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RETHINK YOUR MONEY

5 Ways to Find Financial Success by Obtaining Peace With Your Money

Published on April 3, 2023

John Hagensen
MSFS, CFP®, CFS, CTS, CIS, CES

Financial success shouldn’t be defined by how much you make but rather by how you think, feel and act when it comes to your money. Join John as he details five ways you can find peace around your money and live a more harmonious life (2:11). John also welcomes Creative Planning Wealth Manager Scott Schuster to break down the top money moves you should make during the different stages of retirement (11:00). Plus, you don’t want to miss what you need to know when it comes to risk and the stock market (28:25).

Episode Notes:

Presented by Creative Planning, each week Host and Managing Director John Hagensen cuts through the headlines and loud takes to challenge the advice you may have been given and reaffirm what you know to be true. Plus, don’t miss his weekly interviews with Creative Planning specialists as they cover investing, taxes, estate planning and many other areas that impact your financial life!

John Hagensen: Welcome to the Rethink Your Money podcast, presented by Creative Planning. I’m John Hagensen and ahead on today’s show, we’ll explore finding peace around your money, my conversation with certified public accountant and certified financial planner Scott Schuster on how to construct a tax focused retirement plan, as well as how to invest your money when consumer sentiment is low. Now, join me as I help you rethink your money.

I’ve really enjoyed watching this Netflix docu-series on Formula One. Now, I’ve never been someone who was into NASCAR or racing, but it’s a really well done show. One of the things that I found most impressive about these F1 drivers is that in the midst of going 200 miles an hour, driving through these narrow streets of Monaco on these sharp turns where you’re inches away from hitting the walls, is that they’re so calm. They’re on their microphone while going 200 miles an hour, asking about their last lap speed, what’s the pace of the driver in front of them? It’s like you or I sitting at a red light taking a sip of our latte. This was what made Tom Brady so incredible. When everyone else’s heart rate increased because it was the fourth quarter of a Super Bowl, he was calm as a cucumber.

How about Captain Sullenberger, Sully? As a former airline pilot myself that astonishes me to take off out of LaGuardia, have bird strikes on both engines, and as the controller is saying, “Turn back to LaGuardia,” and he knows he’s not going to make it, he says, in the most matter of fact, calm voice, “I’m not going to make it. I’m landing in the Hudson.” You can almost hear the astonishment in the controller’s voice like, “Wait, what did you say?” And of course, at that point he stopped talking because that was the least of his concerns. He wanted to focus all of his attention on safely landing in the water, which he miraculously did to perfection.

You and I might not be Formula One drivers, or NFL quarterbacks, or one of the best aviators in the country, but the principles that make them successful in times of heightened emotion are valuable lessons that we can apply not only to our lives, but more specifically to our money, because our financial success will be defined more by our actions in difficult times than how we react in the good times. And I’ve got five steps for how you can feel peace of mind when it comes to your finances.

The first, fully committing to improvement. We all commit to something. I met with someone recently that needs tax planning, estate planning, needs some legal work done, needs broad-based financial planning. We don’t have any of that. But they’ve used a broker for almost 30 years. And so as they sat back in their chair at the conference table in my office, they said, “Well, we really need to do this. Our person isn’t a law firm, they’re not a tax practice. We need these services. We don’t even really have a retirement plan, but we just have our investments there. We’re not really sure what to do.” And to that, I just said, “I don’t know what to tell you. We’re happy to help if you’d like us to help you, but you have to commit to wanting to make these improvements.” And frankly, there’s not a right or wrong answer. It’s their money.

I had another client who drove an hour and a half to our office, even though I could have met with them on Zoom. They brought every investment and insurance statement they had. And when I asked why they drove all the way up when we could have accomplished everything through a virtual meeting, they said, “We need to get this done. We don’t have an estate plan. Our business isn’t incorporated. We’re in our sixties and want to retire in the next five years. And while we’ve done a decent job saving, we don’t have any sort of cohesive plan. We’ve got accounts all over the place. This is way too important. We wanted to come up here, sit in your office and get this done.”

If you sometimes find yourself feeling overwhelmed at the thought of everything that you need to get done, join the club. All of us have made mistakes. All of us have room for improvement. But the key is committing to your improvement, and then taking action. As the great Dr. Martin Luther King Jr. Said, “Take the first step in faith.” You don’t have to see the whole staircase, just take the first step. And this first step we are making easier than ever before here at Creative Planning. To meet with a local wealth manager just like myself, schedule your meeting by visiting creativeplanning.com/radio. Why not give your wealth a second look?

