Stephanie McCul…: 00:00 Coming to you semi live from the beautiful Westlakes office park in suburban Philadelphia, it’s Stephanie McCullough and Kevin Gaines of Sofia Financial and American Financial Management Group with another episode of Take Back Retirement. Say hello, Kevin.

Kevin Gaines: 00:13 hello, Kevin.

Stephanie McCul…: 00:15 A common topic at this time of year is new year’s resolutions. And from what we’ve seen, a lot of people’s new year’s resolutions often involve money. It’s kind of that stuff that we know we should do, that feels simple, but it isn’t really easy. Kevin, have you seen this with people you know?

Kevin Gaines: 00:35 When haven’t I seen it? I see it with myself every year, even, quite frankly. And like most people with most resolutions, I tend not to want to talk about them after, say, the seventh day in January.

Stephanie McCul…: 00:50 I was thinking first week of February.

All Speakers: 00:51 [laughter]

Kevin Gaines: 00:53 Yeah, I’d like to say it can last that long and sometimes it does, but yeah, some of them don’t even make it…I still have the Christmas tree up before some of the resolutions are done. So…

Stephanie McCul…: 01:05 [laughter] We all have good intentions, right? We want to do the right thing. We want to make improvements in our lives. And money, as we always say, affects all the most important parts of our life. So, it impacts lots of things, right? It is good. We are financial planners. We believe you should take positive steps with your money. And yet this stuff is really hard.

Kevin Gaines: 01:25 It is. And the sad thing is, a lot of it is psychology and that stuff’s not easy. It’s easy to say January 1st, I’m going to spend less money. Yeah. Until the next great bright, shiny object comes across you. And then I’m doing something against the resolution, shall we say. I don’t want to sound judgmental and call myself stupid for doing it. But yeah, there’s a little bit of shame at some point. That’s like, why did I spend that money?

All Speakers: 01:57 [laughter]

Kevin Gaines: 01:58 The other resolutions, yes. Spending less, saving more. I’m going to pay down debt or I’m going to take that next big step, whatever that may be.

Stephanie McCul…: 02:07 Well, I think some of them, like for me getting my will updated, right? I’ve had this stuff from my attorney, Rebecca for like 10 months sitting in my kitchen. Have I done it? Nope. I have not. Don’t tell anybody. But it feels like that big, important thing that I know I should do, but it’s just so unpleasant. And I think another piece of that is kind of running your numbers for your big financial goals. Right? Retirement. ‘I’ve always dreamed of retiring at 62, but am I saving enough? Am I on track?’ That feels really overwhelming and big, and it’s just super easy to push it to next month and then next month, and then next month.

Kevin Gaines: 02:46 The frustrating thing with those last two things – looking at your numbers or doing the basic building blocks of a retirement plan – will, power of attorney, health directives, things along lines, those are in theory, easy resolutions that, it’s a one-off, it’s not something you have to stick with every year. Yet, we have conversation time and time again with clients and with ourselves and those things aren’t done. Like you said, who wants to talk about death? Especially in January when you know, Hey, it’s the new year, everybody’s optimistic. You know, life is going to be great for us. And ‘voila.’ Do really want to start off on a down note? What happens if I get sick? I need a medical power of attorney or the living will and things along those lines. And who wants to start off the year talking like that?

Stephanie McCul…: 03:44 Yeah. It’s supposed to be a celebratory time and optimistic time, especially as we look towards 2021, because 2020 was really a stinker, but there’s this great quote that I love. And I don’t remember who said it first. ‘Personal finance is more personal than it is finance.’ And when I meet people who say, ‘Oh my gosh, I couldn’t do what you do. I’m bad with math.’ And I think, the computer does the math, the calculator does the numbers. I do the people part. It’s the stuff in our heads. It’s the emotions that are all tied up with that. That is what gets in our way of making these smart money decisions. So if we’re looking at the emotions and the psychology around stuff, let’s tackle that first one. I’m going to save more money in 2021. Let’s say ‘I’m going to put away $500 a month. That feels like it’s doable.’ When I look at the money coming in and then my regular bills, ‘why can’t I say $500 a month? I’m going to do it.’ And really research shows that we’re pretty good at doing it once. We might even be good at doing it twice. But keeping up with it is the hard part because you know what happens.

