker 1: And and Brian again, I'll get off my soapbox. But 482 00:23:48,880 --> 00:23:51,520 Speaker 1: I have seen this happen more than a few times 483 00:23:51,560 --> 00:23:54,880 Speaker 1: here in the last few years, and if you don't 484 00:23:54,920 --> 00:23:57,560 Speaker 1: have those discussions early, you know, a lot of people 485 00:23:57,600 --> 00:24:03,000 Speaker 1: can get surprised and frankly hurt when the rubber meets 486 00:24:03,040 --> 00:24:05,040 Speaker 1: the road and it's time to hand the keys over 487 00:24:05,080 --> 00:24:05,960 Speaker 1: to the next generation. 488 00:24:06,400 --> 00:24:09,560 Speaker 2: So let's talk about some options that don't involve your family, 489 00:24:09,600 --> 00:24:12,560 Speaker 2: your offspring taking over the day to day from an 490 00:24:12,560 --> 00:24:15,680 Speaker 2: executive role here. So what else can you do? Well 491 00:24:17,560 --> 00:24:20,120 Speaker 2: find or you can groom up some other internal team 492 00:24:20,119 --> 00:24:22,400 Speaker 2: member who may not be a family member, who could 493 00:24:22,400 --> 00:24:24,360 Speaker 2: be that future owner and maybe they buy you out 494 00:24:24,400 --> 00:24:26,359 Speaker 2: over time, or you bring in a partner who eventually 495 00:24:26,359 --> 00:24:28,520 Speaker 2: wants to run it, or another one that's considered a 496 00:24:28,560 --> 00:24:30,679 Speaker 2: third party sale. Right, So just don't involve family at all. 497 00:24:30,680 --> 00:24:32,840 Speaker 2: If it's a strong practice and you've got a strong 498 00:24:32,880 --> 00:24:35,920 Speaker 2: EBITDAH and a track record, there are private equity investors, 499 00:24:35,960 --> 00:24:39,800 Speaker 2: strategic buyers, even your competitors might be interested in taking 500 00:24:39,840 --> 00:24:42,399 Speaker 2: that over, especially if you've got clean financials under this. 501 00:24:42,920 --> 00:24:45,439 Speaker 2: But you can also still maybe involve your family just 502 00:24:45,480 --> 00:24:47,520 Speaker 2: from an arm's length away, so you can separate the 503 00:24:47,600 --> 00:24:50,520 Speaker 2: legacy from the actual day to day labor. Maybe that 504 00:24:50,640 --> 00:24:52,399 Speaker 2: child of yours doesn't want to run the business but 505 00:24:52,440 --> 00:24:54,760 Speaker 2: they'd be happy to be involved somehow. You might set 506 00:24:54,840 --> 00:24:57,120 Speaker 2: up a board structure where they're involved as an advisor 507 00:24:57,200 --> 00:25:00,119 Speaker 2: or silent partner, but somebody else runs the day to day. Now, 508 00:25:00,119 --> 00:25:02,439 Speaker 2: you gotta be careful if if your child knows nothing 509 00:25:02,480 --> 00:25:05,480 Speaker 2: about the business, this isn't gonna go very well. Good 510 00:25:05,560 --> 00:25:07,520 Speaker 2: good luck getting somebody to give. 511 00:25:07,359 --> 00:25:10,120 Speaker 1: You fair market value for that business, to say, oh, 512 00:25:10,160 --> 00:25:12,840 Speaker 1: by the way, Johnny's gonna be on the board and 513 00:25:13,240 --> 00:25:16,520 Speaker 1: kind of be your quasi boss. That's not gonna go 514 00:25:16,600 --> 00:25:17,439 Speaker 1: over well, but go on. 515 00:25:18,080 --> 00:25:21,080 Speaker 2: But this could be maybe you have a child who's 516 00:25:21,119 --> 00:25:23,080 Speaker 2: willing to work for the business but not own or 517 00:25:23,119 --> 00:25:25,879 Speaker 2: run the business. While there are roles leadership roles they 518 00:25:25,920 --> 00:25:28,520 Speaker 2: can have that do not involve the bucks stopping with them. 519 00:25:28,760 --> 00:25:30,840 Speaker 2: But again they have to know the business, of course. 