How do you weather the storm during a financial crisis?—and not just weather the storm, but come out stronger?
In this episode, we show you how to prepare for a financial crisis, with actionable steps that allow you to face whatever comes your way.
We’ll cover:
The essential elements of financial resilience
The early warning signs of a financial crisis
Creating a comprehensive financial plan
Emergency fund essentials
Protecting your investments and retirement accounts
And more
Mentioned in this episode:
Transcript
April Schoen: Hello, and welcome. I am so glad you're here. My name is April Schoen and I'm sitting here today with John Curry.
John Curry: Hello, April. Hello, everyone.
April Schoen: Yes, and welcome. Welcome. Now listen, I'm gonna give us just a few minutes. So everyone can get logged in because we're right here at the top of the hour. But let me just tell you first a little bit about what we're going to talk about. We're going to be talking about how do you manage your finances during a financial crisis, or a financial storm?
I know that John and I have been getting so many questions from clients over the last few months about just where are we today? Thinking about this economic landscape. Are we in a recession? Is this recession coming our way? What's going to happen with inflation and interest rates and the stock market and all the geopolitical risk? So there's just a ton of concerns out there.
And we thought it'd be good to have this new call, webinar for today to go through what we think are some great things for you to focus on. I want you to think about controlling what you can control. And we're going to talk through some key action items about what are some things that you can really be focused in on to make sure that you are managing your finances well, if there is some type of crisis, and how do you prepare for that?
John: Speaking of prepare, I like the concept of prepare so you don't have to panic. Because it's too easy to just drift along and listen to the news. And listen to the naysayers and the talking heads and say there's nothing I can do about it. That's just not true. We know that. I've been doing this for 49 years now. You can do something, you can prepare. And even for things that are not on your horizon. Because if you prepare and not panic, you'll be able to weather the storm, so to speak.
April: That's right. And so I also want to take a minute and just congratulate you on taking time out of your calendar, your busy day to listen to this. I think it's really important that you're doing this, that you're being proactive. And I just want to acknowledge you for that.
John: That's part of preparing.
April: That's part of preparing. That's right, it's being proactive about these kinds of things. Learning and getting out there and figuring out what you need to do next. You know, there is a lot of financial uncertainty out in the world. And it seems like, at least for me, since COVID, it feels like it's been pretty constant. And I think that there's this need to have resiliency when it comes to our money and our personal finances.
And I think it's actually more important today than ever. And so today, we're gonna talk about that. We're gonna talk about how do you work towards having financial stability. How do you work towards having financial security? So we're excited to go through this new topic with you guys today, weathering the storm. How do you manage your finances during a crisis?
And we understand there are many challenges that you may be facing today. And not all of them are the same. And we're committed to helping you and providing you with some practical insights and strategies. Not only, let's be honest, we don't want to just weather the storm. We want to come out stronger, better, more resilient. It's not just how do we get through this, but it's how do we actually become stronger through it?
John: Correct. Reminds me of a story about the buffalo and the cow in the plains. Storm comes in, what does the cow do? Runs away from it, trying to avoid it and getting beat up a lot. Buffalo says, nah, I've had enough of this, they charge right through it. They get beat up in the face, shake their head, they go through in moments, a few minutes, because they were willing to deal with it head on.
April: That's right. It's how we want to be. We don't want to just get through it. I want to come out better than I was before.
John: Gooder.
April: Gooder.
John: I don't know if you can tell folks. We always enjoy doing these. We do them to help educate you. But I'm gonna be honest with you. We're sitting here together, the energy just flows. And it's just fun. We love what we do. And we're very fortunate and blessed that we get to work with people we love working with and it's just fun.
April: It's fun. It absolutely is. So today, here's what we're going to talk about. We're gonna talk about some essential elements of financial resilience, from how do you figure out when a financial crisis is about to come? What are some of those early warning signs that you may see? We're going to talk about how do you prepare for those? How do you protect your investments and how do you create a comprehensive financial plan?
So as we dive into this, our goal is to empower you with information, but not just information, but also some actionable steps. Some action items, so that you can really face whatever comes your way. And John, as we're going through this, I think, actually, I'm gonna change tactics. Before we get into it, I just want to make sure everybody knows a little bit about who we are.
John: You're trying to throw me a curve ball.
April: Always.
John: I already know, folks. It's coming up on the slides that she's gonna throw at me. I know it's coming.
April: It's what I'm good at. Let me tell you a little bit about us what we do and how we help our clients. So John and I, we typically help people who are getting ready to retire. And usually I find that to be one, in the few years out from retirement, and many of them are members of the Florida Retirement System. But we also work with business owners and people in the private sector as well. And we really just found that those clients, they have a lot of the same questions and concerns.
So when we first meet with them, they may be a little stressed, or worried, or anxious about, hey, what's this really going to look like for me, as I step into retirement? What's my income gonna look like? Can I really retire and not have to go back to work in some capacity, if that's what they want to do? And they also have a lot of decisions to make. And these are really big decisions.
Like when to take Social Security, and what pension options should they take? Or did they take the right pension option? What to do with their retirement accounts? How do they handle taxes and required minimum distributions and Medicare? There's all of these aspects that come into play when you're getting ready to retire. And they're really big decisions that are going to impact the rest of their lives. And they want to make sure they're making the right ones.