And so as we continue on with this discovery of how to find peace around our money, after we fully commit to that improvement, which is foundational, step number two, and this one might surprise you, joyfully give it away. You’re telling me that for me to feel more peace about money, I’m going to have less of it because I’m giving some away? Yes, that’s exactly what I’m saying. Because a signal of abundance triggers in your subconscious when you give to those who have less than you. I don’t believe that you can have maximum peace of mind around your money if you don’t give any away.

Now, how much you choose to give, where you choose to give it, that is a very personal decision and one that I think should be met with a lot of thought and consideration. A Gallup World Poll looked at 120 out of 136 countries, and those who donated to charity in the previous month reported greater satisfaction with life. We’re not even talking about finding peace around money, just overall peace with life. There is something inherently fulfilling about knowing that you’re contributing at a bigger level than just yourself. If you find it sometimes difficult to give, maybe because you’re in a scarcity mindset where you don’t possibly feel like you have enough, one exercise I would encourage you to do is give a small amount. Maybe all you can do is $50 a month, but it will establish that muscle memory and that heart of generosity that will be necessary in you achieving true full peace when it comes to your money.

I’ve got to brag here for a moment on my 19 year old. We adopted him when he was nine years old from Ethiopia. And I think certainly that experience for him, and also our 21 year old whose from the same village in rural Ethiopia, their upbringings and their backgrounds certainly shape, as it does for all of us, their worldview. And our 19 year old gave away basically everything that he had earned. And me being a certified financial planner and a wealth manager like, “Whoa, that was aggressive. You’ve really run yourself lower on money.” He wasn’t running the compound interest calculation that I was going through in my head about how much that could have been worth when he was 65. He was living in the present and saying, “Yes, I know that I need to be wise financially, but I’m confident that I’ll be okay, and they need it more than I do.” What a powerful testimony from my teenage son on generosity and the peace that you can find with your money when you give to others.

My third step for you in finding peace around your money is to mindfully manage it. Faber said it best when he said, “Finance without strategy is just numbers, and strategy without finance is just dreaming.” And I understand making a budget is about as interesting as watching paint dry, but it’s important that you know your numbers. How much are you making and how much are you spending? And then map out a solid long-term financial plan, one that considers who you are now, where you’re at in life, what events are on the horizon, and what you want from your future. And this plan must be dynamic because your life’s dynamic.

Number four, consciously ask for help. You ever done something for the first time and found it to be quite scary, but then, after you’ve done it multiple times and it’s more familiar, you have more confidence through those experiences? Imagine you’re skydiving and you’re up there looking out of the plane, down at the ground, everything tiny, probably feeling some anxiety, a little bit of an adrenaline rush. But when it’s a tandem jump and your instructor that strapped you says, “This is my 1000th jump. If anything goes wrong, I’ll pull the shoot. I’ve got you taken care of,” you probably feel a little bit less nervous. And this is what a great financial advisor can do for you.

And I would actually take that a step further. In my example, that’s what a fiduciary financial advisor does, not one selling you products for commissions. That’s the person that says, “Hey, I’ve got all the equipment on you. I think you’re going to be fine.” They push you out of the plane and they say, “Make sure you pull your strap. By the way, if you don’t pull your strap, you’ll be dead. I’ll be fine. I’m drinking a latte up here in the airplane.” A fiduciary advisor is that instructor that’s strapped you. And frankly, you feel a little bit more confident because you say, “If something happens to me and this shoot doesn’t open, my instructor’s dead, too.” Your interests and your fate are aligned. This is how registered investment advisory firms, like us here at Creative Planning, operate. And so that’s why as we look at this portion asking for help, I added consciously asking for help to find peace because advisors are not created equal, and the quality of your Sherpa that takes you up Everest and then back down will make an enormous impact on your success or failure.

And the last step in finding peace around your money is firmly trusting in the future, but living in the present. When we focus on the past, it often is filled with regret. When we’re fixated on the future, it can cause anxiety. When we live in the present, that can bring peace. Life is what’s happening While you are busy making plans, if you’re feeling stress or anxiety around something right now in your life, do this exercise. Consider whether or not what you are currently worried about is going to still matter five years from now. Oftentimes, when you run what is currently bothering you through that filter, you find that it’s probably not as big a deal in the long run as it seems in the moment.