520 00:25:31,800 --> 00:25:33,080 Speaker 2: But don't forget if you're going to do any of 521 00:25:33,080 --> 00:25:35,720 Speaker 2: these things, if you're selling the business along these lines, 522 00:25:35,720 --> 00:25:38,320 Speaker 2: you're gonna have big tax implications to be thinking about this. 523 00:25:38,640 --> 00:25:41,800 Speaker 2: Capital gains are involved, potential real estate or potential estate 524 00:25:41,840 --> 00:25:44,760 Speaker 2: tax issues down the line, real estate decisions to make, 525 00:25:45,040 --> 00:25:47,600 Speaker 2: so on and so forth. Not to mention depreciation, you 526 00:25:47,640 --> 00:25:50,240 Speaker 2: may have to recapture that if there are assets that 527 00:25:50,280 --> 00:25:52,639 Speaker 2: have been have benefited from that. So you know, just 528 00:25:52,720 --> 00:25:54,800 Speaker 2: be eyes wide open and make sure you're talking to 529 00:25:54,960 --> 00:25:58,480 Speaker 2: your your your professional team there, your financial advisor, CPA, 530 00:25:58,560 --> 00:26:01,720 Speaker 2: attorneys and so forth. They are absolutely crucial to this period, 531 00:26:01,720 --> 00:26:03,320 Speaker 2: so nobody gets blindsided by anything. 532 00:26:04,000 --> 00:26:06,280 Speaker 1: Yeah, and the key here is to build this team 533 00:26:06,480 --> 00:26:10,520 Speaker 1: sooner rather than later. A good financial advisor, a strong CPA, 534 00:26:10,760 --> 00:26:14,080 Speaker 1: a strong a state planning attorney. Those are it's crucial 535 00:26:14,119 --> 00:26:16,920 Speaker 1: to have all those people on board. Brian, I'm going 536 00:26:16,960 --> 00:26:19,840 Speaker 1: through a situation right now where the business is in 537 00:26:19,880 --> 00:26:23,080 Speaker 1: the process of getting handed down to the next generation, 538 00:26:23,240 --> 00:26:25,560 Speaker 1: to a sun in this case, and we've had a 539 00:26:25,600 --> 00:26:29,119 Speaker 1: process going on for years, in years, you know. It 540 00:26:29,160 --> 00:26:33,400 Speaker 1: involves minority discounts on shares to save estate taxes. There's 541 00:26:33,440 --> 00:26:36,240 Speaker 1: split dollar life insurance that's been in place for over 542 00:26:36,320 --> 00:26:39,240 Speaker 1: thirty years to cover a state taxes that has to 543 00:26:39,240 --> 00:26:41,840 Speaker 1: be accounted for it. There's a lot of moving parts, 544 00:26:42,119 --> 00:26:46,040 Speaker 1: So don't start building that team six months before you 545 00:26:46,040 --> 00:26:48,720 Speaker 1: know you want to sell or transfer the business. Here's 546 00:26:48,760 --> 00:26:51,280 Speaker 1: the all Worth advice. You can't force your kids to 547 00:26:51,280 --> 00:26:54,520 Speaker 1: take over the business, but you can create a success 548 00:26:54,560 --> 00:26:59,040 Speaker 1: and succession plan that honors the legacy and supports the 549 00:26:59,160 --> 00:27:03,720 Speaker 1: life you and your family truly want. Next, all right, 550 00:27:03,760 --> 00:27:07,200 Speaker 1: what happens when you're named executor of your parents' estate, 551 00:27:07,680 --> 00:27:12,480 Speaker 1: Plus the ripple effects of travel splurges, umbrella insurance essentials, 552 00:27:12,920 --> 00:27:16,880 Speaker 1: and how to plan a smart relocation in retirement. All 553 00:27:16,920 --> 00:27:19,280 Speaker 1: of that is coming up next. You're listening to Simply Money, 554 00:27:19,400 --> 00:27:22,560 Speaker 1: presented by all Worth Financial on fifty five KRC, the 555 00:27:22,880 --> 00:27:29,920 Speaker 1: talk station. You're listening to Simply Money presented by Allworth 556 00:27:29,960 --> 00:27:33,480 Speaker 1: Financial on Bob Sponsller along with Brian James. Do you 557 00:27:33,560 --> 00:27:35,840 Speaker 1: have a financial question you'd like for us to answer. 