John: Speaking of that, with Medicare, today's the last day to make any changes on Medicare. And I know everyone that's listening to this has gotten bombarded as I have with either phone calls, postcards or letters or something. Can't turn the television on without seeing some ad about Medicare.
April: Yeah, and even just that one topic is very complicated. And there's lots of different options, right. So you really have to kind of weigh all those.
John: Yes, we spend a lot of time with clients on that. A lot.
April: And so our job is really to help clients quiet down the noise, and help them have priorities so that they can prioritize what's most important to them, and really figure out so they have a plan, they have a system, and they know what's working and what needs to be tweaked. And they also know exactly what they need to do to get ready. I was just meeting with a client earlier this week and showing them what we call a retirement rehearsal.
So where we go through and do a retirement baseline and say, okay, based on what we know, today, this is about what things are gonna look like for you when you get into retirement. And then I said, here's where we are today, but how do we make it better? So how do we tweak it? How do we improve it? How do we optimize it? And that's a lot of what we do. And then we love having our podcast, and webinars and seminars, and get as much information out there into the world to help you when it comes to these topics.
So let's get into today's. So here's what we're gonna go through is how to understand this financial crisis, what is a financial crisis? How to build financial resiliency? And then what are the keys to a secure financial plan? Okay, so I'd love to ask you guys, how many of you would want those things, right? How many of you want to feel more confident, when it comes to your money? Feel more secure? Feel like you have a plan that you know exactly what to do, and then what you need to do?
Well, that's great, because in the next 45 minutes or so, the time we have left, we're gonna be going through all of those things. You're gonna know exactly how it applies to you. You're gonna know exactly what you need to do to get that done. And I think you're gonna find this information very relevant and valuable. Now, we do not have enough time. We always say this, we don't have enough time to get all the information out of my head and all the information in John's head.
So what we're going to do is we're going to save some time at the end so that we can talk to you about how do you customize it for you, so you can create this plan that's more personalized. But we're going to wait and we'll save that for the end of our talk. But don't stop listening. We've got some really good stuff. And we're, that's right, we're gonna get some really good stuff today. And here's why this is so important.
The decisions you make will determine your destiny. I want you to write that down. The decisions you make will determine your destiny. And many people make these decisions based on feelings. And what we want is we want you to make decisions based on facts. Based on knowing all your options, so that you can make the best decisions for you. We can help guide you through some of that, too.
So let's first talk about what is a financial crisis, and how do you recognize a financial storm? So a financial crisis is a significant disruption in the normal functioning of a financial system. That sounds like a very technical definition. I'm gonna say it again. I'm gonna say it again. A financial crisis is a significant disruption in the normal functioning of the financial system. Okay, so let's talk about this for a few seconds.
What types of financial crises or financial storms are out there? You can have economic, you could have social, you can have personal impacts as well. So let's think about some examples because these storms can take different forms. I want you to think about the 2008 global financial crisis. Pretty sure most of us remember that one.
John: Yes. Although a lot of people, because of their behaviors seem to have forgotten a little bit about it.
April: Mm hmm. You know, there was the .com bubble burst. One thing that I think that is often overlooked is we can think about these financial crises, and we do think about them more on a global or economic but what about those personal financial crises? What about if you have some sort of unexpected health concern? Healthcare issue? What if you lose your job? Now that could be both right? That could be something that's more global economic, but it's also nothing going to impact you on a personal level too.
So you can have economic downturns, you could have job loss, you could have unexpected expenses, you could have forced retirement. So there's a lot of different types of financial storms. And so we need to know how to recognize those, how can we see some early warning signs? And how do we prepare for them?
So let's talk about how do we recognize some early warning signs, because the earlier that we know about them, the earlier that we can be aware of them, the more that we can be prepared. Now, you know, I do want to say this too. John and I talk about this all the time with clients about how we want your plan to work well when the sun is shining, and when it's not.
Meaning that ideally, you have a plan already in place of how to deal with some of these things, how to weather these storms, because we all know they're going to happen, right? We're going to have stock market volatility. We're going to have recessions that come and go. There's also going to be some you know, you got to prepare for some of those unexpected life events, because they're going to happen as well. It's life, it's going to happen.
So we've got to be prepared for them in advance. But let's talk about some of these early warning signs. So on the global economic side, some of those key indicators could be rising unemployment, it could be increasing debt levels, it could be market volatility. You've got inflation, you've got geopolitical risk. I think we could go on and on, but those are definitely some of the key indicators on a more global economic side.
John: We could sit here eight hours and go through all that stuff.
April: And I don't think that you have to, you know, maybe pay attention to it as much as John and I do every day.
John: We're kind of geeks about it, but that's what we do for a living. So we need to be aware and be able to help people in good and bad times.
April: That's right. That's right. So you know, you don't have to, we don't want to be fearful. It's not about living in fear of being worried about it. It's just about being aware, and just know what's happening and what's going on. John, what about on the personal side? Some of those personal financial storms? What would be some key indications for someone that something personally is off track?
