Emily Guy Birken helps people become more financially savvy. She took a year off from teaching when her son was born, and in that time began writing for both Wise Bread and PT Money – and discovered a way to make use of her skills as both a teacher and a finance nerd.
She’s written four books, including The 5 Years Before You Retire, Making Social Security Work For You, Choose Your Retirement, and, most recently, End Financial Stress Now: Immediate Steps You Can Take to Improve Your Financial Outlook.
I’ve been reading her books and blogs for many years, and I’m thrilled to have her on the podcast to discuss her journey into financial education, the common issues and mistakes we both see in so many retirees, and the unique challenges facing individuals as they approach retirement.
In this podcast interview, you’ll learn:
[00:00:00] Andrew: And welcome back everybody to another episode of Your Wealth & Beyond. Today we are super excited to have on a wonderful guest, one that I have been reading not only her books but also her blogs for many years so we want to welcome today Emily Guy Birken. Welcome, Emily. How are you today?
[00:00:19] Emily: I’m doing great. Thank you so much for having me.
[00:00:22] Andrew: And I know we were chatting briefly before the podcast. You are up in the Milwaukee area so I just have to gloat that I don’t see one cloud here in Arizona right now. We’re going to hit about 70° so I apologize on that.
[00:00:36] Emily: Yeah. We’ve got a beautiful day outside, but it is freezing cold.
[00:00:40] Andrew: Stay inside with the fire on. Nothing wrong with that. So, Emily, as you know, with our podcast, Your Wealth & Beyond, what we try to do is empower the listener whether it’s an individual or business owner, helping them get a hold of their finances, build wealth, find purpose and I know your passion over the years has really been at that aspect of helping to educate people become more financially savvy. So, before we jump in, can you walk us through why this is a passion of yours, where did it come from, in that scope your background, how did you get to where you are today?
[00:01:19] Emily: So, I’m kind of an accidental financial guru. I’m actually trained as an English teacher. I taught high school English for four years before I started writing in the personal finance sphere. And so, I originally took a year off to stay home with my youngest child, or excuse me, my eldest child when he was a baby and was just doing a little bit of writing to keep my hand and keep working a little bit and so I started writing for some financial blogs. Now, I’ve long been a money nerd. I was the kid who as an eight-year-old I was taking all my money out of my piggy bank, counting it, and putting it all back in. So, that was me.
[00:02:04] Andrew: Well, before you go, like most eight-year-olds back in our day we’re playing Atari or out there running around like what got you excited and look at money on that way at such a young age?
[00:02:17] Emily: Oh, that’s a good question. Some of it is just kind of how I’m wired. I’m someone who likes kind of keeping track of things so I would, let’s see, I would track days of how long I’ve been going to school like a [inaudible] every day. So, yeah, I’ve got a brain that’s wired for these kinds of little details and apparently for my family, I’ve heard that this skipped a couple generations because my great-grandmother was like this too. They said that if she’d been born in a different time, she would’ve gone into finance but because she was born in the late 19th century, it was not available to her as a woman, but she kept track of the family finances without having any specific training in it just because she had a similar sort of like detail-oriented mindset. And so, that really was where it came from for me was I really liked thinking about like, well, if I choose not to spend money now, that means I’ll have more money later and once I learned compound interest, that blew my mind.
[00:03:26] Andrew: That just blew, I mean, to think about it, a child or in this case your teenagers thinking about compound interest, that just puts you so ahead of the game. I think even to this day the clients we work with, 30, 40, 50, they don’t truly understand the power of the compounding. So, I guess you are an anomaly in itself because I have a 13-year-old and even though this has been my world over the last 15 years, it’s difficult. The financial literacy, as you know, they don’t teach it in school so it’s trying to ingrain into somebody to most kids who don’t really understand how it works. And now I think the issue is as you said, counting your piggy bank, the change in there, well, the cashless society we live in is making it even more difficult for us to teach the kids.
[00:04:17] Emily: Yeah. Money has become so much more theoretical now because you can spend money without getting out of bed because it’s so easy just on your phone or your laptop or your tablet, just click a button and, boom, you own something new and money has gone out of your account and you haven’t had to actually count out the money and think about what it’s going to feel like to not have that money, which is one of the benefits of cash. So, it’s something that I think that people really are going to be struggling with as we move further and further into a cashless society. At this point, I have two young kids an eight-year-old and a five-year-old and so I very specifically want them to think about spending their money so we give them allowance in cash and we make sure that when they spend money, we talk about like if you spend this now, you won’t have it for later, and that has actually kind of even with my five-year-old he’s realized, “You know what, no, I don’t want a toy right now because I only have $12 and I don’t want it to all be gone.”