558 00:27:36,000 --> 00:27:38,400 Speaker 1: There's a big red button you can click while you're 559 00:27:38,440 --> 00:27:41,280 Speaker 1: listening to the show. If and only if you're listening 560 00:27:41,320 --> 00:27:45,200 Speaker 1: on the iHeart app, simply record your question and it'll 561 00:27:45,200 --> 00:27:48,199 Speaker 1: come straight to us. All right, Brian, get ready for 562 00:27:48,440 --> 00:27:51,080 Speaker 1: Laura and Fort Thomas. She says, We've built up a 563 00:27:51,240 --> 00:27:55,000 Speaker 1: sizeable emergency fund over the years, but I'm not sure 564 00:27:55,040 --> 00:27:58,560 Speaker 1: what actually counts as an emergency anymore. How do you 565 00:27:58,720 --> 00:28:02,080 Speaker 1: right size that in? She's in her mid to late 566 00:28:02,160 --> 00:28:03,000 Speaker 1: career stage. 567 00:28:03,040 --> 00:28:04,639 Speaker 2: This is a good question because. 568 00:28:04,400 --> 00:28:08,720 Speaker 1: People define emergencies quite a bit differently. This is what 569 00:28:08,760 --> 00:28:09,679 Speaker 1: we find right. 570 00:28:09,800 --> 00:28:11,920 Speaker 2: Yeah, And what I would say is an emergency is 571 00:28:11,960 --> 00:28:14,520 Speaker 2: something you do not have a choice about it. It's 572 00:28:14,600 --> 00:28:17,760 Speaker 2: not We've got this great opportunity to take this vacation. 573 00:28:17,920 --> 00:28:21,080 Speaker 2: Therefore and take the family on a thirty thousand dollars vacation. 574 00:28:21,160 --> 00:28:23,399 Speaker 2: I wouldn't classify that as an emergency. I'm not saying 575 00:28:23,480 --> 00:28:25,920 Speaker 2: don't do it, but I don't know that it's worth 576 00:28:26,000 --> 00:28:28,120 Speaker 2: pulling money out of your retirement plan or those kinds 577 00:28:28,160 --> 00:28:30,159 Speaker 2: of things for that kind of thing. But you know, 578 00:28:30,280 --> 00:28:33,199 Speaker 2: a job loss, obviously, the loss of a source of income, 579 00:28:33,320 --> 00:28:36,200 Speaker 2: something major happens to the card and unexpected time, medical bills, 580 00:28:36,240 --> 00:28:38,360 Speaker 2: those kinds of things, don't have a choice. Got to 581 00:28:38,400 --> 00:28:42,320 Speaker 2: replace this or my life is completely disrupted. That's an emergency. 582 00:28:42,880 --> 00:28:45,360 Speaker 2: So this is much more about optionality and control. The 583 00:28:45,440 --> 00:28:48,160 Speaker 2: risk isn't isn't just can we pay this bill? It's 584 00:28:48,200 --> 00:28:50,240 Speaker 2: do we have to make a bad financial decision at 585 00:28:50,280 --> 00:28:53,000 Speaker 2: the wrong time. So I would say an emergency is 586 00:28:53,040 --> 00:28:54,840 Speaker 2: anything that's going to force you to maybe sell long 587 00:28:54,920 --> 00:28:57,160 Speaker 2: term investments at a bad time, because a lot of times, 588 00:28:57,160 --> 00:28:59,200 Speaker 2: you know, if a job loss happens with layoffs. We're 589 00:28:59,200 --> 00:29:01,400 Speaker 2: starting to hear, you know, we hear about layoffs from 590 00:29:01,400 --> 00:29:05,000 Speaker 2: time to time, and so that tends to come along 591 00:29:05,040 --> 00:29:07,920 Speaker 2: with it with the declining economy. So that means the 592 00:29:07,960 --> 00:29:10,440 Speaker 2: market might be down at a time when you need 593 00:29:10,440 --> 00:29:12,520 Speaker 2: more income and you'll just have to sell those investments 594 00:29:12,560 --> 00:29:14,560 Speaker 2: at a loss, or if it's going to force you 595 00:29:14,640 --> 00:29:17,200 Speaker 2: to take on high interest debt via running up credit cards, 596 00:29:17,600 --> 00:29:21,160 Speaker 2: interrupt your retirement, college contributions, those types of things are emergencies. 597 00:29:21,480 --> 00:29:24,600 Speaker 2: So routine expenses, even the big ones, don't count anymore. 