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Beyond the Headlines: Taking Charge of Your Financial Future

Published on June 24, 2024

John Hagensen

Major news headlines on inflation rates, the S&P 500 and the housing market generate a lot of buzz and remind us that prioritizing our financial planning is critical to a secure financial future. On this week’s episode, we’re exploring what you might face tomorrow if you aren’t intentional with your finances today.

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, five moves to make today with your future self in mind, the latest on inflation and the housing market with chief market strategist Charlie Bilello, as well as the difference between good debt, and bad debt. Now, join me as I help you rethink your money.

Time is our most precious commodity. It’s the great equalizer. It doesn’t matter whether you’re Jeff Bezos, or have a negative net worth. You have 24 hours in each day, but how do you buy your future self more time? Is it possible? It is, but often it requires you to do so by sacrificing time today. I’ve experienced a couple situations recently that struck me as to just how shortsighted we can be if we are not careful. My wife and I rolled up to one of our favorite coffee shops in San Diego called Better Buzz, with our youngest two in the double stroller, and the line was out the door. But with my little girls at wits end, throwing their dolls off the stroller, and kicking their shoes off, and they’re hungry, and they’re tired, I didn’t have to wait in that line. No, no, no, no, no.

Our acai bowls, and our avocado toast… Now, yes, my wife made the order, so I’m not taking credit for this. Also, don’t judge me. I’m in California. I’m eating healthy. We walked right up to the shelf, and grabbed our food that we had ordered ahead of time on the app. Saved us 15, 20 minutes, maybe longer, that we didn’t have to deal with a 4-year-old and a 2-year-old melting down, waiting to eat their yogurt parfait. Which got me thinking, why aren’t all of these people in the line using the app on the phone that they’re staring at while they’re in line? Literally order it, walk up, retrieve your order, sit down and eat.

The best example of this is the TSA precheck. Why doesn’t everyone do this? I wish that the TSA would hire me to be their promoter. I know they get a bad rap. Not everybody likes the TSA. They’re making you take your laptop out. No, yeah, that bottle of lotion’s a little bit too big. That bottle of hair gels a little bit too much liquid in it. I know, they make you throw it away, you’re not going to want to go back out through security, but hey, their pre-check option is amazing. You don’t have to take off your shoes, you don’t have to take anything out of your bag, and most importantly, you walk past hundreds of people in many cases, to get through security. It’s so convenient you might assume it’s really expensive, or really hard to get. No, it’s a one-time, $78 fee. So, you pay about $15.50 cents per year, because it’s good for five years. And according to the TSA, up to 99% of pre-check members wait less than 10 minutes at security.

Now, you’re asking yourself right now, what does any of this have to do with my money, aside from the fact that there are fees associated with these services? No, no, that’s not the point, but I’m glad you asked. Both of these examples of modern conveniences that save you hours upon hours over the course of a couple of years, are being overlooked because of the little bit of upfront work it takes to enjoy them. And sometimes that initial effort required deters us from doing what’s necessary today for the benefit of our future self. And in this case, saving our future selves massive amounts of time, and stress, and aggravation. And yes, in many cases, money, because time is money, and having a passive mindset about your coffee order, or the security line at the airport is one thing, but you can’t have the same passive mindset when it comes to your life savings. Most of your success in the future will be dependent upon the sacrifices you make today.

So my encouragement, be intentional about your choices now, and invest in your future self. They’ll thank you, I promise. So, how much time does the average American spend on personal finance? Let’s see how you stack up. Well, only 3% of Americans engage in financial planning daily. Financial planning engagement increases with age, with those 65 and older being the most involved. A lot of financial planners, most of their clients are 55, 60, 65, 75. It’s like, “Hey, don’t you want to work with younger people?” Yeah, we’d love to, but a lot of younger people don’t have the foresight to really care a whole lot about their future self.