[00:05:27] Andrew: Yeah. No, I think that’s an incredible idea. That’s where a lot of people get caught up with the credit card debt is that because it’s not real in the context of handing over that money then it’s like, “Let’s spend. It makes me feel good today,” and then not until they get that statement do they realize, “Oh my goodness, I spent $3,500 this month,” and half of that was on eating out in Starbucks and things of that nature. So, empowering the young ones at that age I think is a fantastic idea. So, I know to go back of how you went from English teacher then to writer for whether it be Wise Bread as well as PT or part-time money, that was one area where I’m sure you love teaching, right, but this enabled you to get back into your nerdiness of the financial side to educate people and do it with being to raise the kids. Was that kind of your thinking?
[00:06:21] Emily: Yeah. So, the way it worked out was I realized once I had my son and the original plan was to take a year off, I realized that that the way that I was a teacher was not compatible with being a good mom. I was going to do both of them badly. And because the writing was working really well, and it allowed me to continue to stay home and be the kind of point parent for if either of my sons were sick or if there was a snow day or things like that then we didn’t have to scramble to figure out who’s going to care for the kids. So, it just kind of worked out really well. It fit well into my life as a parent and as a wife and also just, in general, was very fulfilling to be able to do something that was really intellectually stimulating while still being there for my kids.
[00:07:18] Andrew: And for you, the continued education even for as much as you knew growing up and this was a passion of yours, I’m sure being able to talk to other experts and financial advisors and having the experience from learning from other people, it’s always helpful as you’re trying to improve your own situation and improve your family situation. That’s the nice thing about the research and writing that I’m sure you’ve seen.
[00:07:42] Emily: Yeah. I find that actually teaching has made me a much better writer. I mean, I was an English teacher. I’ve always been literary and I’ve always written but my experience teaching has helped me to be better at determining what’s going to get someone interested in something that they’re not naturally interested in. So, figuring out how to help the kids enjoy reading, let’s say the Odyssey, except that you got a cyclops getting stabbed in the eye. That is pretty interesting but, you know, getting the kids through Shakespeare and helping them see that this does actually relate to their personal lives and it is something that they can carry with them and it does connect has helped me to be in a better position to help readers realize these kinds of arcane money issues that sound like they are too difficult to understand do actually relate to your life and are important and you can carry it with you.
It’s just a matter of finding the right way to engage with my readers and inspire them to help them understand that this is something that affects their lives and that they can find a joyful way of dealing with because we do so often tend to think of money as a chore.
[00:09:08] Andrew: Right. And that adds to the stress when you think of it that way. So, I was a little disappointed to see that you’ve only written four books. So, let’s walk through that. So, as I’ve co-authored two books, I know having to co-author has helped me and it’s daunting in its itself. So, the first book you wrote, The Five Years Before You Retire, when did you write that book?
[00:09:33] Emily: That was in 2013.
[00:09:35] Andrew: Okay. And so, the key takeaway there is that as we get closer to retirement, there’s a lot of life transitions that happened. So, your goal in writing in this book was to help people envision not just, “Hey, I’m going to retire next year,” but what all of these different aspects we need to think about beyond the fact that am I going to have enough money in retirement? Was that kind of your goal when you were writing it?
[00:10:03] Emily: Yeah. Absolutely. So, this book is one of those where people often say like, “Okay. I’m going to retire someday.” I’m putting money in a 401(k). I’m kind of like I’m preparing for it. It’s within that like five-year span before retirement that it goes, “Oh, this just got real. This is really going to happen.” And there are a lot of questions out there that it can be difficult to find the answers to. So, beyond just the like do I have enough saved? Do you need to figure out like so how do I sign up for Medicare? How much am I going to get from Social Security? How am I going to access my money in retirement? So, like we have this sense like, “Okay, I’ve saved all this money. How am I going to then like how’s going to get into my bank account? And so, what am I going to do for healthcare if I’m retiring before Medicare age? Where should I live in retirement?”
All of these sorts of questions are all kind of tangled up in that worry that kind of hits once you realized that retirement is coming. And I wanted a book that was going to give kind of a good primer on all of these questions so that people could put the book down knowing, “Okay. These are the things I need to focus on this year. Next year I’m going to focus on these things. And so, by the time I hit my retirement date I’m going to be ready.”
[00:11:29] Andrew: Yeah. And I think from the standpoint what we see day in, day out when we’re bringing on potentially a new client to our firm is that we see either a do-it-yourselfer or a lot of the individuals that have maybe what we call a financial or they call themselves a financial advisor but just focusing on one aspect, the investments, and obviously that’s important, but a comprehensive view, that 30,000-foot level of looking at the aspect that you had mentioned. It’s, yeah, anybody can accumulate. It’s now we’re going to be in this position where we need to decumulate all this money that we built up. How do we do decumulate it? Where’s my paycheck coming from? How do I be tax efficient with it? And then having a roadmap or a plan puts people at ease and that’s what so many people don’t have is an actual written plan, whether it be written or through a technology that they can see it. And from what we see it, it just causes fear. I may have all this money, but how am I going to make it last?
And then the other area that I think you hit on was like this emotional, “We work 30 years. It’s our purpose day in and day out and now what’s that going to look like. So, in your book do you help somebody envision what that nonfinancial aspect is going to be of the purpose in retirement? And what’s going to make me feel satisfied?