598 00:29:24,600 --> 00:29:27,280 Speaker 2: If they're predictable and insurable. That's just part of your 599 00:29:27,320 --> 00:29:30,040 Speaker 2: your ongoing budget. So you want to anchor the size 600 00:29:30,040 --> 00:29:32,560 Speaker 2: to the of your emergency fund to the risk exposure, 601 00:29:32,600 --> 00:29:34,520 Speaker 2: not rules of thumb. So I just went through this 602 00:29:34,600 --> 00:29:37,400 Speaker 2: recently where we decided to lower the amount we've kept 603 00:29:37,400 --> 00:29:40,040 Speaker 2: in our emergency fund because you know, the youngest is eighteen, 604 00:29:40,400 --> 00:29:42,680 Speaker 2: he's you know, he's going to be head heading off 605 00:29:42,680 --> 00:29:45,360 Speaker 2: to college soon, and that's we've been planning for that 606 00:29:45,440 --> 00:29:47,040 Speaker 2: for a couple of decades. So that's kind of covered. 607 00:29:47,080 --> 00:29:48,960 Speaker 2: We don't have the same risks that we used to, 608 00:29:49,800 --> 00:29:52,680 Speaker 2: you know, because some goals have been accomplished. So we 609 00:29:52,720 --> 00:29:54,840 Speaker 2: have adjusted our emergency fund accordingly. 610 00:29:54,920 --> 00:29:57,000 Speaker 1: It's not sounded like it sounds like Brian wants a 611 00:29:57,040 --> 00:29:58,000 Speaker 1: new set of golf clubs. 612 00:29:58,080 --> 00:30:00,880 Speaker 2: Yeah, that could. That's an emergency. Now we're we're talking emergencies, 613 00:30:00,960 --> 00:30:03,240 Speaker 2: all right. Just be aware what your obligations are and 614 00:30:04,160 --> 00:30:06,160 Speaker 2: figure out what the right dollar amount is. It will 615 00:30:06,240 --> 00:30:08,840 Speaker 2: change and it's okay to reduce it. So Robin Levin, 616 00:30:08,880 --> 00:30:11,120 Speaker 2: and Rob's been named executive for his parents' estate, and 617 00:30:11,160 --> 00:30:13,280 Speaker 2: he's worried about making a mistake that sounds like a 618 00:30:13,280 --> 00:30:15,960 Speaker 2: scary legal thing of course sometimes, and he's wondering what 619 00:30:16,000 --> 00:30:18,880 Speaker 2: he should be doing now to prepare before anything happens. 620 00:30:18,960 --> 00:30:20,640 Speaker 2: What do you think, Bob, Well, first. 621 00:30:20,480 --> 00:30:22,600 Speaker 1: Of all, Rob, I think it's great that you're asking 622 00:30:22,640 --> 00:30:25,360 Speaker 1: this question now. And my first piece of advice is, 623 00:30:25,440 --> 00:30:28,760 Speaker 1: do not be nervous. Don't panic. This tends to not 624 00:30:28,880 --> 00:30:31,400 Speaker 1: be quite as difficult as people make it out to be. 625 00:30:31,560 --> 00:30:35,640 Speaker 1: I think people get confused about terms and terminology. So 626 00:30:35,800 --> 00:30:38,480 Speaker 1: here's my advice. You know, if your parents are open 627 00:30:38,520 --> 00:30:42,760 Speaker 1: to this, have a conversation now with their financial advisor 628 00:30:42,840 --> 00:30:46,120 Speaker 1: if they have one, and with the estate planning attorney 629 00:30:46,360 --> 00:30:49,320 Speaker 1: that built the estate plan, and if possible, get copies 630 00:30:49,360 --> 00:30:52,560 Speaker 1: of the documents and it's well worth the time to, 631 00:30:52,920 --> 00:30:55,960 Speaker 1: you know, spend thirty minutes with the estate planning attorney 632 00:30:56,000 --> 00:30:58,400 Speaker 1: and have he or she walk you through, Hey, what 633 00:30:58,560 --> 00:31:02,560 Speaker 1: are my responsibilities as an executor. That's a good place 634 00:31:02,640 --> 00:31:05,480 Speaker 1: to start, and that can bring down, you know, the 635 00:31:05,520 --> 00:31:09,280 Speaker 1: whole tension of this whole responsibility that you're thinking about. 