Now here at Creative Planning, helping 75,000 clients in all 50 states and abroad, we have plenty of on top of it, self-motivated accumulators. Those that are still a long way out from retirement, and are thinking about the future. But they’re the minority, when looking broadly at society, because for most people, planning occurs as a response to crisis. One in four Americans surveyed by the Motley Fool primarily start financial planning in response to unexpected expenses or a loss of income. It’s not proactive, it’s reactive.

So, don’t be lazy with your finances, or you won’t be prepared for these five obvious scenarios that I see regularly as a certified financial planner, that should not come as a surprise. The first is retirement. If you’re lazy with your finances, you may not be on track for retirement, which on average is going to last you about 20 to 30 years. What’s your plan when you don’t have your wages? How much money will you need to retire comfortably and maintain your lifestyle? Do you know what that number is? Are you on track for that? Are you saving enough? How much income can you realistically expect from that nest egg? Which accounts will you withdraw from first? So my question for your current self today, for the benefit of your future self is do you have a written, documented, detailed financial plan? Can you reference that right now? This is not rhetorical. I want you to ask yourself that question. Do you actually have a plan, a real financial plan?

And the second reason not to be lazy with your finances is so that you’re prepared for tax increases in 2026. The Trump tax reform sunsets in about a year and a half. When’s the last time that your advisor reviewed your tax return? Like proactively, not to file your return, but when have you had that conversation, mapping out how to minimize taxes over the next five or 10 years? Have you been proactively tax loss harvesting? Have you been saving in the right type of accounts? Do you have the right investments in the right types of accounts? If you’re lazy with your finances, you won’t be prepared for unforeseen expenses. This is the crisis response that I was referring to in the study.

Medical accidents and injuries, job loss, natural disasters. When’s the last time that your insurance was reviewed? And I’m not talking about spending 15 minutes to see if you can save 15% or more on your car insurance, although I love the caveman ads, and that little gecko is sure cute, with his accent. I’m not talking about discount double checking with Aaron Rogers or my kid’s favorite Liberty, Liberty, Liberty, Liberty. No, no. I’m not talking about just checking to see if you can save money on insurance. Do you have the right coverages in place to adequately protect yourself against the unexpected?

Don’t be lazy with your finances, or you won’t be prepared for a recession. One out of every three to four years, the stock market is down in value. An average intra year correction in the market sees a drop of nearly 15%. About twice a decade you’ll see a full on bear market, which on average are down around 30%. If that derails your strategy, or you don’t have 100% confidence that when the market drops, and notice I didn’t say if, when the market drops, you have a game plan, and you will be okay, then you need to help out your future self by preparing today.

And the last reason you don’t want to be lazy with your finances is because you won’t be prepared for estate planning. I’m going to die. You are going to die. It’s inevitable. So, why do we not prepare for it? It’s not urgent, but if you died yesterday, are you 100% confident that everything would go where you want it to? It would minimize taxes, it would avoid probate, and the hassle associated with that, or do you think maybe there could be some improvements?

As a client of ours at Creative Planning, we will review your existing estate plan, and create a diagram that maps out in plain language what you presently have in place. We have over 50 attorneys and have done tens of thousands of estate plans over the last 40 years. If you want to save your future self time, and stress, and money, you want to put a big smile on your face as you walk past all the people standing in the TSA security line, then reach out today to creativeplanning.com/radio, just as thousands of others have already done, to speak with one of our nearly 500 certified financial planners, a local wealth manager just like myself, not looking to sell you something but rather provide clarity, then visit creative planning.com/radio now, to schedule your meeting. Why not give your wealth a second look?

Speaking of estate planning, did you know that only 32% of U.S. adults have created estate planning documents of any kind? And this isn’t anecdotal for me. I’ve met with two different people that stand out in the last couple of months, one with a $5 million net worth, and a super old will, printed off of a popular online website that barely even slightly sort of applies to their current situation. If they had passed away yesterday, it would be a nightmare.