John: I want to touch on that a little bit. But the one that hit me the most was when you were talking about health issues, just when, back in 2008, not only did we had the financial crisis, I had triple bypass surgery in July 10th of that year. And then we started seeing the financial calamity towards the end of the year. And I couldn't work for a while. So there were things I couldn't do to help clients. I could help them by telephone but not as many face to face appointments. That popped in my head.
Then the more recent one was in March of 2021, where I had my right leg amputated above the knee and I had no clue of all the things that would be impacted with that. And fortunately business was not impacted because you stepped in and took over and ran the business just fine. Incidentally in 2008, we did well, we didn't panic and go out of business like some people did.
But with the amputation, I had to remodel the house, had to be redone to accommodate a wheelchair. Had a wheelchair ramp sit in the front for a while, because for six months, I used a wheelchair. I didn't get the prosthesis until September of that year. So that's what went through my mind is okay, it's not just things that you see, and you think about. Inflation, we all know there's gonna be inflation, up and down.
I mean, you gotta live in a cave, not to understand inflation comes in cycles. But those are the things that popped out for me. And some people will know some will not, but my most recent thing is I go in for a scheduled colonoscopy. And then I discovered that I have cancer in my colon and my liver. And it's spread pretty fast to the liver. And we didn't know it.
So what do you do? Okay, those are all unplanned events. Trust me, I didn't plan to have heart trouble. I sure as hell did not plan to have my leg cut off. And cancer wasn’t exactly a treat either. So I have a choice. I can panic. Or I can do what it takes to prepare for that. And because of the decisions I've made financially over the years, I have zero financial stress. I'm not worried about that. I can take care of health issues, the physical therapy for the leg, go to chemo every three weeks.
So I'm at peace with that. But I'm telling you right now, April, if I had not done the things that we preach to other people, if I had not followed our own advice, I would probably be freaking out. But thankfully, because I did that, from a standpoint of no debt, low expenses, then I've weathered those storms. Might be a little more information that what you wanted, but that's what was in my head.
April: Yes, it's perfect. And I think some of these, those of you who are listening to this, or wondering well, how do I know, things seem to be doing pretty good. I haven't lost my job. It's pretty secure. What are some early warning signs that I could know, I need to stop and address this?
So on that side, I think about looking at where you are financially and if you find that you're not saving as much as you used to, right? You've got now increased spending. Could be inflation, or it could be debt. Now you've got also increased debt. So there are a couple of things there that could be some kind of early warning signs too. So reduced savings, increased spending, increased debt.
John: I'm thinking about the gentleman that we met with yesterday, who told us about how much he has procrastinated on things. So I think the number one concern is ourselves. We know we should do something, but we procrastinate. And I shared with him yesterday, and I'm going to share it with everyone now. The three most dangerous words in the English language, in my opinion, are: I know that.
So you may think everything's perfect. And it may be. But what if there's one little thing that's not right, that could make everything fall apart? And what I love about our process, we look at everything. And we tell people, we got to see it all. Something as mundane as your car insurance, home insurance. Why do we care about that? We don't sell that.
But we care, because if it's not done properly, and you have an accident, you hurt or kill somebody, guess what? All of your financial stuff could be in trouble. And you're talking about a crisis. Now you got one. So I would say, if you're finding yourself saying I know that, I know that. That's an early warning sign that you might want to sit down with us or someone like us and just review everything you've got.
April: Good. So we've talked about how we can see this early warning sign. Let's now talk about how do you prepare for a financial storm? So I want to walk through some key things here. Think about if you were preparing for a hurricane, what would you do? You would have an emergency kit, you would have an evacuation plan, you would evaluate your home insurance, you would secure valuables, you'd seek professional advice, and you'd monitor the situation.
And I want us to take a few minutes and just compare this about thinking about preparing for a hurricane and preparing for a financial storm because there's so much overlap here. Now here we are in Tallahassee, Florida. And so we are very familiar with preparing for hurricane.
John: Yes, we are.
April: I bet most of you listening to this are too. Even earlier this year, there was a pretty big hurricane, a category three that came in very close to where we are. So all of us that week we're doing all of these things. So let's kind of talk through this a little bit. So if we weren't getting ready for a hurricane, we first get our emergency kit together, right?
So we would have all the essentials. We'd have water and non-perishable food and flashlights and all those things. Well, what about on the financial side? Well, we'd have an emergency fund. An emergency fund is like having that financial kit. It gives you a cushion, right to cover those unexpected expenses, medical bills, car repair, sudden job loss.
John: I got to tell you a funny thing. I was, in preparation of this last hurricane, I was at Publix. This guy had his shopping cart full of beer. I said, got a party? He said, hell no man, I'm getting prepared for the hurricane. He said I'm stocked up now. So his emergency kit was a whole bunch of beer. He didn't want to run out of beer. I had tears in my eyes, I was laughing so hard.
April: One of the things too, is you're gonna have an evacuation plan. So thinking about, you're going to know if you've got to leave, where are you going to go? How are you going to get there? And that's really one of those key components. So how does that apply on the money side of things? Well, that's having a financial plan, right? That's thinking about outlining what are your income and your expenses and your savings goals and guiding you through those financial decisions to help you navigate some of those.