636 00:31:09,960 --> 00:31:12,360 Speaker 1: A lot of times too, people get confused on what 637 00:31:12,440 --> 00:31:16,840 Speaker 1: an executor actually has to do. It's basically, you execute 638 00:31:16,920 --> 00:31:20,239 Speaker 1: whatever the will says. You're not making, you know, you 639 00:31:20,280 --> 00:31:22,880 Speaker 1: do not have the autonomy to change your parents a 640 00:31:22,920 --> 00:31:26,640 Speaker 1: state plan. You're there to execute what that will says. Well, 641 00:31:26,680 --> 00:31:29,720 Speaker 1: a lot of times, you know, assets aren't even going 642 00:31:29,800 --> 00:31:32,440 Speaker 1: to go through probate or go through the will if 643 00:31:32,480 --> 00:31:36,200 Speaker 1: everything has been structured properly. Case in point is iras 644 00:31:36,240 --> 00:31:40,000 Speaker 1: and retirement plans. They all just pass by beneficiary designation. 645 00:31:40,400 --> 00:31:43,320 Speaker 1: So the executor, you know, at that point, you're just 646 00:31:43,440 --> 00:31:48,800 Speaker 1: calling up the advisor whoever manages those accounts and informing 647 00:31:48,880 --> 00:31:52,000 Speaker 1: them that your parents have passed away. And once you 648 00:31:52,080 --> 00:31:56,400 Speaker 1: supply a death certificate, the advisor in most cases can 649 00:31:56,480 --> 00:32:00,000 Speaker 1: just handle everything, dispurse the money out to the beneficiary. 650 00:32:00,240 --> 00:32:03,400 Speaker 1: So you know, again my first two pieces of advice 651 00:32:03,720 --> 00:32:06,000 Speaker 1: I think are the best ones. Have a thirty minute 652 00:32:06,000 --> 00:32:10,680 Speaker 1: conversation with your parents' financial advisor and attorney and just 653 00:32:10,880 --> 00:32:12,800 Speaker 1: know what you're going to need to do, you know, 654 00:32:12,920 --> 00:32:15,360 Speaker 1: on the front end. Another big one that you probably 655 00:32:15,440 --> 00:32:19,000 Speaker 1: will have to be involved with, whether you as executor 656 00:32:19,200 --> 00:32:21,920 Speaker 1: or if your parents home is owned in a trust 657 00:32:22,840 --> 00:32:25,800 Speaker 1: and you're also named as the trustee, you will need 658 00:32:25,840 --> 00:32:29,280 Speaker 1: to be involved in selling that home at some point. 659 00:32:29,320 --> 00:32:31,320 Speaker 1: And that's where you got to decide what do we 660 00:32:31,320 --> 00:32:33,239 Speaker 1: do with the contents? How do we do all that? 661 00:32:33,480 --> 00:32:36,120 Speaker 1: And you know, make sure you hire a real estate agent. 662 00:32:36,200 --> 00:32:39,280 Speaker 1: But again the key point is know what you're getting into, 663 00:32:39,800 --> 00:32:43,560 Speaker 1: and I think you're going to be pleasantly surprised at 664 00:32:44,000 --> 00:32:46,760 Speaker 1: what you don't have to deal with, and hopefully that'll 665 00:32:46,760 --> 00:32:49,840 Speaker 1: bring some of the tension down in this whole situation. 666 00:32:50,240 --> 00:32:53,560 Speaker 1: Hope that helps, all right? Mark and Milford says, we've 667 00:32:53,600 --> 00:32:58,240 Speaker 1: started traveling more and spending unevenly throughout the year. This 668 00:32:58,320 --> 00:33:00,680 Speaker 1: is a pretty common thing, Brian. How do you plan 669 00:33:00,840 --> 00:33:04,200 Speaker 1: cash flow when expenses aren't you know what i'll call 670 00:33:04,400 --> 00:33:08,320 Speaker 1: linear or monthly or really predictable from month to month. 