I talked with someone who’s single, with no kids, a seven figure net worth, and absolutely no documents. I mean, this would be the Mr. Deed scenario, where a lawyer shows up in a suit and a briefcase, informing a distant cousin, “Hey, you essentially just hit the lottery from this relative. You met one time in your life.” Jeffrey Rollason, and Margaret Solstet dated in the 1980s. Now, almost 40 years later, after they’ve broken up, haven’t talked in decades, she stands to inherit his $1 million retirement account. You didn’t hear this incorrectly. The reason she might get the money is that in 1987, Rollason listed her on a handwritten form as the sole beneficiary of his workplace retirement account. He then never changed the beneficiary designation, and died in 2015.

And this is now a legal battle being fought between his family member, and this Margaret lady, who by the way, my opinion, should acknowledge clearly that his intentions were not to have her inherit a million dollars instead of his actual family. But, this goes to show how important updating beneficiary designations is. When is the last time you reviewed your beneficiary designations? Do you now have additional grandchildren? Are certain children no longer minors? One question to ask yourself is, should one of your children predecease you, do you want their share of the inheritance to pass through to those grandchildren? Because you have to designate that, and often, if not designated, you may unintentionally disinherit the grandchildren who may in many cases need the money more than your other grandchildren, because they’ve lost one of their parents.

Today I have a very special guest. Charlie Bilello is Creative Planning’s chief market strategist. Charlie’s an award-winning author, and he has been named by Business Insider and MarketWatch as one of the top people to follow on X, where he has over a half million followers. His market insights are often featured in Barron’s, Bloomberg, and the Wall Street Journal. Charlie has a JD and an MBA in finance and accounting from Fordham University, and a Bachelor’s in economics from Binghamton University. He holds the Chartered Market technician designation, and Certified Public Accountant certificate. Charlie, thank you for being here. A CPI report came out about a week and a half ago. What are the latest inflation trends we should be aware of?

Charlie Bilello:

If we exclude food and energy, that continues to move lower, it’s now the lowest we’ve seen since 2021, at 3.4%, and if we look at overall inflation, it moved down a little bit as well, but still at 3.3%, and now it’s been a few years of above 3% inflation, and we haven’t seen inflation that high for that long since the late 1980s, early 1990s. So, a positive way of looking at it is, if we exclude things like food and energy, which everyone needs, it’s trending more in the right direction. But if we don’t, the negative way of looking at it is saying, “Well, it’s still elevated.” And that cumulative rate of inflation is what Americans are really feeling and they really, really hate, if we look at any number of polls, look at consumer sentiment, consumer confidence, we look at just general polls about people’s feelings about the economy, they seem to still be pointing to that inflation number, because even though the rate of change is coming down, that price is still overall going up.


Let’s talk about the Fed announcement that came out. Did you see any big shifts from expectations relative to what we were talking about at the start of the year?


The shifts have been enormous, and it wasn’t a big surprise. The Fed wasn’t going to cut rates this meeting. They still want to see more progress on inflation. Their target for whatever reason, is 2%. How they came up with that number, nobody knows. It’s a big mystery. They’ve never explained it.


Well, it is interesting though, right? Because even when you say 3.3, it doesn’t seem crazy.


They’re not. But if you put that 3.3 on the back of 5% for two years, that’s what people are feeling. The Fed, to their credit here, and I want to give them some credit. I don’t usually give them credit. They’ve been hesitant to say, “The war on inflation has been won because there’s still that wide gap.” We’re not at 2%. That’s their target. We’re still above 3%. Hopefully we’ll get to 2%, but there’s no guarantee, and what they’re doing is working in the sense that any area that’s sensitive to higher interest rates has seen a pullback. If we look at autos, a lot of people finance the cost of a car, over 80%. Auto rates are at the highest level since 2001. If we’re looking at eight, nine, 10% rates, you’re going to pull back in terms of buying. That’s bad for someone who wants to buy a car, but it’s good for pricing.