Kevin Gaines: 04:47 Yeah. It’s real easy. I mean, how are you going to save an extra $500? Well, I’m not going to go out to eat as much. Okay, fine. And you know, in January, you’re going to do that. And say, you do it for four weeks, but then your life catches up with you and you realize part of the reason you and your family go out to eat so much is you don’t have time to cook or you’re too tired to cook or ordering is the same old places all the time. So you end up going out to eat. And next thing you know, all that money, you were going to save by not going out to eat doesn’t exist anymore because you’re eating out again. Let’s face it as COVID winds down or however you want to term it, we’re all going to go out to eat a lot more than we have been.

Stephanie McCul…: 05:40 Heck Yea. I can’t wait.

Kevin Gaines: 05:41 Anybody who makes a resolution to say, I’m not going to go out to eat, or we’re going to cut down on entertainment expenses or anything along those lines, you’re fooling yourself. Worse, you’re lying to yourself.

Stephanie McCul…: 05:56 Well, it might be easy while the lockdown’s still on, but then we’re going to have to give ourselves a little bit of leeway, I think. One of the things that is helpful, I think in tackling this resolution – all right, let’s say I really do want to save that $500 a month. First of all, you have to do some self analysis, leaving the self flagellation behind, right? Where are those extra dollars going? Where are your leakages? There’s money coming in. There’s money going out. And then there’s the stuff that’s just kind of leaking out. If you don’t know what those are, it’s going to be hard to plug the holes. So doing a little analysis on your credit card statement or your bank statement and seeing where am I spending more than I kind of thought I was, or than I really think aligns with my values and how I want to show up in the world. I think that’s step one.

Kevin Gaines: 06:45 I just want to jump in. We’re not trying to sneak a conversation about creating a budget through the back door on this. No, we’re not saying come up with a spending regimen. We’re just saying, look at where you are spending the money, right? There’s nothing wrong with where you’re spending the money. You’re getting enjoyment most likely out of how you’re spending the money. But most of us really don’t know where all the money goes. I mean, it sounds somewhat cliche, but yeah. So, we’re not saying budget. We’re saying, just look at your spending.

Stephanie McCul…: 07:16 Yup. Yup. And paying attention is important, right? For me, my car is almost paid off. So when that payment is done, if I don’t consciously redirect that money somewhere else, every month, it’ll just get absorbed into the regular old stuff and it’ll disappear. So I need to intentionally make that plan for the money that’s currently going to the car payment to go to savings or to the vacation fund or wherever I decide I want to put it. But that’s the key is making a decision because if you don’t pay attention and if we’re not watching this stuff, it’ll just go.

Kevin Gaines: 07:53 And I actually want to channel Shakespeare on this ‘To thine own self. Be true.’ Be honest with yourself. If you no longer have that car payment, are you really going to have the discipline to put all of that money into savings? Yes, we’re all going to say you should do that. And some of us will, but others are going to say, ‘you know what? It’s a couple of extra bucks. Let me spend it on this, that, and the other.’ Next thing you know, you’re spending all the money. Here’s a thought. $300 car payment. $200 goes into savings and give yourself the permission from the beginning, I get to blow this a hundred dollars. If it’s an extra night on the town, whatever you want to spend that extra hundred dollars on, do it. And that way, you might find it easier to save the $200 because you’re getting to enjoy the car being paid off, but you’re still doing the stuff you tell yourself you should be doing. Do it. Set yourself up for success, not failure.

Stephanie McCul…: 08:57 So, here’s another point on this, ‘set yourself up for success.’ And this comes in from some of the research around behavioral finance and just kind of neurobiology in general. If we can set up our environment to help us in this way, instead of relying on our willpower to resist, for example, those specials. I mean, it’s the holiday season when we’re recording this. I’m getting a fricking sale email from every place I’ve ever purchased or looked at something in my email, like twice a day. It’s crazy. It’s really hard to resist those. At some point, I’m going to click through one and be like, ‘Ooh, look at that. It’s 50% off.’ Click click. I’ve blown my resolution, but what a client of mine did, and I thought this was really smart – she set up a whole separate email address and changed her retail emails to go to that address. So they’re not in her main inbox when she checks her email for work or for family or communications or that kind of stuff. She’s not seeing the special offers. ‘Out of sight, out of mind.’ It has cut back on her kind of impulse spending, which was one of her leakages. That’s an example of setting up your environment to help you meet your goals.