671 00:33:08,400 --> 00:33:10,520 Speaker 2: Well, I'm going to call it lumpy. So when spending 672 00:33:10,560 --> 00:33:13,000 Speaker 2: becomes kind of lumpy, the mistake is trying to force 673 00:33:13,040 --> 00:33:15,479 Speaker 2: it back into that monthly box just because that's how 674 00:33:15,480 --> 00:33:16,560 Speaker 2: our brains really want to work. 675 00:33:16,640 --> 00:33:16,800 Speaker 1: Yep. 676 00:33:16,960 --> 00:33:18,480 Speaker 2: I think a better move is to try to plan 677 00:33:18,560 --> 00:33:20,840 Speaker 2: that cash flow by the season and by the purpose, 678 00:33:20,920 --> 00:33:22,720 Speaker 2: not by the calendar months. That spreads it out a 679 00:33:22,760 --> 00:33:24,520 Speaker 2: little more and gives you a kind of a wider 680 00:33:24,560 --> 00:33:27,200 Speaker 2: window to work within. H So here's a quick framework 681 00:33:27,200 --> 00:33:29,840 Speaker 2: to think about. Once, when travel and experiences are trying 682 00:33:29,840 --> 00:33:32,080 Speaker 2: to kind of driving the variability of that spending, figure 683 00:33:32,080 --> 00:33:34,320 Speaker 2: out what your baseline is and separate that from that 684 00:33:34,400 --> 00:33:36,600 Speaker 2: lumpy spending. So the baseline is all the stuff that 685 00:33:36,640 --> 00:33:39,360 Speaker 2: happens no matter what you got to pay for housing, groceries, gas, 686 00:33:39,440 --> 00:33:42,680 Speaker 2: and so on, that's covered by regular income or predictable withdrawals. 687 00:33:42,760 --> 00:33:44,680 Speaker 2: You know it's coming, so make sure you've got the 688 00:33:44,720 --> 00:33:48,440 Speaker 2: income there to cover it. Lumpy spending is travel, big gifts, 689 00:33:48,480 --> 00:33:51,360 Speaker 2: home projects once you know, one time, things that should 690 00:33:51,440 --> 00:33:53,640 Speaker 2: not be competing or involved in any way with your 691 00:33:53,640 --> 00:33:56,040 Speaker 2: baseline cash flow. This is why we always we build 692 00:33:56,080 --> 00:33:58,360 Speaker 2: financial plans. We separate out You might think you have 693 00:33:58,440 --> 00:34:01,160 Speaker 2: one goal full of living expenses, but Bob and I 694 00:34:01,240 --> 00:34:03,680 Speaker 2: having done this for you know, thirty years, we know 695 00:34:03,720 --> 00:34:05,560 Speaker 2: that you're gonna have seven or eight different goals because 696 00:34:05,560 --> 00:34:07,560 Speaker 2: they're gonna come at different times, They're gonna have different 697 00:34:07,600 --> 00:34:10,920 Speaker 2: inflationary factors and so forth. So let's carve those out separately, 698 00:34:11,120 --> 00:34:13,839 Speaker 2: and then you can prefund those lumpy buckets. Right, so 699 00:34:13,920 --> 00:34:15,640 Speaker 2: we know, if we know we're gonna spend you know, 700 00:34:15,680 --> 00:34:17,960 Speaker 2: maybe it's the once in a lifetime trip twenty five thousand, 701 00:34:17,960 --> 00:34:20,319 Speaker 2: maybe fifty thousand to take the family somewhere, and we're 702 00:34:20,320 --> 00:34:22,120 Speaker 2: gonna do it two years from now. If you've got 703 00:34:22,160 --> 00:34:24,160 Speaker 2: the money now, maybe carve that out and stick it 704 00:34:24,160 --> 00:34:25,880 Speaker 2: in a CD or something that's going to come do 705 00:34:26,600 --> 00:34:29,600 Speaker 2: when that when when that bill comes due, and so 706 00:34:29,680 --> 00:34:32,239 Speaker 2: that way you're just kind of literally dividing out of 707 00:34:32,440 --> 00:34:36,200 Speaker 2: the actual expenses and making them ready when the bill 708 00:34:36,520 --> 00:34:37,839 Speaker 2: is ready to be paid. 709 00:34:38,200 --> 00:34:41,640 Speaker 1: All right, Speaking of lumpy buckets, Brian's coming up next 710 00:34:41,719 --> 00:34:45,440 Speaker 1: with his bottom line advice on how to truly and 711 00:34:45,600 --> 00:34:49,480 Speaker 1: properly manage an emergency fund. You're listening to Simply Money, 712 00:34:49,520 --> 00:34:52,320 Speaker 1: presented by all Worth Financial on fifty five KRC the 713 00:34:52,719 --> 00:34:59,879 Speaker 1: talk station. You're listening to Simply Money presented by all Worth, 714 00:35:00,000 --> 00:35:02,880 Speaker 1: ain Ancelo and Bop spun Seller along with Brian James. 