If we look at the housing market, and we can talk about that more in a little bit, but imagine where the housing market would be if interest rates were low. We’ve seen a big decline in activity. Yes, prices are still going up, but where would they be if interest rates weren’t this high? Most people buy a house, they have a mortgage, and that monthly payment is being dictated by that mortgage rate. So, if we look at things like credit cards, hopefully you don’t have credit card debt if you’re listening to this. If you do, make that your number one priority to pay it off, but we’re seeing record high credit card rates still, and that leads to a decline in consumer demand, consumer spending, and all of these things, if we keep rates where they are, should be helpful in terms of bringing down the rate of inflation.


I’m speaking with Creative Planning chief market strategist, Charlie Bilello. If you have questions for us, you can visit creativeplanning.com/radio to speak with one of our nearly 500 certified financial planners just like myself, a local advisor that’s willing to answer your most important questions. Charlie, we hate inflation as Americans. There was a poll recently that showed a lot of people think we’re in a recession right now. Can you speak to the psychology behind inflation, and why you think the general sentiment is worse than reality?


There could be a few reasons here, and one, I’m not a conspiracy theorist, but I do believe that there’s certain aspects to the way the government calculates inflation where it’s not a hundred percent, let’s say accurate with reality. So part of it is the fact that people-


You’re saying it’s political, Charlie? Like there’s some tiny political component to it?


Well, it’s certainly in their interest to say inflation is lower, for many reasons than it actually is, right? They look better. They don’t have to spend as much in terms of the increases for social security, which is running out of money at a rapid pace, so it’s in their interest to do so. Then there’s a simple fact that for a lot of people, it might not be the case that their wages are going up more than that cumulative rate of inflation, and those people are feeling poorer, and you can’t discount that. So, a lot of different things. The biggest thing I would say though, John, is just the recency effect of it, that we were so used to inflation being 2%. We had this spike now, it hit 9% in 2022, highest since the early 1980s. That’s 40 years. We went a whole generation of people did not see that type of inflation. So, that’s still fresh in people’s minds, and when you ever have a shock like that, it’s going to feel much worse regardless, because it’s something you simply haven’t experienced before.


I fully admit I’m Monday morning quarterbacking here, but when you look at what happened, “Let’s dump way more money into the system. Let’s inject checks from the treasury out to people into their bank accounts. The spirit behind it I think was great. “Hey, we want to help people.” The problem is that created a lot of inflation, and you know who benefits from inflation? Wealthy people with assets who don’t need to borrow any money, because everything’s growing for them, and they’re not as sensitive to some of the other factors of people that are in tighter financial situations.


Inflation is the greatest tax of all lower income Americans.




And it’s a subtle way to take their wealth from them, and you don’t see it directly. What people are starting to realize is that stimulus came with a cost.


Oh, it did.


Initially, it all felt great, right? You didn’t see the inflation start until about a year after the last payment, and then it was like, “Oh, wait, what did we do here?” And the ironic thing, John, is that a number of states saw prices go up. We take a state like California, and they were like, “You know what the answer to the higher prices is? We need more stimulus. We’ll do our own stimulus.” So, it’s a circular thing, and now, I don’t know if you saw this, but they just instituted another minimum wage hike to around $20 an hour, just for fast food workers out in California, and the reasoning was, “Well, it’s so expensive to live here that we have to pay people more.”

And so, of course now it’s going to be even more expensive. The prices at those restaurants are going up, those restaurants are going to be put out of business because of it. So it’s kind of like a spiral, where they’re trying to solve the problem with what caused the problem in the first place. And of course, that’s not the way to do it. What you have to do is pull back. You have to say, “Let’s reduce the deficit. Let’s not send out more stimulus. Let’s be prudent. Let’s not increase the money supply.” But of course, that’s not very popular. That’s not how you get reelected.