[00:12:52] Emily: Absolutely. Yeah. I have my readers kind of go through what does an ideal day, week, month, year look like in retirement? And so, part of that is to kind of like do the dream big because you do want to kind of figure out like in an ideal world how am I going to spend my retirement? I also have them do like a Plan B. So, if things aren’t going great, what would I want my day, week, month and year to look like? And so, in that case, you can find because, in general, your retirement is going to be somewhere between your pie-in-the-sky ideal and your plan B, things just didn’t go great financially, but I need bare minimum X, Y, and Z to feel comfortable and content.
And you’re likely to have something somewhere in between but if you spent the time thinking about like if money were no object, I do X, Y, and Z and if there’s a terrible market downturn just as I retire, I only need A, B, and C then you can figure out like what is going to make you feel most retired, most comfortable in retirement, what’s going to make you feel fulfilled, whether or not there is a huge amount of money there. And so, that’s something that I think is really important is like it’s great to dream big and I really encourage people to do that. It’s also good to kind of dream little and think what’s going to be the least that I need to feel contented in my retirement? And then that way you can kind of come up with the retirement that you’re most likely to have which will be somewhere in the middle, but still know what you plan to do if things go to gangbusters and so you happen to have more money than you anticipated or if things don’t go well and you have less than anticipated, but you can still feel contented and fulfilled with your retirement.
[00:14:43] Andrew: Right. And especially if those that retire in their mid-60s, we’re seeing that 30 plus years of retirement as more of commonplace. That’s what we’re trying to educate our clients on is they’ll say, “Hey, my mom and dad died in their 70s. I’m not going to live to 84,” and we know that’s just not the case. So, as planners, we have to teach them that, “Hey, we’ve got to build something out here for the worst case scenario,” that you both live a long life and/or ultimately with taking account things you can’t control, when we’re going to die, inflation market risk, all of those things. The other thing I think is funny is we’ll build out the plan. The client will retire financially. They’re fine but we get that call seven months later, “Hey, I’m going back to work. I’m consulting,” and like, “What’s happening?” He goes, “Well…” Sometimes it’s the relationship. If you think about it like a husband-and-wife maybe haven’t spent that much time together in 30 years and if they don’t go back to work, the relationship they splinter off and some just had to find that purpose.
So, it’s interesting to see that we’re seeing people more so a lot of times re-career, go back, and educate themselves on the passion, maybe pick up a hobby that they really wanted to do more so than just golfing every day. But it is, I mean, that’s one of the most difficult parts is what is that going to look like. And I think, listeners, you got to think about that well before retirement is planning out where you’re going to live, if you want to be close to the kids, what environment is going to make you the most happy. And without that, no matter how much you saved, it becomes – retirement isn’t going to be what you had originally planned or dreamed for if all those things haven’t been built into the overall plan itself.
[00:16:26] Emily: There’s a Jack Nicholson movie called About Schmidt which I feel like does a really good job of kind of visualizing what that looks like where if you define yourself by your career, what happens after you retire. In the film, Jack Nicholson retires from I believe an insurance company in Omaha, Nebraska and he is just kind of lost and then, spoiler alert, it’s an old movie but his wife ends up dying suddenly and it’s all about how he is just trying to know who he is without these two important facets of his life, this work and his wife. So, that’s kind of I recommend that to people to kind of see like this is something to think about. This is very common. What he’s going through is a very common thing to happen if you define yourself by your career.
And there’s nothing wrong with defining yourself by your career, but especially in those five years before you retire, it’s a very good idea to kind of start to shift. If you have a hobby that you are passionate about kind of shift into thinking of yourself as the person who does this hobby, shift to thinking about yourself as a good friend, who spends time with friends as a good grandfather or grandmother spend time with grandkids so that your entire sense of self is not tied up in the career because once that’s gone, it can be very difficult to know who you are and what you do every day and why you get out of bed every day. And that psychological aspect of retirement is I think not as commonly discussed as the financial aspect of retirement but it is just as important because retirement should not just be about do I have enough money to live? It’s not survival. It’s living. It’s the next chapter in your life and you should enjoy it.
[00:18:27] Andrew: Yeah. We say we don’t want to have it where you don’t outlive your money. It’s outliving your – we don’t want you to outlive your lifestyle and that’s an important component. So, as we’re talking about retirement and then we’ll dig into more of for everyone the financial stress and what we can do to get a handle on our finances and things like that but one of the books you wrote was Making Social Security Work For You and, again, we look at Social Security as a key piece of the retirement puzzle. We got a lot of workshops on it. We teach and preach about optimizations. I love Laurence. Kotlikoff’s and his book, Get What’s Yours. And so, you wrote a whole book on it and let’s talk about that a little bit because what we see is people making a rash decision without even thinking it through, and they give up a lot of benefits that social security provides by potentially being creative or delaying for a period of time. So, what was the passion there to have your other book, one of the four, Making Social Security Work For You? And let’s go through some maybe tips that we can give the listeners.