So just like having an evacuation plan, you want to have a financial plan. And if you're a homeowner before a hurricane comes, you're going to make sure your home insurance is up to date, right? So home insurance is an interesting thing. We can't wait and let the storm hit, and then call the insurance company and say now I want to get that home insurance policy, homeowners insurance policy.
Now I want to make changes to my plan. It's something you have to do before the hurricane hits. You know, we also use the other example. You can't call your car insurance agent at the scene of the accident and say, hey, I just got into an accident, can I increase my limits? They're not gonna let you do that.
So there's some things in your financial plan that you have to do before you have a problem, before you have an issue. What are some of those things? Some of that is protecting your investments, it's also other protection vehicles. That could be life insurance. That could be making sure you've got plans to help you if you get sick or you get hurt. These are all things you have to have in plan beforehand, before you need them.
Another thing would be like securing valuables. What I think of here is like having that go bag, you know, you've got this bag or box or you know you've got your thing ready to go that's going to have like your documents and your valuables and all of those things. So funny story, John about that. With this last hurricane, I was talking to the boys about that, because we were talking about where's the hurricane gonna go? And if it came closer here, we probably would have left.
So they were all going, what will we do with all of our things? And I was like, well, you know, we're gonna go in the car and we'll pack a bag and we'll take both vehicles, we're gonna take the dog. And so we'll just want to take some things with us that are valuable, that we want to take with us to safeguard. And so Connor who is seven is like, so we're going to put the TV and the back of the car? And I laughed. I was like, probably not the TV buddy.
John: I thought you were gonna say favorite toys or something.
April: Oh no. He was like, well, maybe that is his favorite thing. He was like, convinced that we were gonna put the TV in the back of the 4 Runner. And I was like, no, no, that's not what I'm talking about here. So on the financial side, when we're thinking about securing valuables, really, this is thinking about your future. We want to think about are we on the right track when it comes to retirement.
We want to understand our options on the investment side so that we can secure that future for the future, right? And then seeking professional advice. If there's a hurricane coming, right? I don't know about you, but you're watching the news. You're pulling up, I've got you know, I listened to one of the local news guys, I always follow his like Facebook feed, I'm looking up alerts online.
So you're getting that professional advice so that you know what's happening. It's the same thing with your finances. You want to have professional financial advice. You want to have a network. You want to have people advisors that you can go to to get advice for your specific situation.
Okay, so I really recommend that if you don't have someone already, find someone that you know, like, and trust that can help you with that. It could be us, someone on our team, but it doesn't have to be us. Just make sure that you've got someone that's helping you through that.
John: As you're talking about this, I'm thinking about a friend of mine who lives in New Orleans. When Hurricane Katrina came through, he lost his home. He lost his business building. They had to move away. And September of that year, I was in New York City for a group meeting. There were 30 of us there. And it's when Bob enrolled in the living balance sheet. Announced it. I was the second person to sign up.
Because this gentleman, Rick, was number one. And he shared with us as a group, he said, guys, if I'd had this, I'd have all of my financial records in place, because it'd be there safe and sound in a digital format. But he lost everything. Had to start over. Actually I think he'd moved to Birmingham for quite a while, worked there and later retired. But I'm thinking about our emergency kit for people and ways to protect their valuables, especially their information is through the planning process we use.
April: Absolutely.
John: In a lot of ways. Because you can't take everything with you.
April: No, you cannot, no you cannot.
John: You can't put the big TV in the 4 Runner.
April: No, no not taking that with us. Well, and part of that plan too, we talk about continuous monitoring. It's not just something that you really want to just like, set it and forget it. Just like you would in a storm, you're gonna be getting those weather updates and staying informed about what's happening. I mean, remember when that last hurricane came through, I had my alarm set on my phone to whenever they were going to have the new update to check it to see how the track of that hurricane and where it was.
So you need to do the same thing with your finances. It's great to get a plan, but we just can't leave it there. We've got to continually look at it and adjust it to make those changes as things change in our lives. So we could spend an entire hour just going through, probably more than that actually, just going through these items about getting prepared for a financial storm.
So we're not going to have enough time today to go through every single one of these in detail. So we're gonna pick a few of the highlights to go through with you today. But definitely, these are things that we would suggest that you think about when you're getting ready to prepare for that financial storm.
It's that emergency kit, which would be an emergency fund, it's having a plan, it's reviewing your insurances and your investments, it's securing your valuables for the future, seeking professional advice, and then continuing to monitor your finances. So now we're gonna get into one topic that we talk about a lot with clients. And it is an item that we find that's overlooked a lot.
So we're gonna go through emergency fund essentials, why is it important? How much should you have in your emergency fund? And where do you keep it? Okay, so an emergency fund is a pool of money that you set aside to cover unexpected expenses or financial disruptions. Okay, let me give you some examples. It could be job loss, it could be a medical emergency, unexpected house repairs.
Your emergency fund is really there to help you stay afloat, and it's very important that you have one. You know, I was just having a conversation a few weeks ago with someone about how this is something that we find that people overlook is having an emergency fund. And they asked me, well why? Why do people overlook it? And I said, because it's not fun.