There are thousands of variables in your future that you simply can’t control. So focus on the things that you can in fact control and remove the worry from the things that you can’t. And so to recap my tips for finding peace around your money, fully commit to your improvement, first and foremost, joyfully give it away, mindfully manage it, conscientiously ask for help, and firmly believe in the future while living in the here and now.

I am joined by an extra special guest today. His name is Scott Schuster. He’s a fellow wealth manager here at Creative Planning, a certified public accountant, certified financial planner with more than 30 years a professional experience. Thank you so much for joining me here today on Rethink Your Money, Scott.

Scott Schuster:  Thanks for having me, John. Really appreciate being here.

John:     You have a unique background of tax, along with being a certified financial planner, and that’s what I want to discuss today is a tax focused financial plan. So where do you believe people should begin?

Scott:    When you talk about retirement planning, people really need to start with absolute square one. And it’s amazing to me how many people don’t really know what they spend in retirement. They get out a piece of paper or they get out a spreadsheet, and they start adding up the things they spend, their coffee, the dog walker, the times they went to dinner, and they forget that an average American spends money between 1500 and 1800 times a year. So after about three minutes of watching them just fuddle around in that, I say, “Let’s do something a little different. If you give me two numbers, in 35 seconds, I can tell you how much you spent. How much did you make, and how much did you save?”

John:     Perfect.

Scott:    If you give me those two numbers, I can use subtraction and I can tell you what your spend rate is, and I’m right, and they’re mostly wrong. It’s kind of funny that way.

John:     That’s the exact approach that I take with clients, as well. I think it’s so much easier. So know your numbers, figure out the spend rate. What next?

Scott:    Understand the difference between cash flow and income. In retirement, you’re going to be super excited. You’re going to drop the mic on your boss. You’re going to say, “Hey, thanks for the chance to work here. I’m out.” And you’re going to walk to the mailbox, and you’re going to hope to heck that there’s … Let’s say you need 10 grand a month to live on. You’re going to look in there and look for 10 grand. And the reality, there’s not going to be 10 grand in your mailbox. So what there’s going to be is probably a couple streams of income, not cash flow, but income. There’s going to be a social security check possibly for one person, maybe for another, and possibly a pension. So what they have to do is they have to first off understand what their income streams are and when they start, a lot of times they don’t start exactly the day someone retires, and then figure out if their assets can make up for the difference between those two.

John:     What about the three types of money from a taxation standpoint, pulling from after tax, tax-exempt, or fully taxable retirement accounts impact how much of that gap you’re able to fill. So how do you evaluate that when you’re trying to fulfill the needed retirement income?

Scott:    I love how you say that. There really are only three kinds of money, but there are three kinds of money. The three kinds of money best to worst. Best kind of money in the world is no tax money. No tax means never to be taxed, ever, for your life plus 10 years. So that’s Roth money, that’s health savings account money. That’s the holy grail. If you spend that money, everything else is gone. That’s the last ditch effort to spend. The second best kind of money is actually what I call after tax money. So you get your paycheck, Uncle Sam takes some bucks, state Sam takes some bucks, and you have some dollars left, most of which you pay your daughter’s Starbucks cards and you pay for college. But there’s a couple dollars left over that you go invest, whether it’s in a joint account, a trust account. Now that money, even though it’s exposed to taxation, the capital gains rate is only applied to the difference between what you put in and what it grows to. And it’s a heck of a lot lower than ordinary income.

So the second best kind of money is post tax money. Most people in this country have a ton of IRA 401k monies. That’s the worst kind of money out there. Every time that you need to go buy a donut or buy a cup of coffee, you got to pay the federal government, for sure. And depending on what state you live in, you also got to pay the state government at times. So you really need to understand the power and the difference between your no tax, your post-tax, and your pre-tax. And then you need to get your creative hat on and get yourself the right cash flow depending on the buckets that you’re drawing from.

John:     So once someone is aware of these three types of money, how should they determine which type of investments go into each bucket?

Scott:    So that is where I can find so many different holes in people’s portfolio. They might have a perfect allocation, so they’re allocation, good location bad. Say a typical affluent person has a couple million bucks and they’re getting ready to retire. Invariably, 70 to 80% of their money is going to be in IRA’s, 401ks, because that’s the easiest and the most convenient place for people to save. The next bucket that people will have will be that after tax bucket, and then obviously in the Roth IRA, HSA, that’s where you want all the aggressive investments.