715 00:35:03,239 --> 00:35:06,480 Speaker 1: Speaking of Brian James, it's time for Brian's bottom Line 716 00:35:06,520 --> 00:35:09,680 Speaker 1: where he gives us some real rock solid advice on 717 00:35:09,719 --> 00:35:13,160 Speaker 1: how to truly manage an emergency fund properly. 718 00:35:13,560 --> 00:35:16,640 Speaker 2: Hit Brian, Well, I think emergency funds need to rethink. 719 00:35:16,680 --> 00:35:19,440 Speaker 2: Here in twenty twenty six, higher interest rates have changed 720 00:35:19,480 --> 00:35:22,640 Speaker 2: where your cash should live. Job market volatility is now 721 00:35:22,719 --> 00:35:26,279 Speaker 2: sector specific, not really economy wide right where we hear 722 00:35:26,360 --> 00:35:31,280 Speaker 2: about layoffs happening across you know, mainly specific to sectors. 723 00:35:31,320 --> 00:35:35,120 Speaker 2: Now it's not just overall economic impact like we used 724 00:35:35,160 --> 00:35:37,239 Speaker 2: to see over the past decades. Lots of people have 725 00:35:37,239 --> 00:35:40,560 Speaker 2: built emergency funds years ago and just never updated the strategy. 726 00:35:40,760 --> 00:35:42,680 Speaker 2: You know, simply figured out well, twenty years ago, this 727 00:35:42,760 --> 00:35:44,520 Speaker 2: is what life cost us, so that's what our emergency 728 00:35:44,520 --> 00:35:47,840 Speaker 2: fund is built off of, but haven't actually updated that 729 00:35:47,920 --> 00:35:51,280 Speaker 2: for whatever reality is now. So emergency funds aren't broken, 730 00:35:51,280 --> 00:35:54,040 Speaker 2: they're just outdated. So the question used to be how 731 00:35:54,120 --> 00:35:57,560 Speaker 2: much cash do I have? Now it's how fast can 732 00:35:57,600 --> 00:36:00,320 Speaker 2: I access that cash and how many ways? So you 733 00:36:00,400 --> 00:36:02,320 Speaker 2: want to layer this out, so that first layer is 734 00:36:02,320 --> 00:36:04,759 Speaker 2: your media, cash anything. This is your checking account, right, 735 00:36:04,760 --> 00:36:06,759 Speaker 2: so you know you don't need a ton here. This 736 00:36:06,840 --> 00:36:08,520 Speaker 2: is the money you're gonna need over next zero to 737 00:36:08,520 --> 00:36:10,920 Speaker 2: thirty days. It's just what keeps the ship afloat on 738 00:36:10,960 --> 00:36:13,680 Speaker 2: a monthly basis. So you know, this is a high 739 00:36:13,719 --> 00:36:16,120 Speaker 2: yield savings account. If not just playing old leaving in 740 00:36:16,120 --> 00:36:18,080 Speaker 2: your checking account, pay your bills this this is to 741 00:36:18,280 --> 00:36:21,239 Speaker 2: prevent panic and not You're not worried about return on 742 00:36:21,320 --> 00:36:23,960 Speaker 2: this one, so and now and then the second bucket 743 00:36:23,960 --> 00:36:26,239 Speaker 2: can be a short term backup. This can be money 744 00:36:26,280 --> 00:36:30,120 Speaker 2: market funds, treasury ladders, inflation bonds you know that are 745 00:36:30,160 --> 00:36:33,000 Speaker 2: that are past that one year lock up. This might 746 00:36:33,040 --> 00:36:36,640 Speaker 2: be your your thirty to ninety days the bills coming 747 00:36:36,680 --> 00:36:38,720 Speaker 2: do here, So just be aware of what the calendar says. 748 00:36:39,120 --> 00:36:41,799 Speaker 2: And then then beyond that, what else can you get to? 749 00:36:42,000 --> 00:36:44,160 Speaker 2: So these would be things if there's some kind of 750 00:36:44,200 --> 00:36:46,680 Speaker 2: crazy contingency, what other things could you dip into? This 751 00:36:46,760 --> 00:36:48,759 Speaker 2: might be a home equity line of credit. I'm a 752 00:36:48,800 --> 00:36:50,879 Speaker 2: big fan of having those in place. You know, lots 753 00:36:50,920 --> 00:36:53,839 Speaker 2: of people are really really hesitant to borrow against the house. Well, 754 00:36:53,880 --> 00:36:55,680 Speaker 2: I would be more hesitant to run up a bunch 755 00:36:55,719 --> 00:36:58,160 Speaker 2: of debt on a thirty percent credit card, just so 756 00:36:58,200 --> 00:37:00,640 Speaker 2: I can say I've protected myself from barrow against the house. 