It's not sexy, it's not some investment or some new thing to do. It sounds kind of boring. We're talking about keeping cash on hand and how much to have and where to put it. So it's just not as fun as talking about retirement accounts and investments. The other thing I find is that, you know, until recently, we've really been in a very low interest rate environment. So we've been earning next to nothing on our savings and on our checking. So people didn't want to have a large amount of money, just sitting in checking and savings because of that low interest bearing.
They wanted it to be working for them and to be working more efficiently and effectively. We call your emergency fund like the moat around your castle. It's really your first line of defense. And we'll kind of get into some of the reasons for that in a few minutes. I'll give you this example, though. Take last year, John, 2022, when the stock market is down 20% and bonds are down 10%.
John: It looked like everything was falling apart.
April: Everything was falling apart.
John: Not to mention the political stuff that was going on.
April: That's right.
John: And a war.
April: And a war. So let's say for example, just for conversation, your air conditioner goes out at your house and you need to replace the air conditioner. Okay? Do you want to go to your investments to pull money out when the market is down. Again, think about the market being down, the stock market 20% and bonds down 10%. Do you want to have to go to your investments to take money out of those to replace the A/C.
John: Only if I have to, because once I pull it out, that's a permanent loss. Because that money is not there to come back. I went through that in 1994. May of '94, we bought a house. And the game plan was to use the mutual funds to cover the downpayment and closing costs. Well, mutual funds were in the dump on closing time.
So I used a policy loan on my life insurance policy to cover all that. And then when the mutual funds came back up, I took the money and paid my policy loan back. I could have used other investments, but I didn't do it. But in that case, to me, having the cash value in my policies and the savings that I had in the bank. That's what kept me from having to tap into that account.
April: Absolutely. It's so important, especially thinking about a year, like last year in 2022.
John: Let's think about it this way. What about if there's an opportunity? What if somebody comes to you and says, look, I've got this great business opportunity, or some investment or something, and you don't have the money? What's the opportunity cost on it? Or you get the money but you use say 18 or now 28% credit card, or you go to the bank and borrow money, have to pay it back. So having the emergency fund and opportunity funds is very, very important.
April: Now, let's talk about how much should someone have in their emergency fund. Now, this, I do feel like is more tailored and specific to every individual person. We're gonna give you a rule of thumb. But this is something that you also have to kind of figure out what's a good emergency fund for you. So our rule of thumb, and I really am not a fan of rules of thumb. Because whose thumb are we going to use? Are we going to use my thumb? Are we going to use John's thumb?
John: We'll do a comparison. My thumb is bigger, so I will probably use my rule of thumb if it's going to give me more money.
April: That's right. So I'm not a big fan of those. But just as a guiding principle, we say at least six months of expenses in your emergency fund.
John: Minimum.
April: Minimum, minimum.
John: Preferably a year, but a lot of people say oh, I can't do that. Okay, then do whatever you can. Maybe it's three months. For some people three months is a big number. And I'm not talking about people that are always living paycheck to paycheck. I'm talking about people who they just they are so focused, April, I've got to put everything they can in retirement.
I've got to max my retirement account. They don't have enough liquidity. And if something bad happens, you mentioned investments, well, it's just as bad taking it out of the retirement account. Because it's not there to grow for your future, which is to give you income. That's what retirement plans are for.
April: Absolutely. So we say at least six months of expenses. But you should calculate that number and then ask the question, do you feel like that gives you enough comfort? Because for some people, depending on the stage of life that they're in, their expenses could be really low, and they say, oh, that's not enough for me to keep on hand in cash.
So start there, but then evaluate to decide if that's enough or you want to have an extra buffer or an extra cushion. Now, John, let's talk about where should they be keeping this money? That emergency fund, now they know how much to have. Where should they keep it?
John: Well, some people keep it in a sock drawer, bury it in the backyard, put it in a bank account. All the obvious places. Yes.
April: I was gonna say don't put it in the backyard. Don't bury in the backyard.
John: We've got some funny stories about that, but those are for another day.
April: You've got checking accounts, savings accounts, CDs, money markets, cash value life insurance, you've got a lot of different options about where to keep your emergency fund. But what's the worst place to have your emergency fund? Retirement accounts.
John: Tell them why.
April: Retirement accounts are the worst place for your emergency fund, I think for two reasons. The main reason is taxes. Because if you have a traditional retirement account, every dollar that comes out is going to be taxed at your highest marginal rate.
John: And also possible penalties if you take it out early.
April: If you're under age 59 and a half, you're gonna have a penalty on top of the tax. And then we just mentioned earlier about the investment. So if it's invested, I think either way it goes right. If it's an investment that's working for you, and it's growing, you don't want to take money out of it then because you want to let it continue to grow.
Or if it's down, you don't want to take it out then because now you've locked in your losses. And your account has to work even harder to get back to where it was. So definitely evaluate how much you should have in an emergency fund and then have a place that you can get to it where it's liquid and it's easy to access and you don't have to worry about market volatility.
Another key component we talk about with clients is having a spending plan. So we're going to talk about having a spending plan versus a budget, prioritizing essential expenses and discretionary expenses. So this is when we're gonna start to get into maybe some more of the strategic options for you, is thinking about having a spending plan.