Let’s finish up with how unaffordable housing is. I’m hearing a lot of Gen Zers whining and complaining, and maybe for good reason. This is a tough housing market for people, certainly first time home buyers. Are there any signs of a light at the end of the tunnel for those looking to purchase a home?


There are some good signs, in terms of listings are starting to go up. They’re 16% higher than a year ago, the highest level since 2022, but if you zoom out on the chart, John, still very, very low, still not at 2019 pre-COVID levels. So what we need to see is more inventory, and Gen Z, rightly, is angered, and this is the number one election issue for them, saying, “This is unaffordable.” And they have to make a choice, and we’ve talked about this on a past show. Do I reach, do I stretch, and start to spend 40 or 50% of my income to buy a house? Which is definitely not advisable, especially for a starter home. They might only be living there for a few years. You have the transaction costs on both ends, the cost of moving, or do I sit tight, wait until I save more money, have more for a down payment, and rent?

Because guess what? It’s very different story renting an apartment today, versus buying a home. We’re seeing much bigger supply in terms of the number of apartments available. There was a huge boom in multifamily construction over the past few years, that’s leading to higher vacancy rates. Yes, rents have gone up over the past few years, but they’re not at record highs. They’re not similar to home prices. They’re actually flat over where they were two years ago. So, the good news is, better time to be a renter. The bad news is, still a very difficult time to be a home buyer.


Well, and you said something that I don’t want missed. It was subtle in there. If you’re waiting on the sidelines to improve your financial situation, or build up more cash reserves, or make a bigger down payment, or you feel really good about your rental situation, that may be a great reason to wait, but the person on the sidelines saying, “I’m waiting specifically because I think there’s going to be a drop in the housing market at some point. I see this softening, then I’m going to go in and buy.” It’s just like trying to stock pick. Good luck with that. Generally, it moves up into the right. And if interest rates do soften, I can’t see a scenario where home prices don’t increase, and potentially increase dramatically. You’re dating your mortgage rate, you can always refinance, but you’re married to that home price.


All else equal, right, a lower interest rate likely lead to higher prices. The question is, is all else going to be equal? You’re right. No one could predict that. If you’re going to be in a house, let’s say for 20 or 30 years, and you can afford it today, forget all that, it doesn’t matter. But what I’m pointing this to is first time home buyers, likely a starter home, they’re going to be moving in a few years. Do you want them to be in a situation where they’re stretching to afford that home and then they’re forced perhaps to sell it, because they lose their job at the worst possible time?


Financial planning 101 is to be prepared to live in your home for at least seven years if you need to, because if you look at most real estate cycles, you end up okay. Obviously there are way better seven year periods, way worse seven year periods, but anytime you’re looking to move, three or four years later, there are many variables to your point, even if rates fell, as to why they fell, that would impact that supply and demand balance, which we know is ultimately what’s going to drive prices. Thank you so much for joining me here on Rethink Your Money, Charlie.


Thanks, John. Great to be with you.


Inflation was top of mind during the ’80s, and if you bought a house during that time, you probably remember your 12 or 14% mortgage. Then we had a period of a few decades where inflation, sure you knew it existed, but it was relatively low, and far from a focus within most financial plans. Well, now core inflation has fallen to the lowest level in three years, and conventional wisdom may be, “Well, there’s nothing more I need to do. Inflation’s gone, or at least it’s going down.” But let’s rethink this together, and I have three tips that are practical, easy to follow, to help you preserve and grow the value of your investments in the face of inflation that is still here, albeit growing at a lower rate than it previously has been over the last couple of years.