At Creative Planning, John, you know how we do this. We talk to families and we say, “You want to really have between five to seven years of your spend rate in bonds.” And that’s really to let yourself go through some of these economic cycles that we’re living through right now, not an exactly wonderful time where the market’s choppy. Let yourself be able to turn the news off, not listen to what’s going on, not listen to the war stories, not listen to the banks failing, but be able to live your life and know comfortably that you’ve got five to seven years of spend rate to get yourself through that economic cycle. You want every penny of those bonds, you want to hide them in your IRAs.

John:     Sure.

Scott:    That’s the worst tax asset that you’ve got. If you have more money than you need, Roth assets giving to the next generation are the best things in the world because they’re tax free. But the second best asset you can give to a next generation is after tax assets. Because, and I say this tongue in cheek, if you forget to be alive, the federal government and the state government pay all the taxes on those dollars, and the recipient of them gets them tax free. So in essence, it’s almost a Roth if generation behind you spends it.

John:     Sure.

Scott:    If you put your bonds in those assets, you get no growth on them and you don’t get the benefit of Uncle Sam and State Sam paying the taxes for you.

John:     And a really good test on asset location is to simply look at all of your accounts. And if they each have the exact same allocation, let’s say you’re 60% stocks and 40% bonds, you’re not doing this right. And so to put a bow on this portion of our discussion around what someone should know if they’re about five years out from retiring, what advice would you provide as a summary?

Scott:    Definitely know your number, understand the cash flows that you’re going to have in terms of both retirement income and then what your assets look like. The last thing I’ll tee off, and I want to just make sure people know this, John, what’s your wife’s name?

John:     Brittany.

Scott:    So where are you and Brittany going to retire? John?

John:     I have no idea.

Scott:    Okay. I love that. You’re too young. I’m way older than you. I want every client within five years to know the answer to that. And it’s not so much that I can tell you that I want you to live in the south of France or wherever it is, but I want you to understand the state tax ramifications of the state that you’re going to live in. So knowing that, as well, is super helpful in terms of making sure that your asset location, as well as maybe Roth conversion strategies, are being done right while you have some lead time to be able to do it. So not really a super good bow, but more of a wrapper.

John:     No, no, that’s great. All right, Scott, so let’s say now we’re about to retire. We’re within a year. From a tax focused financial planning standpoint, as a CPA, what’s your advice?

Scott:    Have what I call a comfortable cash zero. So let’s say your cash zero is 50 grand. If you have 49 grand in your checking account, you’re not going to go to Starbucks because you feel destitute. Okay? We’re going to trial run your retirement budget. You told me that you’re going to live on 12 grand a month. We’re going to have 12 grand a month flow from your paycheck into your checking account. And on April 7th and on August 9th and on May 13th, I’m going to call you and say, “How much do you have in your checking account?”

And you’re going to say one of three things, right? You’re going to say, “49.7,” and I’m going to say, “Okay, all systems go because you’re spending 12 grand a month.” You’re going to say, “Oh, Scott, I got 33, but don’t worry about it,” and you’re lying to yourself, so I’m going to say, “Okay, your spend rate is really higher than what you thought.” Or you’re going to say, “I have 63,005,” and I’m saying, “Oh my gosh, your spend rate’s lower, but we’re going to really dial in what your real spend rate is by test-driving it in the last year while you’re working.”

John:     That’s a great exercise. So what other consideration should be taken in the final year before retirement, Scott?

Scott:    Now is the time to not let any vagaries exist in their retirement plan. So it’s the time to get absolutely specific with all streams of retirement income. When are you going to take your social security, at full retirement value, earlier, or at age 70? When’s your spouse, same thing? And then, not in a more complex fashion, but a lot of people have access to pensions, whether they were teachers, whether they were working in a company that had a pension, and understand what the pension distribution options are. You really got to dial in all the specifics of your retirement income because we then have to know how much your assets have to provide you on an annual basis. And then we get our cool hats on and try and figure out the best way to provide that cash flow in the most efficient manner possible.

John:     Scott, you are the best. As always with you, this was entertaining and it was informative. I enjoyed myself, and I hope you did, as well. Thank you for joining me here on Rethink Your Money.

Scott:    Thanks, John.