Now, I do not like the term budget. To me a budget is a dirty word, it feels kind of like a diet. Budget to me is very restrictive. I don't think budgets work to be honest with you. Because just like a diet, what the main problem with budgets is that people make them too restrictive. They don't give themselves enough wiggle room, they don't leave room for the fun things, things that they want, things that they know are gonna happen.
A budget is way too restrictive. So a spending plan, when we talk about having a spending plan with clients, it's more about just being intentional with your money. It's two things. I think it's being intentional, so that you're making the decision about where is your money going. And that you also know where your money is going. You have to know your money to grow your money.
I do find most people do not know they don't have a spending plan, they don't have a budget. And it doesn't matter if someone is retired or someone is in their 30s and 40s. Most clients that we meet with aren't really sure how much money they're spending. They tell me that they don't know where it all goes, that it feels like their money comes in the front door and goes out the back door just as quick.
And they don't know where it's all going. So one of the first things we recommend is that we figure that out. So it's easy. You can take a look at how you've spent your money. The first thing I say is don't judge it. You just look at where have you spent your money in the last three months. Make no judgments. Here's where it is, these are the facts.
This is where my money went the last three months. So first look at that. And then you can evaluate it and just ask the question, is this how I want to be spending my money? If it is great, but you might look at it and see some adjustments. Most people we work with find some adjustments. I had this conversation with my husband years ago.
I remember we were sitting in the kitchen and we were going through our spending plan. Now I have to admit that I used to make my husband sit down with me quarterly to go through this. I'm sure he loved it. I'm sure it was just his favorite thing to do is sit down quarterly with me and look at these numbers.
John: Wrong.
April: But I asked the questions like what do we want to do with our money? Do we want to just haphazardly going to like Amazon and Target? Or do we want to be more intentional? Do we want to focus more on building our future? Do we want to focus more on giving and making an impact in the community? Well, the obvious answer is that we wanted to be more intentional. But if we're not, then our money's just gonna go somewhere if we're not telling it where to go. So that's the idea behind the spending plan is to be intentional about it.
John: For a long time, I had this cartoon on my refrigerator door. It said, it showed this couple around the kitchen table. The caption says money talks and ours is saying goodbye. I've got to find that again.
April: That's good. And you know, I want to be clear on something too, here. This isn't about not spending your money. If you've been around John and I long enough, you know that we're a big proponent of you enjoying your life. I don't want you to wait forever. I don't want it to always be this what if money, and I can't take money, and I can't spend money because of this, this, add this?
No, no. I want you to enjoy your money. I just want us to have a plan for that. So whatever that looks like for you. Does that mean that we still need to be saving for the future? Great. Are we already in retirement, then let's structure it where you can spend and enjoy that money.
John: And, the key phrase here is it's guilt free spending.
April: Guilt free.
John: Because whatever you have set aside for those things. It should be guilt free. And how many times have we talked with someone who they tell us about these great plans and they never do them. They never do them. Sometimes things change and you should do them. But I'm thinking of our friend who every year, every year talked about taking this trip, and then he gets sick and could do it. And I'm an example of that. How many times I've talked about going to England, Scotland, Ireland.
The likelihood of me putting my butt in the position now to do all that now is very slim. Well, maybe, but not likely. It's a hassle when everything's working just fine. Much less when you got a prosthesis dragging around. I say dragging around, I'm not dragging it around. I get around just fine folks, but you get my point. But the guilt free spending that whatever you set aside, you can go enjoy it.
April: That's right. I'll wrap this up here and just say when we look at this, one of things you can look at is we recommend clients do this, especially thinking about retirement planning. Is if you've got your spending plan, then you can say what part of this is essential expenses? And then what part is discretionary? And it's just good to know. I'm not saying you make any decisions about that.
But just having an idea about what's essential, and what's discretionary. We actually use that information in our planning for retirement. So we talked about looking at what are your guaranteed streams of income, and making sure you've got enough guaranteed streams of income to cover those essential expenses, and then having other buckets on your balance sheet for discretionary spending.
So I think it's great information to know. Let's get into talking about protecting investments and retirement accounts. I think that, especially given the landscape where we are thinking about coming off of last year in 2022. And then you know, 2023, we're going to end this year, and the market will be up and it'll look like a pretty good year from a market return standpoint. But boy, was it bumpy? And boy, was it volatile.
John: And we're not done yet. We've still got a few more days that's going to be volatile up and down.
April: So as we're going through this, we're going to talk about how diversification is key. We're going to talk about staying the course versus strategic changes, assessing your current trajectory, knowing when to make changes, and then the importance of professional guidance. So this first point here about diversification. Now, I know you guys have been hearing this for years and years and years about how important diversification is.
John: All of your adult life.
April: All of your adult life. We all hear it right, about how you have to diversify your investment portfolio. So let me kind of give you this as an example. It's like having a well balanced ship. Okay, it can help you in various economic conditions without putting all your eggs in one basket. And so the question is, are your investments diversified enough to handle these changing tides in the market?
So we will commonly do an investment analysis where we take a look and we peel back all the layers of the onion of how are you currently positioned and ask the question, is this working or are some tweaks needed? And John how many times have we had people say, man, I've never had anyone show me what you just showed me.