First, incorporate stocks. Why is a Chipotle burrito bowl so expensive? I mean, I’m not even talking about if you pay the ridiculous amount for guac, I’m talking about no guac. Well, because they’re a business that wants to make profits, and everything is costing them more. So, rather than taking a loss, or shutting down their stores, they raise their prices, and this is why being an owner is so valuable. If Jerry Jones came to you and said, “Would you like to own a fractional piece of the Dallas Cowboys? I’ll sell you a little sliver of the team.” Now you might say, “I’m an Eagles or a Giants fan. Forget it. I hate the Cowboys.” But, if you were thinking pragmatically as an investor, you’d say, “Yeah, returns in professional sports leagues, especially the NFL, this is a great opportunity.” And then Jerry said, “Whoa, wait, wait, wait. Or if you want, you can just provide me a loan, and I’ll pay you 4% interest.” Well, it’s pretty obvious, which has more upside, especially relative to inflation. You’d want to be an owner of the Cowboys, not a lender.

So, the first way to counteract inflation with your long-term monies is to own stocks. In the same vein, include an allocation to real assets like real estate, which also does well in inflationary environments. Now, if you’re hearing that and saying, “I get it, John, but I’m in retirement, I need money from my portfolio, I can’t only be an owner because it’s too volatile, I need additional stability.” Well, if you’re going to be a lender and you’re in an environment as we all are, where inflation is a factor, then stay short on durations, and or utilize floating rate bonds.

Let me give you an example of why inflation is so detrimental to bonds. Well, because historically, every 20 to 25 years, your money has to double just to keep pace with inflation. So, a million dollars today needs to be 2,000,000 20 to 25 years from now, just to have the same purchasing power. So, here’s how a 20-year bond plays out. Even if it all goes perfectly, the corporation, or the municipality, or the federal government pays you, let’s say 4% interest. They never miss a payment. They’re solvent, they don’t default, and at the end of 20 years, they give you your $100,000 back. Let’s suppose that was the principle that you invested.

On the surface, you might think, “What a fantastic investment.” But wait, you’re missing something. Sure, they provided you with your $100,000 at maturity, which now is comparable to giving you $50,000 back, because your purchasing power has been cut in half. In short, have a bias toward ownership, not lending, and if you need stability, stay short in duration, and of course, remain diversified, and strategically rebalance to ensure that your strategy is consistent with your time horizons, and your overall objectives.

Oh, and a bonus tip, what not to do, sit in cash. Cash gets crushed by inflation, and it’s only meant to be available for short-term needs like emergency funds and for upcoming expenses, a down payment for a house, college tuition, the purchase of a vehicle, a home renovation, and things of that nature. Cash is not an investment, and it’s not a long-term strategy. So, the notion that inflation is lower than it used to be, so I don’t really need to worry about it, that’s an idea that you should rethink.

Another often misunderstood concept in personal finance is that risk and volatility are the same thing. While similar, they are not really at all the same thing. Risk refers to the possibility that an investment will fall short of its expected value. Risk is the probability of loss, and that’s just alluding to principle risk. I’m not even talking about things like liquidity risk, or exchange rate risks, oftentimes called currency risk, commodity risk, country risk, business risk, operational risk, interest rate, risk, inflation risk, political risk. There’s all sorts of risks, but volatility is different. It refers to the extent to which the price or value of an investment or sector will fluctuate over time.

Volatility is a measure of how frequently the price or value goes up or down, and the magnitude of those swings. Volatility would be comparable to you sitting at a restaurant, and saying, “Well, my hamburger might come in three minutes or it might come in nine minutes. Yeah, yep, it was late to the table.” Risk is, “Your burger could have e. coli and kill you.” Now, in some cases, low risk may also be accompanied by low volatility, but not always, and the same may be true of high risk, and high volatility.

I’m only addressing principle risk, that risk of losing your money. The other risks are significant, but they’re often far less obvious, and so we downplay those risks while we overemphasize, in my opinion, dramatically, the impact of volatility. Here’s what I mean. While a 10-year CD may be low risk, and low volatility, it could come with considerable inflation risk. If inflation’s really high for that decade, at the end of the decade, when your CD matures, sure you get your money back, and it buys you way less because inflation’s been through the roof. A 30 year bond may have significant interest rate risk, like we saw in 2022, when some fell 40% in value, or even short-term bonds. They have a reinvestment risk. What am I referring to right now? It might seem obvious to have money in a high yield savings account, or even a money market, but reinvestment risk means if rates fall, that rate’s not locked in for very long.