John:     And if you are listening to Scott and me talk, and you’re wondering, “Am I doing this correctly?” speak with one of our local fiduciaries who isn’t looking to sell you something, but rather explain to you in a clear and understandable way exactly where you stand with your money. That’s what we’ve been helping families with since 1983 here at Creative Planning, in all 50 states and in over 75 countries around the world. CreativePlanning.com/radio.

Well, according to Goldman Sachs, Americans are expected this year to dump $1.1 trillion in stocks and move those proceeds to cash and money market funds. I think there’s a lesson to be had. When markets drop as they did last year, and we see one of the worst performing periods for a balanced portfolio in nearly five decades, what follows? Well, all of us running out of the store when everything goes on sale. This is the year of Tara. That’s right. We’re going to talk about Tara and her sister Tina. Tara stands for there are reasonable alternatives.

We have seen a rise in bond yields since the start of 2022, and that higher interest rate has increased flows to bonds and money market funds because yeah, there are reasonable alternatives now to equities. If you look at Tara’s sister Tina, which stands for, of course, there is no alternative, well, stocks did very well, and have for the previous decade leading up to 2022, and that was in part because, again, there was no alternative to stocks. Interest rates were near zero.

Now, historically speaking, what happens in these Tara years where there are reasonable alternatives to equities, these households tend to buy fixed income products. And to some extent, this is logical. When your expected return on equities isn’t as high, then what you are expecting to earn in less volatile assets due to higher interest rates, people are often less receptive to taking on additional risk. So the practical question for you and I is do we change our asset allocation just because interest rates have now gone up? And I would say in short, the answer is maybe. Now it could be a good time for you to look at your allocation, but it doesn’t necessarily mean a change is required because relocating while your investments are down in value often doesn’t make sense.

There’s a missing 5%, as I call it in most Americans historical returns. We are seemingly looking under our couch cushions and in the drier little vent screen saying, “Where did 5% per year go for the last 30 years on our money?” Because according to many recent studies, while the S&P 500 has earned nearly 10% per year for the last 30 years, the average American has barely earned half of that on their equity mutual fund investments. Not bonds, not cash, not annuities. We’re talking growth-oriented stocks, and we are missing 5% per year for the last three decades as Americans. Where is it going? Fees. Yep, some of that. Taxes, Uncle Sam gets his share. But by far the biggest, bad behavior and dumb decisions. And it is during these very times, as we sit well off market highs, and have experienced tremendous volatility in a banking crisis, and not too long ago, a global pandemic where we saw the fastest bear market in the history of the stock market, where it can be tempting to make reactionary decisions.

Let me share with you a real world example. One of the biggest and most popular funds has been ARC investments. And I’m not picking on them, but rather using this as an example. Let me give you some facts on ARC. March of 2020, there was $2 billion in the fund. The next 12 months, the fund went up 150% and $15 billion came in of new AUM. And this is the key takeaway that I’m trying to convey. The fund was skyrocketing and the inflows were pouring in. From March of ’21 to the end of 2022. The fund was down 77%. The point isn’t about the specific fund itself and whether it’s a great investment or a bad investment. The point is that seven and a half times the amount of investors were there at the top to experience the downfall while there were less at the beginning during the run-up.

The summary of the fund since inception in 2014 … And again, this is not an endorsement of this fund, this is not a solicitation of the fund, it is certainly not me telling you you shouldn’t own the fund, but using it to make a broader point. The total return is up 82%. But here’s the key. The dollar weighted investor return is down 27%. Investor dollars lost about $10 billion. This is one of the most popular funds in history, and it’s grown a lot. Yet, the average investor in the fund has lost money. We’ve got a behavior gap. That’s where we’re missing that 5%.

And so, as we sit today in this Tara environment where there are reasonable alternatives, it may be tempting to sell out of areas in the market that are down in value presently. But rather than doing so, let me encourage you to pause, and instead, get a second set of eyes from an experienced credentialed fiduciary that’s not looking to sell you something so that you can gain clarity around your situation. Schedule your meeting today online at CreativePlanning.com/radio. Why not give your wealth a second look?

Well, as we do each and every week, it is time for a game of Rethink or Reaffirm, where I’ll break down common wisdom or a hot take from the financial headlines, and together we’ll decide whether we should rethink it or reaffirm it. Our first topic is if consumer sentiment is down, it’s not a good time to invest. Well, I don’t know. Is that true? If everyone around you, and everything you’re reading, and everything that you’re hearing and seeing is negative, maybe the consensus is right. Well, actually it doesn’t necessarily mean that. And the reason is that consumer sentiment lags. So you’re getting the information after the fact.