[00:19:30] Emily: Sure. Now, to be honest, this book was my publisher’s idea. They said, “We’d like you to write on Social Security.” My first thought was like, “Oh boy.”
[00:19:40] Andrew: Uh oh, this is going to be a snooze fest, right? That’s what you’re thinking?
[00:19:42] Emily: That was my fear and in fact, it was pure joy to write. I had so much fun writing it. So, which, again, I’m a hoot at cocktail parties but I just I found it very, very interesting kind of digging into this major piece of legislation that affects all of us that there’s a lot of misinformation about. Because it affects everyone, everyone has an opinion on it but because it is so complex, it’s hard to really understand all the nuances of it and also even the reasoning behind a number of the decisions.
So, I actually found it really fascinating kind of like I went all the way back to the beginning of Social Security because I want to understand the history of it and where it came from all the way throughout to the present to really understand why changes were made, when they were made, what the expectations were, and so on and so forth to really get a good handle on what this program is, what it’s meant to do for us, and how we as individual beneficiaries can make the most of it, can get the benefit from it that is going to be the best for us and fits within what Social Security was made to do, which is be a safety net to help protect us in our old age. And so, that’s something that I think can often get lost. We see a lot of people taking Social Security early. As for some people, it’s as early as they can. They’ll take it just as soon as they hit 62, even though that means a lower monthly benefit for life like your benefit is permanently reduced and some of that is because it’s coming from a mindset that is, “I want to get the most amount of money possible, and if I die young, I’m going to lose out.”
[00:21:48] Emily: And the problem with that mindset is the same thing that you’re saying is like the worst thing that could happen to you is not dying young. The worst thing that could happen to you is living to be 120 and not having enough money. So, in that case, it makes thinking about what Social Security is meant to do to be a safety net. You want as big a safety net as possible for the years when you most need it. Most people don’t need, I’m not going to say most, many people don’t need a huge safety net in their 60s because you are still capable of working. You’re still relatively young and healthy so when you hit your 80s and 90s, when your health is not necessarily doing as well, we tend to get frail or need more healthcare, life gets more expensive. That’s when you need a safety net and you’re going to need a bigger one.
[00:22:37] Andrew: Right. We try to envision and like we’ll have somebody close their eyes and say, “Imagine an asset that will potentially grow at 8% a year to age 70. When you turn it on, there’ll be a cost-of-living adjustment that historically has been over 2.5%. Also, the maximum tax on it is only 85% of the benefit and it will pass to your beneficiary, the larger of the two.” So, when you start thinking of it that way and taking out the name Social Security, it gets people really understanding that, “Hey, this is potentially a valuable piece of the puzzle that we don’t want to take the decision lightly,” and the question I always ask in our workshops is, you know, if a two-earner couple in their mid-60s that worked their entire lives, how much do you think they paid into the system between social security and Medicare? And nobody really gets close to the answer, and, guys, don’t quote me. It’s not like the holy grail but it’s over $0.5 million if not more that we would’ve paid into the system. So, I mean, that’s a lot of money.
So, we’ve got to figure out how to get the most out of it and really work in conjunction with everything else that you built, your pretax money, your after-tax money, and that’s where a lot of times if we can look at like from your book, teaching the ins and outs of it and utilizing maybe other assets to bridge that gap. Of course, our job would be easy if we know when we’re going to die. That would be the easiest of our jobs but we can’t and so like you said, we’ve got to plan on the inevitable. So, what are some of the couple mistakes people make besides, well, filing early of course, and getting that reduced amount is obviously a long-term negative for somebody if they live a long life. What are some of the other things that you see people making mistakes on?
[00:24:24] Emily: So, you kind of touched on this, but filing without thinking about how it will affect your spouse is another mistake that can happen so it’s very likely that there will be a surviving spouse that one of you will pass away. And so, if you are looking at your Social Security benefits just based on maximizing how much you get right now, or needing money right this minute, you are not necessarily looking at how that will leave your widow or widower should you pass away. So, that’s something like not thinking through how your claiming strategy will affect an eventual widow or widower. Now, it’s completely understandable why people don’t think about that because it sucks to think about your own death.
[00:25:11] Andrew: Yup. Not fun at all.
[00:25:13] Emily: Not even remotely like a lot of people would rather have a root canal, but these are things that you want to think about so that you can be better prepare your spouse or yourself for an eventual widow or widowerhood. So, that’s something that the people often kind of forget to think about. The other aspect that I think people sometimes forget to think about is the cost of Medicare and the fact that Medicare will pay is often the Medicare part B premiums are taken from Social Security. So, factoring that and particularly if you take your Social Security benefits before age 65 when Medicare would kick so that’s something where like that can feel like a surprise. Filing taxes is something that can be kind of an unpleasant surprise.