Kevin Gaines: 10:08 And that’s important. If you actually do that particular exercise, you also find it easier to find the emails you want to find because you won’t have all that clutter in there. And actually truth be told. I actually do that. I have an email address that I use. Now, I don’t do it because I have the discipline to make sure I don’t get the sale alerts on anything. I just did it so I didn’t have all that clutter – so the stuff in my email is the stuff I want to hear from such as people that I talk to all the time – not just random ads and such. But, that sets up the environment to lessen the temptation.

Stephanie McCul…: 10:47 So, let’s look at the next category that we see people often set resolutions around. And this is paying down debt, whether it’s credit card debt, whether it’s paying off your mortgage, student loans. There are lots of people out there who would really like to get that debt monkey off of their back. And that’s a hard thing to do, again, because of all these very human things that come up and get in our way. So if I’ve got a regular monthly debt payment to pay down this big lump sum, it feels big, it feels like a weight on my shoulders, what is it that gets in the way of me actually making progress on that goal? I can think of a couple of things. Kevin, you have thoughts?

Kevin Gaines: 11:30 It took me several years to fight this battle. This was in my twenties, especially, and actually into my thirties. This was my resolution every year. Now I phrase it to myself as ‘have less debt than I started the year with.’ And then as I got older and the weight came on, then the whole weight resolution started up, which kind of overwhelmed the debt one. But yeah, I fought this battle and you hear some of the same old tricks to do this, and it’s easy to dismiss them as, ‘well, everybody says that,’ but they actually work. Start with the smallest debt. If you have five credit cards, tackle the smallest one. It may have the lowest interest rate, but if you can just eliminate one, you’ll get that feeling of success. ‘I’m getting somewhere. I’m actually accomplishing something.’ Because, say you start with the biggest debt because it has the lowest interest rate. Well, you know, it’s going to take a long time – it might take a long time – before you start noticing that number going down enough that you’re going to start feeling good about it. And the trick with most resolutions is you want to see some success in the beginning.

Stephanie McCul…: 12:51 Yeah. So that psychological win. The psychological win helps with momentum, I think.

Kevin Gaines: 12:57 Absolutely.

Stephanie McCul…: 12:59 So another trick that I like is having some kind of visual reminder, not only of where you’re trying to get to, but of where you’ve come from. So if you’re a spreadsheet person, maybe you make a spreadsheet. If you’re a more visual person coming up with some kind of graph or picture that shows how much debt you have today, or maybe it’s, you know, ‘I’ve got five blocks because I’ve got five credit cards to pay off,’ and it doesn’t have to be exact, but you can make a smaller one for a smaller amount of debt and a bigger one. And then in two months, when that one’s gone, redo your picture, but keep it up there so you can see, ‘Ooh, I used to have five and now I have four and they’re a little bit smaller, right?’

Stephanie McCul…: 13:39 Give yourself a fricking gold star, right? That kind of thing, I think also, not only does it keep it top of mind because you have that visual reminder, but seeing your progress – I have several clients that I’ve had to sit down and remind them of their progress and where they’ve come. They were stressing out about things. I have to be like, ‘hold on, let’s go back to 18 months ago when we started working together and you were in a much worse situation, right?’ Look at what you’ve done! Okay. I helped along the way I gave some advice, but the client is the one that actually takes the action. So, giving that kind of praise and recognition, again, that helps.

Kevin Gaines: 14:22 Yes. And if you don’t have somebody to give you that ‘congratulations’ externally, figure out a way to do it internally.

Stephanie McCul…: 14:32 Yeah.

Kevin Gaines: 14:32 Maybe, this won’t work for everybody, but it’ll probably work for a few of us – January 1, print out your credit card statements and make an appointment for yourself to look at those numbers again, three months down the road. And when you do it, it may not be a big number. You know that, ‘Oh, I made a huge difference.’ But hopefully you’re going to see that you have been making progress. And hopefully that will keep you going. Going back to some sort of visual cue to help you stay on path. One thing that does not work for a lot of people is making a rigid plan month by month. For some people, this will work. But for a lot of us, you know, we sit there and say, ‘well, I’m going to put an extra, a hundred dollars a month on this card, another 200 on this one, dah, dah, dah.’ And then something happens in your life.