John: Dozens of times, if not hundreds. They just never think about. And they think they're diversified. They've got five different mutual funds. You look at the top 10 holdings, and they're almost identical, all five funds. That's not being diversified.
April: It's not. tThere's too much overlap. And that's one of the things that we look at. We look for red flags, were trained to look for red flags. What could be getting in your way. And so staying the course or strategic changes. So when we've got market volatility, again, we've heard this all before too, that this, you know, age old advice of stay the course just stay the course.
However, I think it's important that you assess, are you on the right course. Are you confident that your current investment strategy aligns with your goals? Or I'll get a little more technical, I guess is that does it align with your risk tolerance? How many times do we find people are taking on way too much risk than they need to be taking on?
I was talking to a client last week, and he's 70. So he's going to be taking his required minimum distributions in three years. And his IRA is 95% in stocks and 5% in cash. It's a little too risky for where he needs to be at this stage in his life. Because he's gonna have to start taking money out of that. And actually, it's probably, it's a little bit less than three years.
John: But so, okay, so what would you say to that type of person who says yes, but I feel like I'm so far behind because I didn't do enough in the early days. So I'm willing to take that risk.
April: Yeah, I think it's a great point. But we just don't want you to take that risk with this part.
John: With all of it.
April: With all of it and with this part. So for him it wasn't necessary making these huge big changes, but actually goes back to a little bit of that liquidity and this discussion around where are we going to access and take cash from. But it's about getting this plan for his required minimum distributions. Where are we going to take your income from? Because this has worked great for you while you've been working and you're growing your money, but it's gonna feel pretty painful when we start taking the money out. And he's gonna have to. He doesn't have a choice.
John: Well, and you're going to have some of those years when he takes that money and it's a down market. That's just the way life is. It's not up every year.
April: Absolutely. And it's okay to take risks. But can we do it in a way where we level it out? And it's not so up and down and up and down and up and down? So part of that is taking a closer look at your trajectory and are you on track to meet your goals? Is your investment structured to handle some of this, I'm going to call them unexpected financial storms. But we know the market is going to be up and down. We know there's gonna be market volatility. So we have to plan around that.
John: We just don't know when it's gonna happen. But we know it's coming.
April: So these strategic changes, they shouldn't just be arbitrary. We need to know when we need to make these changes. So, have there been significant life changes? Market shifts? Have there been adjustments to your plan? Like the example I just gave someone was working and saving for retirement. And well now we're getting really close to that. So we need to have a plan for as they're getting ready to retire, we actually call that the retirement redzone.
Where the five years before you retire, and the five years after are the most important part of your plan. And then that's when you really want to have professional guidance. You don't want to just do this on your own, you want to make sure that you're working with someone that can help you go through this. So let's talk about the keys to having a secure financial plan.
You want to have a plan for all seasons. We want to talk about the role of professional guidance. You want to stress test your plan. You want to have continuous improvement and tweaking and then you want to prepare for life's unexpected events. A good financial plan is like a reliable map for your financial journey. It's not just knowing the route when times are good, but having a clear plan for navigating through those storms as well.
So do you have a road map that covers both the sunny days and the rainy ones? And working with that financial professional is kind of like having that navigator by your side. They bring expertise and experience and really some understanding of those financial landscapes. So again it doesn't have to be us. But just make sure that you have someone that you're working with.
And we talk about this all the time, let's stress test your financial plan. It's like preparing for that storm, before it even arrives. And you're going to need continuous improvement and tweaking. It's not just a static document, right? It's a living, evolving strategy. So your plan should be tweaked, it should be refined.
So you got to make sure that you have a plan for when you're doing that and how you're doing that. And life is, we all know this. Life is very unpredictable. So we've got to have a plan that's proactive and that can prepare you for that. So whether there's a sudden windfall, or there's an unforeseen crisis, a well crafted plan makes sure that you're ready for whatever comes your way.
Good and bad. We kind of been focused a little bit more on the bad stuff today. But also good things happen in life, right? So today we've kind of gone through and talked about understanding financial crises, and how to build financial resilience. And also, what are those keys to a secure financial plan?
John: I've got something that just popped in my head. I'm going to be careful I don't use a name here. But a positive one. How about the fact that all of a sudden, your child or grandchild is accepted into a major university? And I'm thinking of people that we know who robbed their retirement accounts in order to fund college for a child or grandchild.
Some the stories came out good, some not so good. But that's another example of okay, something good happened. This child was accepted. Had no expectation of that. How do you pay for it? How do you pay for it?
April: It's a good thing to happen. You know, you gotta have a plan for both of those things. Yeah, absolutely. So as we've talked through these things today, you may be wondering, okay, what's next? What are the actual steps that I need to take to get there? So this is an area in which we can help you.
So one of the recommendations we would make is for you to schedule a time for a focus session. And here's what you're gonna get on this call. So these calls are 30 minutes. And what we want to go through on that is we want to get clear on what your goals and concerns are. We want to get clarity on any opportunities that may be available to you.
What roadblocks could be in your way? And usually, even in like a 30 minute call, usually, we'll have a couple of tweaks that we can share with you. Just yesterday, we met with someone new and by the time he walked out the door, I think we had a list of probably, I don't know, maybe at least four or five things, tactical things, that we needed to work on together.