So, as you said, only the maximum that can be taxed is 85%, but there a lot of people who are unaware that Social Security can be taxed at all and because of the way Social Security is taxed, depending on how much you are accessing from other accounts that can raise the amount of taxes that are amount that can be taxed from your Social Security. So, this is one time where I think it’s a really good idea. I totally understand people who DIY their taxes, who use TurboTax, things like that. This is the sort of thing that it might be helpful to talk to a CPA to make sure that you are clear on how your drawdown strategy will affect your Social Security in terms of taxation.
[00:27:01] Andrew: An example we’ll utilize because we use a planning software called eMoney and this is where you and I get really nerdy on how the provisional income and what Social Security and how much of it is used in that formula but bottom line is if it’s under a certain threshold, this formula will allow potentially zero of your Social Security benefit to be taxed. So, again, not for everybody but if there’s a situation where you’re getting X amount of income, and then you have two buckets of money and you say I need $20,000. And if you pull it all out of your pre-tax, an IRA or 401(k) versus pulling that out of after-tax, ultimately that 20,000 could then provide that Social Security goes from being taxed at 0% all the way up to that higher threshold of 85%. So, it’s just teaching clients that if we could be smart there and working with the CPA, we potentially could save $3,000 or $4,000, 10% or what have you, and we look at that it’s like we’re coming into the year ahead of the game by minimizing taxes.
So, listeners, just to be smart, work with a planning team that understands these things and can help guide you through so that you don’t make decisions that you necessarily maybe was a bad decision but it’s just so hard and complicated to know how it all works.
[00:28:20] Emily: Yeah. That’s one of the things that gets very frustrating particularly when talking about Social Security. It is so large and I feel the same way about the tax code. It is so large and kind of onerous that it’s very difficult for an individual to understand it, but every single little piece in there was made for a very good reason. So, it’s just in aggregate that it becomes kind of very difficult to understand, and so on the one hand, that’s job security for me and you. On the other hand, I can certainly understand people’s frustration with how complex these things are and that’s one of the reasons why I want to kind of demystify a lot of these things to make sure that people feel comfortable or at least educated enough to even ask the right questions because, again, because this is a program that affects so many people it is going to have like these little details that can be very difficult to even know to ask about.
[00:29:29] Andrew: Right. As you know, the social security office isn’t going to give any guidance or recommendations. In fact, many times we get the call from the client saying, “They can’t do what you told me I could do,” and I’m like, “Well, let’s walk through this.” So, listeners, there’s a big change in 2015 that some of the creative strategies that we utilize, they called it a loophole, we called it the law, but for some people they were grandfathered in where they could file a restricted spousal application and get half of their spouse’s benefit and then grow there to 70 so it’s a great strategy and ultimately, we had a client that we gave him, “Here are the notes. Here’s what you have to go in and say,” and they still were saying, “Hey, that law changed,” and that was true, but they were grandfathered in because of their age at the end of 2015 so I actually had to get on the phone with like a manager and talk through it with them. Otherwise, the client would’ve been like, “Hey, yeah, I can’t do it,” and then forever, they would’ve given up for those, I mean, that could’ve been tens, if not potentially hundreds of thousands of dollars that could’ve left on the table. So, before you guys make any decisions on social, please just make sure that that you work with someone that can at least guide you and walk you through the pros and cons.
Okay. So, let’s pivot away and I know we’ve been hitting more on the retirement side, your latest book, End Financial Stress Now. Money, a lot of people, heart palpitations, it causes stress, both individually and with relationships so I think if we jump into now is what are some of the immediate steps we can make to improve our finances whether we’re getting to be retired or we’re 30 years of age, what was the purpose of this book that came out recently for you? And all of these books and everything will be in the show notes, guys, so you’ll be able to link on that and then purchase via Kindle or Amazon, etcetera. So, what was the reasoning behind this, the latest book that you wrote?
[00:31:20] Emily: So, this book was kind of 10 years in the making in my head so I know that I have always had a different view of money than most of my friends and peers. And even once I got involved in the personal finance community, I have a different viewpoint of money. And so, some of the things I’ve been interested in and reading and researching for many years has been behavioral economics, sociological studies, like kind of psychology of decision-making and habits and things like that. And so, I had this realization that a lot of why my view of money is different from other people and specifically like money is to me more like a puzzle than something that causes stress was because of the way that I am kind of wired to look at things from that kind of sociological perspective without even realizing it. That just kind of how I’m built.
So, I wanted to kind of dig down into what that is and how people, anyone can do this, can kind of change their viewpoint of money from a source of stress to become a puzzle to be solved. So, that is something I’ve been like really interested in for many, many years. When I discovered behavioral economics, specifically Predictably Irrational by Dan Ariely, it was like light bulbs going off like this is what I’ve been doing and I didn’t realize that everyone didn’t know that. So, behavioral economics is all about figuring out the irrational reasons behind our money behavior. So, we make these irrational decisions that if you stop and think about it like that doesn’t make any sense, but there is an underlying sense to it.