Stephanie McCul…: 15:33 Right.

Kevin Gaines: 15:33 You gotta get a new car. The HVAC goes up. Some sort of big one-off expense comes across. Nothing you can do about that, but that throws you off this plan. And a lot of people get discouraged and say, ‘Oh, I’m never going to meet it. Okay. I’m done with it.’ They think that because the one step didn’t happen the way they thought it would, that the whole thing’s going to blow up. This gets back to creating an environment for success. Don’t make things too rigid. Think about people who were doing this in January of 2020, but six weeks, eight weeks into the year, all of a sudden priorities have changed. You don’t know what the future’s going to hold. Don’t make things too rigid, too hard for you to be flexible.

Stephanie McCul…: 16:24 Yup. Yup. Give yourself some grace along the way. For sure. So, this third category of resolutions that we have seen is kind of like tackling that big, hairy thing that’s been on my to-do list forever. Whether it’s getting your will done or figuring out if you’re on track for retirement or having that money conversation with my spouse, you know, something that just feels so miserable that you haven’t tackled it yet. So, realistically, why are you going to do it now? Right? If it’s been that difficult up to now and you’ve been putting it off, what’s different now? What is it that’s going to make you do it? And how can we get you there? How can we get you down that road?

Kevin Gaines: 17:04 Again, for everybody, it’s going to be different. But the best thing to do is – or one of the better things to do, I should say – is tell somebody you’re going to do this. It’s amazing the impact of doing that on your mindset. If you keep it inside yourself and you don’t follow through, or you don’t do it, then psychologically, it’s only us. And it’s like, okay, It’s easy to write that off. But if you tell somebody, and it’s not that the other person necessarily cares whether you do this or not, but you’ve now put it out there and you feel the need to follow through. And it might be something that simple that gets you to have that conversation.

Stephanie McCul…: 18:00 Yeah. Some kind of external accountability. I often recommend finding a money buddy. Because it is hard to maybe admit to your friend or next door neighbor that you haven’t done your will, right? But find someone you’re comfortable sharing this stuff with – and you want to be accountability partner for each other, right? A friend, a relative, whoever it might be. Maybe you want to get into all the numbers. Maybe you don’t. Maybe it’s just like, ‘Hey, I have this thing I need to do. Will you hold me accountable? And I can do the same for you. Right?’ And then maybe you have regular check-ins whether it’s a text message or a phone call or a Zoom and say, ‘Hey, how’s it going? Have you made progress toward that big thing?’ Having that external accountability, it does something different that helps with the motivation. I agree on that.

Kevin Gaines: 18:47 Yeah. You look at how many things out there – these different support systems exist, and it’s not so much that they’re going to hold you down and force you to do things, but it gives you an outlet to talk about these things and hold accountable. And if you’re having trouble with it, there’s somebody that you can talk this through with. Maybe it is a financial professional, but a lot of times, like you said, it could just be a friend who says, ‘yes, I want to help you.’

Stephanie McCul…: 19:17 Back to kind of looking at, I guess this is a similar recommendation. We said, one of the things, if you want to save more, is you’ve got to figure out where your money’s going. If there’s something big that you’ve been avoiding, spend a little time asking yourself, ‘why am I avoiding this?’ What is it about this thing that makes it feel unapproachable? Is it that it feels too big? Is it that it feels too unpleasant? Is it that you think it could go wrong? What’s the story you’re telling yourself that has you avoiding even tackling it. And again, maybe you kind of verbalize this with someone externally. ‘Is that a realistic story that I’m telling myself? Could that really happen?’ Sometimes if something feels too big – I’ve done this, I’ve had a project, for example, I’m trying to work on and it feels like a giant project.

Stephanie McCul…: 20:11 Maybe it’s like reorganizing my closet or something for work that just feels so big. But once I start it, I realize, ‘Oh, it’s not going to take me eight hours.’ Maybe it’ll take me an hour and a half. It’s not going to take me eight hours. Maybe it’s not as big as I’ve made it up to be. Sometimes I think the longer things sit on my to-do list, the bigger and grosser and hairier, they feel. Part of it is tackling it means I have to bash myself for not having done it 18 months ago.