John: Did you take a look at the whole list? It was over 12. Because there was a whole bunch of things that were important to him. It's almost like, what about this? What about this? What about this? And you can't in one initial meeting, but you can start determining what the priorities are. What are you worried about? Or as you asked him, what are your biggest money concerns? And then start mapping it out once we have all the data?
April: That's right. So a meeting like this, or a call like this is great for you if you're motivated, you're an action taker, you're open to new ideas, you're willing to learn. John and I love working with people who are motivated and action takers. We work really well with people like that, because it's very similar to our own personalities.
But this call is not for you if you're not motivated, you're not willing to learn, or you're just looking for some unpaid consulting. So let me walk through and talk about the best way for you to schedule one of these calls. If you've got your cell phone, you can pull out your phone's camera, and on the screen is a QR code.
So you can pull out your camera and scan it over the QR code, and that's going to take you right to the website to book a call. Okay. You can also call our main office at 850-562-3000. And just let Luke or Leslie know that you were on the webinar, and you wanted to book your focus session. But we're getting fancy over here with our technology, with our QR code.
John: Some of us are getting fancy.
April: So yes, we're trying it out, folks, we are trying it out. So you can again, get your phone, get the camera app out, hover over the QR code, and it's going to take you right to the page to book a call on my calendar.
John: Right to the dinosaur in the middle.
April: That's right. I left him on there. My son Connor loves dinosaurs. So a little tribute to him. So I suggest that you do this while you're thinking about it. Because we all have the best intentions. We all get super busy and forget to do things. And so there's really a cost to waiting. So what are those costs? Well, if we wait, we're not going to have clarity, we're not going to have direction, we may not reach our goals on time.
And when we're talking about building wealth, and when it comes to your money. You guys all know this. Time is such a precious asset when it comes to that. Now, sometimes when people are going through this or talking with us, they might have some obstacles and things they say we're not ready yet to book this call. And here's some things that sometimes I hear. Could be I already have an advisor. And that's wonderful. If you already have an advisor, I'm so glad that you do.
John: Most everybody we meet has an advisor.
April: Most of our clients do.
John: Sometimes they have two or three, and they're frustrated, because they get conflicting information.
April: Like the person yesterday, right? And our goal is to not disrupt what you already have. But it's more about how can we add value. And sometimes there can be emotional barriers. You know, maybe we don't want to face the financial situation, maybe we're worried about what might reveal or sometimes we're embarrassed. So just know, you know, we're here to support and guide you. Honestly, I want to get a sign that says judgment free zone. Because we have seen it all. There's nothing that you could come in and tell me that would shock me at this point.
John: I'm thinking about the TV show Dragnet that a lot of people will remember. Sergeant Joe Friday, he would ask for just the facts, just the facts. Because people would go off on a tangent. Just the facts. And then let's work with the facts.
April: That's right. I'm saying that medical doctor, where there's just not, we can look at that information, almost like we call it out in our system like a financial MRI. There's no judgment there with what the situation is.
John: And once you get all the facts down and properly organized, then you can come back and be judgmental about it. This isn't working. It's a fact. It's not working. So what do we do with it? Do you stay on the same track or do you make a change? If it is not working, that's a fact. If it's working great, that's a fact. Leave it alone.
April: That's right. And then sometimes people are worried about if there's a cost associated with it. So first of all, initial conversations are complimentary, there's no charge for an initial cost. And what our goal is on these calls is to take time to understand your situation. Our goal is to provide you as much value as possible to ideally give you a couple of ideas and some tweaks for you.
And if we decide to move forward and work together, and listen, that's going to be a decision that we're going to make together. It has to work for you, it has to work for us. And we'll be very transparent, and discuss different pricing options that we have available. Different programs that we have that align with your needs and your goals.
So the best way to book this call is a couple options. You can call our office at 850-562-3000. That's our main line. So 850-562-3000, just tell Luke and Leslie you heard our call or our talk and you'd like to book a focus session. Or you can use the QR code. Again, use the camera app on your phone and pull up the QR code, it's going to take you right to the calendar to book a call.
So thank you guys so much for taking the time. I appreciate you guys being on here. And I really just want to commend you again, for taking time out of your day to learn about this. That's really kind of like that first step. And we really enjoyed having the call today and hope to talk to you soon. John, any last remarks?
John: The only thing I must say, I'm going right back to what I said initially, and that is prepare, so you don't panic. Take the time to review everything you've got. Make sure it's doing what you want it to do. And if it's not, then make some changes. Don't make changes until you have a solid plan. How many times yesterday did that gentleman keep saying I want you to do this, do this, do this. He wanted us to take over his money yesterday. And no, no, we're not doing that. Not until we have more facts to know what you're doing.
April: Good stuff. Great. Well, thank you guys so much, and we look forward to seeing you on one of our future calls. Bye now.
John: Bye bye.
Voiceover: This material is intended for general public use. By providing this content, Park Avenue Securities, LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, you can visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with, or endorsed by, Park Avenue Securities, Guardian, or North Florida Financial and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities, LLC. Address 3664 Coolidge Court, Tallahassee, Florida. Zip Code 32311. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.
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