[00:33:22] Emily: And for me, I have always been kind of the person who like if I make a bad decision, I don’t beat myself up about it necessarily. I start thinking like, “Why did I do that? What happened there? Well, how can I change that in the future?” And so, like helping people to get there with money takes a little bit more because money is such an emotional topic that we often don’t consider to be emotional. We think of money as being like, “Oh, it’s real simple. It’s just dollars and cents. Can you add and subtract? Then you can do money.” Well, that’s not true actually because money is very emotional. It means different things to different people. And so, until you are able to kind of divorce that emotional sense of money from your decisions about money, it is very difficult to make better decisions about money and ease your distress surrounding money.
[00:34:15] Andrew: And so, when we think about the experiences, I know we had talked about your childhood where you are kind of focused on making money work for you. Do you think that a lot of people’s issues in adulthood comes from maybe experiences in childhood that they saw whether it be parents or the lack of education?
[00:34:33] Emily: Oh, absolutely. Yeah. There is a researcher named Dr. Bradley Klontz. He’s a financial psychologist and he has coined the term money scripts to describe the stories we tell ourselves about money, and these stories are rooted in how we sell money as children. So, there are two ways that this can happen. There is like explicit information about money that our parents and family and even society teach us and then there are the stories that we as children kind of draw about money. We come up with them about money because we don’t have the full picture to be able to understand it and what happens is both the explicit stories that are our parents teach us or lessons our parents teach us and the ones that we kind of create on our own become cemented as, “Well, this is what money is,” as children.
And because money is a taboo subject in our culture, we don’t talk about it. We don’t talk about the fact that so for one person may feel that money is how you show love. Since if we don’t talk about it in our culture, we don’t have a chance to examine those scripts or examine that belief and think, “Well, wait a minute, that is not necessarily true.” We just continue proceeding as if that is true because that’s what’s true in childhood and then it ends up causing both stress and relationship problems potentially if you continue along with that belief system without examining it and run smack up against someone who believes that money is a source of shame for instance. So, the idea of being lavished with expensive gifts is going to cause a fight.
[00:36:37] Andrew: Yeah. That’s where when we look, I think of Valentine’s Day yesterday, but the struggles or the stress in relationships, I think a lot of people they look at the love aspect of one side, but you also have to get a really good understanding of your partner. You’re going to be with them for the long haul. You know, having those discussions on money is so important. Are they savers? Are they spenders? Are they organized? Are they thinking long-term? So, in your book, do you talk about the relationship side and what we can do to have a better money relationship with our partner?
[00:37:14] Emily: Yeah. I do get into that a little bit and so one of the first things is knowing who you are in terms of finances because that’s the first thing and that’s true of any kind of relationship advice is you need to know yourself before you can work on what’s going on between you and your spouse or partner. So, knowing who you are, knowing what is meaningful to you, what money means to you, what your money scripts are, what you believe about money. So, once you have done that then you can go into conversations about money recognizing what your kind of emotional triggers are when it comes to money, which makes it a lot easier to talk to your spouse or partner about money without being emotionally triggered by a money situation and then that also if your spouse is on board, having them also determine what their money scripts are and figure out what they believe about money. So, when you can do that you can have a conversation knowing, “Okay. I know that this is what her triggers are. She knows that this is what my triggers are. We can kind of like work around those as we figure out what to do going forward.”
[00:38:31] Andrew: Yeah. And if you can get to the bottom of that in both beyond somewhat of the same page of at least where you stand, that can help a lot of potential issues in the future, because so many times relationships end up failing and it comes down to the money and so not, you know, and people are hiding what they’re spending, and all kinds of different things, which then can only lead to probably disaster. So, when we think about this budgeting and I assume that you take pretty good detailed notes of what you spend. Budgeting is something that a lot of people lack of maybe organizing where their money is going each and every week or each and every month. What do you do to keep track of the family finances of where money is going, especially if you are using cash more than credit cards?
[00:39:15] Emily: So, as I said, I’m quite a nerd. I have a full Excel spreadsheet that I used to keep track of my finances. My husband uses Excel quite a bit in his job. He’s an engineer and so he helped me create it so it works for both of us. I also color-coded it because that’s something that makes me excited to work on. It is like, “Ooh, it’s pretty colors.” So, and that’s something and I do not expect anyone to do what I do, but I spent probably about an hour-and-a-half to 2 hours a week on our finances. So, I track what we spent. I have what I call envelope budgeting, but it’s a savings account as I used to do traditional envelope budgeting with cash on envelopes, but it got to be a little onerous. If my husband forgot to bring cash with him then I had to put the money back in the bank to pay the credit card, that sort of thing.