Kevin Gaines: 20:39 Yeah. It gets back to the fear of the unknown and the longer it sits there, the bigger of an unknown it becomes in your mind. If you don’t want to tackle something because you don’t want to deal with the subject matter, there’s not much you can do other than just suck it up.

Stephanie McCul…: 20:58 Well, I have a suggestion there. Sometimes working with someone who’s not going to make you feel bad about it. I think some of the issues – Maybe I’m not doing my will because I think all estate planning attorneys are stuffy and overpriced and judgmental. Therefore I don’t want to go do that. Or I’m not doing my retirement planning because all financial advisors are confusing and they charge too much money and they don’t speak a language I understand. And they’re going to make me feel bad about my life.

Kevin Gaines: 21:33 That’s a big one.

Stephanie McCul…: 21:34 I would push back on that. We’re not all like that. I pride myself on being the nonjudgmental financial advisor. There are other people out there. There’s lots of different ways. Just because you’ve met one financial advisor, it means you’ve only met one financial advisor.

Kevin Gaines: 21:51 And maybe you do need somebody to make you feel bad. And hopefully when you’re interviewing financial advisors, you’re going to be honest with them and they’re going to be honest with you. If you want say, ‘I need somebody to really stay on top of me. Every time I talk about spending an extra dollar or two, I need somebody to give me grief.’ I can tell you right now, I’m not that advisor. Stephanie. I know you’re not that advisor. But there are some – it gets back to figuring out what you need and figuring out what works best for you. And it’s a process. It’s not going to be immediate success every time.

Stephanie McCul…: 22:32 The other thing I’d say, and I’ve encountered people who didn’t know this – You can fire your financial advisor any old time you want to. There is nothing linking you to them for life. You can try someone out. And after a few months or after one meeting, you can say, ‘yep, this is not right,’ and move on. Right? It’s not an irreversible decision. So, I would encourage everybody to interview a few people. Have conversations, right? See how much time they’re willing to spend with you so you can get to know their style and how they’re likely to be interacting. Ask all those questions. Always ask how they get paid, of course. But ask how often do you talk to people? What’s the the content of your regular meetings? What kind of things are we going to cover? A lot of advisors really only talk about investments. Let’s be honest, right? Even people who call themselves financial planners, they’re really investment people. Or maybe they’re insurance people. If you want help with your whole financial life, you’ve kind of got to push a little bit to see if the advisor is going to be talking about your whole financial life, which we do. We think that’s crucial.

Kevin Gaines: 23:36 Right. And don’t feel intimidated about going to somebody and I guess, feeling bad, not intimidated – feeling bad that you didn’t hire somebody. We know how the process works. We encourage you to, and I’m speaking for most financial advisors at this point, I think – that we know the first meeting isn’t necessarily always going to mean you’re going to become our client. We understand you want to talk to people and find out who’s going to be your best fit. You’re not going to hurt our feelings. And quite frankly, at the end of the day, it’s your money. Don’t care about our feelings. It’s your future. Don’t care about our feelings. If we’re not going to help you get to where you need to be, then we’re not the right fit. And you’re only wasting your time and money with somebody who doesn’t work for you.

Stephanie McCul…: 24:25 So overall, we want to wish you a very happy new year. We really hope that you’ve come out of 2020 and the whole, oh, we’re not out of the pandemic yet, but hope you’ve come out of it with maybe some lessons, maybe some silver lining, some re-appreciation of what’s truly important in the world. And we wish you all the best in 2021.

Kevin Gaines: 24:53 And for everybody, who’s been listening to all our episodes, thank you. We appreciate you investing the time to hear what we have to say. And we want to encourage you to reach out to us. If you have questions, please say ‘hey, you know, I’ve got a one-off question. What do you think about X?’ We’ll talk. That’s what we do.

Stephanie McCul…: 25:16 We hope this has been helpful to you. Please feel free to reach out. Let us know if you find the information helpful and if you have any topics you want us to cover. We are enjoying coming to you in this manner. Happy new year, everyone. It’s goodbye from me.

Kevin Gaines: 25:31 And it’s goodbye from her.