Remember, the market is forward-looking, but how we feel about the market is always in retrospect. And furthermore, there’s something called mean reversion, which isn’t just related to finance, but it’s the idea that given enough time, things work back toward their averages. And if we know that the broad stock market has earned about eight to 12% a year, historically speaking, then your long-term forward-looking returns, once the market’s down, say 25 or 30%, tend to be higher from that moment moving forward than if it were currently up 25 or 30%. But, certainly it doesn’t feel that way.

In fact, if you look at the University of Michigan Consumer Sentiment Index and the S&P 500, and just take the forward 12 month returns from 1952 until the end of 2022, when consumer sentiment is in its highest 5%, so everybody’s really enthusiastic and optimistic, forward 12-month returns of the S&P 500 are 3.7%. All other sentiment readings are 11.1%. When consumer sentiment was at its lowest 5%, the S&P 500 has averaged 18% over the next 12 months.

Now, the takeaway isn’t that you should use this as a direct correlation, like when sentiment’s low, I’m going to pile a ton of money into the market, and then when it’s high and everybody’s excited, I’m going to move to cash. No, that is not what I’m advocating. But back to our question, the answer, too, if consumer sentiment is down, it’s not a good time to invest is an absolute rethink.

And our final piece of common wisdom, timing the stock market is difficult to successfully time the market. You don’t have to just be right once, you’ve got to be right twice, when you get out and when you get back in market. Timing reminds me of alcohol. When you go to open the second bottle of wine, no one says to themselves, “I’m going to be so thankful that I did this tomorrow. This is going to be great. I’m going to feel so spry and ready to go jog a few miles.” No, but what substances like that provide us is a temporary hit of relaxation. It calms us. Now, we know long term it’s bad for our health. We don’t sleep as well, we look worse, and so on, and so forth. But we are soothed in the moment. Market timing does the same thing.

And there’s a few primary challenges that I want to highlight as to specifically why it’s so hard. First off, just look at a fundamental level. The stock market has historically earned eight to 12% per year. Two-thirds of the market growth comes from inflation and dividends. The market’s up seven out of 10 calendar years on average. So when you are timing the market and you get out of the market, the odds simply are against you, then the market’s going to go down. Secondly, the order of market returns is completely randomized, and there is no pattern that can be found, which leads me into my next point. That happens because the future is unknown, and those unknown events impact the market long before you have time to react and make a trade. The market’s forward-looking and information is already priced in before you or I get the memo.

Another challenge that I see often overlooked is that your losses on the upside are unlimited. Let’s suppose that you sold in late 2008 as the market was plummeting, and then it continued dropping once you moved to cash all the way to March of 2009. And you were feeling pretty good about yourself because for a few months everyone else was losing a lot of money, and you were on the sidelines. Well, then the market started screaming back. We know this. March 9 of ’09 was the bottom. You’re wondering to yourself, “Well, is this just a dead cat bounce? Is this just a bear market rally and then things are going to drop again. I’m going to wait to get back in until I know that the coast is clear.” So, you wait, and it keeps running up. And you think to yourself, “Well, this isn’t sustainable. I’m going to wait until the market drops back to this number, and then I’ll buy.”

Well, unfortunately, the market often, and in this case of this example, never pulled back to the target that you had, and it just continued to forge on for the next 13 years toward new highs. And while I could spend the entire hour’s show talking about why it’s hard to time the market, I’ll leave you with one final challenge, and that is how rapidly markets recover off of their lows. Long before anyone on Main Street perceives things to be getting better, the market has already been rallying, and missing those early returns can be costly. Using a couple of our recent bear markets as proxies, the pandemic and the great financial crisis during ’08 and ’09, markets recovered over 30% within just a couple of months off their lows.

And so the verdict on whether timing the market is difficult, yeah, that’s a reaffirm. In fact, it could almost be a rethink because difficult could be replaced with impossible. And if you are in cash right now, or you’re just unsure how to enter the market, what your asset allocation should be, how you control risk and volatility while still growing your assets in an inflationary environment that is still sitting at near 40-year highs, what’s the right strategy for you? And how can you have peace of mind that you’re on track to accomplish your financial goals in the midst of an uncertain world? That’s what we’ve been helping people with just like you here at Creative Planning since 1983. We’re a law firm, a tax practice, a wealth management firm with over 210 billion of combined assets under management and advisement. And we’re helping families in all 50 states in more than 75 countries around the world. CreativePlanning.com/radio to meet with one of our local advisors. We have all the advice, all the expertise you need, all in-house.