But I have things separated out so I know exactly where the money is coming from to pay for anything from daycare for my kids to pet food, to if my husband and I go out on a date, that sort of thing. So, again, I don’t expect anyone to do what I do. I do this because I enjoy it. What I do think is important is for you to find the budgeting system that works for you. You need to know what your financial psychology is and lean into it because if you hear me say this and you’re thinking like, “Oh, I need to do that too,” but the idea of opening up an Excel spreadsheet is horrifying to you, you’re not actually going to follow it. So, the most important thing about creating a budget is creating something that is idiosyncratic to what motivates you. So, for some people, that means you would do great if someone else does the tracking for you so that’s where things like Mint.com would be good. So, as long as you don’t have to do the tracking, you can make good decisions about your money.
[00:41:16] Emily: For other people, that might mean productively ignoring your money. There are apps out there that will allow you to be to productively ignore your money. So, for instance, things like Digit is an app that will transfer money to savings based on what your spending is in a way that that can tell what is safe to be transferred and then that’s a way for you to save without having to think about it.
[00:41:41] Andrew: Have you heard of Tiller Money?
[00:41:44] Emily: No. I think that’s a new one to me.
[00:41:45] Andrew: Okay. Yeah. So, I actually started using it. I’ll send it to you in a link but Michael Kitces’ one of his blogs, a planner, who actually use it for herself and now for clients but I think it could be right up your alley, especially when you talk about Excel spreadsheets. Basically, it’s different templates using Excel spreadsheet and automating the process that you’re doing so basically, you’re able to connect the credit cards, create your own categories because that’s part of the problem with Mint and AMEX is that the categories get all skewed. And then ultimately, you can create the weekly budget or the expenses, the analysis. So, I’ll send it to you but, for listeners, Tiller Money allows you to really take that automation to the next level, while still getting in the weeds and being able to track things on the Excel basis there. So, it’s one that it ties into Google Sheets and so it’s just an automatic deal and every week I’ll go in and I’ll categorize if it hasn’t already been categorized.
Like, for instance, we have a new dog so I created category Pets and so every time like Chewy.com or something of that nature, it’ll automatically then position that as a category and then I can track to see, hey, how much are we spending on that versus something else? So, Tiller Money, awesome stuff. Definitely recommend it.
[00:43:11] Emily: Sounds good.
[00:43:13] Andrew: Okay. So, as we kind of take this to the end here and finish up, what are some ways that we can create good habits in regards to our money, creating those good habits to help us reach our goals?
[00:43:29] Emily: So, one of the important things that I think to remember is that a lot of good habits are about removing temptations from your space. So, they found that the people who have the most willpower don’t have any like core inner strength that that the rest of us lack. It’s that they have structured their lives to remove temptations and that’s something that I think is really important because we tend to beat ourselves up if we have bad habits. Whereas that’s the way our brains are designed where we’re structured to follow habits and the way to break a habit is to make it impossible to engage in it. So, for instance, one of the things that I tell people is if you have a problem with online shopping, first thing you do is take your credit card information out of the memory of all of the e-tailers that you go to.
The second or a couple seconds it takes for you to get up and get your wallet to get your credit card so you can put it in, gives you enough time to go, “Do I really want to buy this?” that the one-click ordering does not give you, and there’s a reason. I mean, it’s not for our convenience that we’ve been offered one-click ordering. Similarly, if you unsubscribe from the sales newsletters you get from your favorite e-tailers, if you don’t know something exists, you’re not going be interested in buying it. So, it’s those sorts of things that I think are our the most productive way of reestablishing habits and getting into good financial habits is remove the temptations. Look around, what are the things that you spend money on, what are the things that you wish you didn’t do financially?
[00:45:23] Emily: So, and that can be anything from shopping’s a really common easy example but another one is like I get freaked out when the market has a downturn and I take money out of the market. So, okay, then what you can do is set it up so that you change the password for all of your accounts and have your spouse hold onto the password or someone you trust and you are only allowed to check it every three months so that you cannot see how market downturn affects your money and overreact to it. So, those are the sorts of things like start thinking creatively about what your worst financial habits are and ways that you can get around those financial habits and kind of force yourself to behave in the way that you want to behave and once you start thinking about it that way then you take willpower out of the equation and you take the sense that you should be able to do it a certain way out of the equation and it simply becomes something that you have to do because that’s how your life is set up and then it becomes a habit.
[00:46:37] Andrew: That’s great advice. Sometimes, you’re right, ignorance is bliss. It’s not following the marketing messages out there and needing to keep up with the Joneses can be your best outcome, best solution for a good outcome there. So, you’re obviously pretty sophisticated in your planning and you drill down into the weeds. Question for you, do you work with a financial planner or do you, guys, you and your husband are you do-it-yourselfers?
[00:47:03] Emily: We are currently do-it-yourselfers. So, my father was a financial planner, so he was always my financial planner. Unfortunately, he passed away in 2013 and it was, he recommended someone for us to go to where we are living before he passed away so we were going to that same financial planner for quite some time and then when we moved to Milwaukee in 2016, I realized that everything that the financial planner was offering me was something that I could do on my own. Now, I do generally tend to have a pretty rosy view of financial planning just because my dad was fantastic at it but, you know, I got to this point where I was like I feel really good about being able to do this on my own and kind of proud of the fact that I think my dad would be proud of me for doing it myself at this point. That said, when we get to, if or when we get to things that are little more complex, we’ll certainly seek out advice.