757 00:37:00,680 --> 00:37:03,719 Speaker 2: If I've got other assets, then then it's not gonna 758 00:37:03,760 --> 00:37:05,600 Speaker 2: hurt me to borrow to take out against the home 759 00:37:05,600 --> 00:37:08,239 Speaker 2: equity line because I can get you know, an interest 760 00:37:08,320 --> 00:37:10,840 Speaker 2: rate of maybe six seven, maybe eight percent, something like that, 761 00:37:10,840 --> 00:37:13,480 Speaker 2: which is gonna be far better than other alternatives to 762 00:37:13,480 --> 00:37:16,040 Speaker 2: borrow money. But another thing you can do is you 763 00:37:16,280 --> 00:37:18,799 Speaker 2: can borrow against securities. Right if you have a bunch 764 00:37:18,840 --> 00:37:21,200 Speaker 2: of stocks sitting in a taxable brokerage account, you can 765 00:37:21,239 --> 00:37:24,120 Speaker 2: set up what what's called a margin line against them 766 00:37:24,360 --> 00:37:26,640 Speaker 2: and borrow against those securities. There's gonna be an interest 767 00:37:26,680 --> 00:37:28,400 Speaker 2: rate involved. You're gonna want to compare it against any 768 00:37:28,440 --> 00:37:31,040 Speaker 2: other kind of loan, but that's still, again again going 769 00:37:31,080 --> 00:37:33,080 Speaker 2: to be cheaper than anything you would run up on 770 00:37:33,080 --> 00:37:35,520 Speaker 2: a credit card. But finally, speaking of credit cards, they 771 00:37:35,520 --> 00:37:38,000 Speaker 2: can play a role here. There's absolutely nothing wrong with 772 00:37:38,000 --> 00:37:40,879 Speaker 2: those zero percent balance transfer offers as long as you're 773 00:37:40,920 --> 00:37:43,840 Speaker 2: not going to carry it past that balance, past whatever 774 00:37:43,840 --> 00:37:48,160 Speaker 2: that promotional period is, so that layer doesn't cost anything. 775 00:37:48,800 --> 00:37:51,080 Speaker 2: You know, if if you know to have in the 776 00:37:51,440 --> 00:37:53,359 Speaker 2: in the background. As long as you don't, you may 777 00:37:53,400 --> 00:37:55,120 Speaker 2: not need to borrow on these things, but at least 778 00:37:55,120 --> 00:37:57,720 Speaker 2: you'll have them there, and it will it will protect 779 00:37:57,719 --> 00:37:59,719 Speaker 2: you from needing to sell your long term assets or 780 00:37:59,760 --> 00:38:01,000 Speaker 2: run credit card debt. 781 00:38:02,000 --> 00:38:04,560 Speaker 1: Brian, I actually had a meeting with a couple I 782 00:38:04,560 --> 00:38:06,759 Speaker 1: don't know, two three months ago where they had five 783 00:38:06,840 --> 00:38:09,040 Speaker 1: or six of these credit cards going, and they treat 784 00:38:09,040 --> 00:38:11,560 Speaker 1: it like a game. It's something they love to do 785 00:38:11,640 --> 00:38:15,040 Speaker 1: together as they plan their vacations. They're just flipping these 786 00:38:15,080 --> 00:38:18,400 Speaker 1: balances back and forth between credit card companies. They're getting 787 00:38:18,480 --> 00:38:21,600 Speaker 1: zero interest, right, and they're getting points for the transfers, 788 00:38:22,080 --> 00:38:24,719 Speaker 1: and they're using it to pay for vacations and they're 789 00:38:24,719 --> 00:38:27,080 Speaker 1: having fun doing it. So it's not how I'd like 790 00:38:27,120 --> 00:38:29,480 Speaker 1: to spend my time, but some people get a kick 791 00:38:29,520 --> 00:38:32,120 Speaker 1: out of doing that. All right, thanks for listening tonight. 792 00:38:32,160 --> 00:38:34,880 Speaker 1: You've been listening to Simply Money, presented by Allworth Financial 793 00:38:34,920 --> 00:38:37,480 Speaker 1: on fifty five KRC, the talk station