It’s time for listener questions, and my answers. Our first comes from Randy in Queen Creek, Arizona. “What are your thoughts on AI when it comes to investing, and do you think there’s a potential for this technology to be helpful for everyday investors?” Do I think that ChatGPT is the answer for everything? No. But are we disregarding this as an exciting new technology that absolutely could impact the way that financial planning is constructed, or the way that you are able to receive information efficiently? Well, I think there is a lot of optimism across the board for some great use cases.

And if you’re unfamiliar with this new technology, it can be used to help with virtually anything. It can write a business plan, what should I do for my 10 year old’s birthday party? It can write a congratulations message for a coworker. But when it comes to our personal finances and your money related questions, probably better at this point to leave it to the humans. In fact, Fortune.com conducted a pretty interesting experiment where they had ChatGPT help make a plan to buy a $500,000 home. They ran the advice of the artificial intelligence against a real human certified financial planner. And the outcome was that while ChatGPT generated a lot of the same advice as the certified financial planner did, the process of working with the CFP to craft the actual financial plan toward homeownership provided much greater value, which obviously, this is a new technology, this isn’t a complete shock. But when working with the CFP, the person was able to ask specific questions about how their plan might change over time, and how to balance competing goals and potential unknowns.

And so, a few of the takeaways were that ChatGPT didn’t account for any potential changes in income. It had limited knowledge of events after 2021, most notably, the massive impact of rising interest rates. The real human was able to collaborate with the person to set realistic goals. For one, ChatGPT assumed the person knew exactly how much they spend. Well, as a certified financial planner myself, I know that almost no one knows exactly how much they spend. And if they do, it’ll probably change within a few months or a year. It’s very dynamic. A real human can keep you accountable and adjust your plan necessary.

This is, to me, the most important shortcoming, at least at this point, of AI. We can’t get six-pack abs because a robot hands us a workout plan. That’d be absolutely amazing if we could. But the hard part about being in great shape and why we don’t all look like fitness models isn’t because we’re not smart enough to figure out how to be in great shape. It’s because the doing is significantly harder than the knowing. That’s where human beings can be helpful. The reality is personal finance is far more personal than it is finance. If you’re wondering, “Is this something that I should be investing in? Should artificial intelligence be a part of my portfolio?” I would say, like any new exciting technology, yes, it should. But rather than going out and making big concentrated bets on really early stage companies, broadly diversify and you will have exposure to this technology through the ownership of other companies.

Almost all the biggest players in this space currently are some of the largest stocks in the S&P 500. And so, if AI takes off those stocks that you likely already own in ETFs and index funds may experience positive results by AI. But remember, there’s a big difference between the bleeding edge and the cutting edge. You may have thought the internet was going to be the next big thing in the late nineties, and by the way, you were right. But if you invested in the biggest player at that time, you would’ve bought America online. It was our browser, email, instant messenger. And so even if AI takes off, it’s extraordinarily difficult to find which needle in the haystack will ultimately emerge victorious, and oftentimes, think Yahoo versus Google or MySpace versus Facebook. It’s not the first household name in the space, the one that wins the battle, who ultimately wins the war.

And if you have questions like Randy, you can email those to radio@CreativePlanning.com. Next question from Carl in Tennessee, not sure which city, just says Tennessee. “With high inflation and market drops, do you still stand by not investing in gold or precious metals?” I will spare everyone who’s listened to the show for any amount of time a long answer that you’ve already heard now multiple times. Let me summarize. Gold hasn’t been a good inflation hedge statistically. That is a complete wives’ tale.

It doesn’t offer compounding. There’s no earnings or interest being generated. It’s more volatile than the stock market while earning similar returns to treasuries. And it’s not going to help you if the world ends because if that happens, you’re going to want guns, and warm clothes, and bottles of water. You’re not going to be wanting to lug around a bunch of gold bars in a backpack and then shave off a little piece of it to buy a six-pack up at seven-eleven. Beyond that, Carl, I absolutely do not advocate gold as a worthwhile investment, even in inflationary environments.