I have a long-term goal of eventually I would like to create a museum exhibit for a children’s museum on financial literacy in my dad’s name. So, that sort of thing for like big long-term goals, I’m going to be seeking out a financial planner and expert to help me with that, but for the general retirement savings, saving for college, and all of that, my husband and I are doing really great on our own.
[00:48:39] Andrew: Awesome. Love to hear it and you have a passion for it which is good. So, the question for you is those that majority of people that really can’t do it on their own or not the self-starter, look at this as a foreign language or just are too busy running their businesses or an executive, what are some quick tips what people should look for if they are to interview a financial planning firm, an advisor? What do you think in your experience are some questions that should be asked?
[00:49:06] Emily: So, there are a couple of things to remember when you’re looking for a financial planner. One is that it’s very easy to fake trustworthiness. That’s the reason why con artists have been con artists and why people still fall for it. So, you want to go beyond feeling warm and fuzzy with the person that you meet. So, you want to ask, the first question I think the most important question to ask is, “How are you compensated?” because that will help you to really understand what this relationship is going to be. So, now if your potential advisor says that they’re compensated via commission, that’s not necessarily a bad thing. Just understanding how it works is great. It’s when they say, “Don’t worry your pretty little head about it,” that’s when you go, “Nope. Thank you very much. We’re not working together.”
The other thing to have them kind of repeat back to you what your financial concerns are, what your plans are. So, in this interview, you’re interviewing each other. You’re interviewing the advisor to see if they are going to fit well for you. They’re also interviewing you to see if you’re a good client, good match for the kind of work that they do. And so, by asking them like, “Tell me what you see as my financial goals and objectives based on this conversation that we’ve had,” A, you can tell that they see you as an individual that they were listening to you that they can then follow what it is that you really want. And, B, it’s a really good way to help you crystallize your own concerns and views and they can kind of help you come to a better understanding of what it is that you want. Because a lot of times our ideas are so amorphous, talking it out with someone who does this for a living can help really focus what it is you want.
[00:51:12] Andrew: All awesome points and the other thing we tell our prospective clients is we are planning centric first but we want to build a long-term relationship. They want to build and go on a journey, so it’s something where you have to feel comfortable with not just what maybe they offer but do they have the same beliefs, do we want to work together side-by-side. And there are many cases on our end where they may have a lot of dollars, but we’re not going to work with them because we know it’s not going to be a fit. We don’t want to put the time in, in the beginning, which is very time intensive to get the plan up and where it needs to be at least for the now for them just to walk away. So, I think it’s on both ends there, but like you said, make sure that it’s a comfort level that they’re transparent. Are they working in a fiduciary capacity for you? And make sure they’re listening to you, not just pushing what their mothership is trying to position into.
So, and again, what’s right for one may not be right for the other so it’s just where that comfort level is. And do-it-yourselfers like yourself, also you could find a planner that just charges a fee to sit down and review what you’re doing and give you pros and cons and second opinion without any ulterior motives. That’s actually not a bad idea too to have somebody just run a full financial diagnostic checkup for you.
[00:52:37] Emily: Yeah. I feel like it’s a little bit like my husband’s an automotive engineer so it’s a little like keeping our cars running. You know, there’s only so much you can do at home. Eventually, you do need to take it into a mechanic, just get a full diagnostic, and make sure everything’s going well.
[00:52:54] Andrew: Awesome. Well, we’ve covered a lot today from the gamut of what we can look for as we get closer to retirement in that transition of retirement, some of the tips with Medicare, Social Security, and then how can we help create a stress-free financial life in the now. So, this has been awesome. So, inside of the of the show notes I know we’ll link out to the various books for you, the four books, End Financial Stress Now, Making Social Security Work For You, Choose Your Retirement, and then the original, the Five Years Before You Retire. Also, Emily. How else can they follow you? Is it on Wise Bread? Do you have your own blog page there that we can put on the show notes?
[00:53:41] Emily: Well, you can find me at EmilyGuyBirken.com and all of my work is available there. I also really welcome conversation on Twitter. My handle is Emily Guy Birken and then I have a Facebook page, Author Emily Guy Birken. So, you can reach me at any of those places.
[00:54:02] Andrew: Awesome. Listeners, definitely follow Emily. She puts out great content. A lot of questions that are in your mind, she’s going to write through on and the good thing, Emily, you put it in English where they can simplify it and brings probably back to your training as an English teacher there. So, well, thanks for being part of the Your Wealth & Beyond Podcast. This has been awesome. Have a great day. Stay warm there in Milwaukee.
[00:54:27] Emily: Thank you very much.
[00:54:29] Andrew: All right and stay tuned, listeners, later this month for another episode of Your Wealth & Beyond. Take care, everybody, and happy planning.