Our last question comes from Ann in Milwaukee, Wisconsin. “My portfolio is down 20%. I’m about three years from retirement. This is stressing me out. What should I be doing? I don’t want this to push back my plan.” So, Ann, my advice, get a review of your plan. If you’ve got confidence in who you’re working with, and they’re an independent fiduciary, and they’re not trying to sell you a bunch of high commissioned insurance products or proprietary funds being manufactured by their company, then have them review it. If you’re looking for a second set of eyes, find a company like us here at Creative Planning and review where you actually stand, in light of the drop of your investments, in terms of accomplishing your retirement goals.

And by the way, if you have no plan but have an advisor, that would be a good reason to fire them, or at least look in a different direction toward what you might be missing. But that analysis will answer if you have too much risk if your asset allocation’s correct. You said you’re wanting to retire in about three years. So do you have enough of a buffer outside of the stock market to allow your stocks time to work back to their averages? The fact that you’re down 20%, S&P’s down about 15% off of its high. So I’m not sure how you’re invested, but that seems somewhat aggressive relative to your time horizon. And that sort of planning can also help you determine if there are opportunities for you to be tax loss harvesting, or strategically rebalancing, or starting to plan out from a tax perspective where, in fact, those first withdrawals will actually come from, assuming that you’re going to need some of the portfolio to generate that cash flow.

And my biggest piece of advice for you, Ann, absolutely do not panic. Don’t snap sell what you currently own, assuming that you’re not in two stocks, that you’re properly diversified. That’s the worst thing you could do. So my advice is to sit down with a great advisor, have the plan built out if you don’t have one, review the plan if you do, to ensure that you are on track. We have offices in the Nashville area, in Milwaukee, as well as the East Valley of Phoenix. To request to speak with a local advisor, visit CreativePlanning.com/radio.

I want to conclude today’s show with something that I learned from my children. It’s pretty humbling, but also neat. When you are in a position as a parent like I am to seven children and you’re trying to instill wisdom, you know how imperfect you are, and that ultimately you’re still trying to figure things out. You’re trying to help nurture and grow these children into kind adolescents and great contributors to society. But yet, you learn more about yourself as a parent through that process. And in some cases, they actually straight up teach you things. I love it.

Our kindergartner came home at the beginning of the school year with a chart that said fixed versus growth mindset, and it is awesome. And we taped it to the inside door of one of our cabinets in the kitchen. And here are some of the examples on this sheet. A fixed mindset says, “I can’t do this,” versus a growth mindset, “I’m still learning.” How about, “I’m not good at this,” but instead say, “What am I missing?” How about I made a mistake, mistakes help me learn. I’ll never be good enough, versus I’m doing my best. A fixed mindset says, “They’re better than me.” But a growth mindset instead asks, “What can I learn from them?” A fixed mindset leads us to envy others’ success. But a growth mindset, it allows us to see these success stories as inspirational, and even aspirational. It’s something that we can work towards.

And so when you look at your financial picture, I want to encourage you to think in new terms about your money. I can learn new concepts about money. I believe I’m going to earn more and more over time. I’m going to listen to financially successful people and change my habits. I’m going to have an amazing retirement. Use big numbers when thinking about planning for your future. Dream big and get crystal clear on how you envision your money making a positive impact on the meaningful aspects of your life and the lives of those you love most. And remember, this is important because we are the wealthiest society in the history of planet Earth. Let’s make our money matter.

Announcer: Thank you for listening to Rethink Your Money, presented by Creative Planning. To hear past episodes or learn more about the topics and articles discussed on the show, go to CreativePlanning.com/radio. And to make sure you never miss an episode, you can subscribe to Rethink Your Money wherever you get your podcasts.

Disclaimer: The preceding program is furnished by Creative Planning, an SEC registered investment advisory firm that manages or advises on 225 billion in assets. John Hagensen works for Creative Planning, and all opinions expressed by John or his guests are solely their own, and do not represent the opinion of Creative Planning. This show is designed to be informational in nature, and does not constitute investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on this show, will be profitable or equal any historical performance levels.

Clients of Creative Planning may maintain positions in the securities discussed on this show. For individual guidance, please speak with an attorney, CPA, or financial planner directly for customized legal, tax, or financial advice that accounts for your personal risk tolerance, objectives, and suitability. If you would like our help, request to speak to an advisor by going to CreativePlanning.com. Creative Planning Tax and Legal are separate entities that must be engaged independently.

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