Conversely, when looking at volatility, it’s completely irrelevant If you don’t need to sell. Don’t believe me? Let’s suppose you went into a coma in 2009. You woke up today. You would’ve looked at your statements, probably would’ve been the first thing you did, right? “How have my investments done?” Of course, I’m joking. Another sign of how unimportant oftentimes our money really is in the scheme of things, but yet we lose sight of that. So you get home from the hospital, you look at your investment accounts. You would’ve made about 14% per year in the S&P 500, large cap United States stocks for the 15 years that you were asleep. Huge compound growth.

You’d be happy, but your friend might tell you all that happened. “Oh, there was a slow recovery coming out of the great financial crisis, right when you went into your coma, then there was a trade war. 2018 was a terrible year. Then there was this crazy global pandemic, which resulted in the fastest bear market in history. Market was down to 35% in six weeks. Then we had inflation as high as we’ve seen in decades. The worst year for a stock bond balance portfolio in 2022 that we’ve seen in nearly 50 years, blah, blah, blah.” You would listen to all of it. You would shrug, and you’d say, “Whatevs, yo, I’m up 14% per year the last 15 years. I don’t care about the noise.”

Of course, the reality is we’re not in comas. We do hear the noise, more than ever before, it’s in our faces, and it distracts us and makes us think that volatility is the same thing as risk, or it’s really important. No, it’s not. Risk is something you should always be mindful of, regardless of your age, regardless of your situation, but volatility is situational, and it’s only relevant if you potentially need access to your money, which would cause you to lock in losses during those volatile periods to the downside. And this is the very reason that volatility should in fact be a consideration, and planned for if within the seven or so years you need withdrawals from your portfolio.

If you have questions about either the risk or the volatility within your portfolio, and how they may impact your financial future, speak with one of our nearly 500 certified financial planners just like myself, and we are ready to answer those questions as we’ve been doing for 40 years, for over 75,000 clients in all 50 states and abroad. Visit creativeplanning.com/radio now to schedule your meeting. Why not give your wealth a second look?

Wondering just how much debt the average American has? Ramsey Solutions posted research on this very topic last month, and even though household net worth is on the rise in America, at about $156 trillion at the end of 2023, unfortunately, so is debt. Average credit card debt per household is just under $20,000. Student loan debt, 58,000, auto loan debt, 37,000 mortgage debt, 230,000, and if you look at average debt per household in the aggregate, it’s $180,000. Not all debt is considered equal, and I would break it down into three categories. There’s bad debt, like the horrible, worst type of debt. There’s situation specific debt, and then there’s what would be considered potentially good debt.

So, bad debt, let’s start there. Let’s get the bad news out of the way. This is pretty easy. Avoid borrowing on a depreciating asset, cars being the best example, and borrowing for consumption is a bad idea. Talking about credit cards, which in general, come with some of the highest interest rates, well over 20%. Situation specific debt would be taking out a loan for a business, an idea that you really believe in, that you have a good strategy for, but you don’t have the money for. So the investment is, “I’m going to borrow, because I believe I can use this money to benefit my future.” And along those same lines would be student loans. It’s going to cost money if you want to go to medical school. If your parents can’t afford to help, you might have to take out loans. If you make $750,000 a year as a radiologist for 30 years, that’s probably going to be a worthwhile investment, but as has been a hot button topic in our political sphere, a lot of student loan debt is unnecessary. It’s not a worthwhile investment, and those payments significantly impede financial progress.

The only type of debt that I would consider potentially good debt would be a mortgage. Now, if someone’s buying a home today, they may not want to take out a six or a 7% mortgage, but continuing the conversation on inflation that we had earlier, the best way to hedge high inflation is a long, 30-year fixed rate mortgage. When inflation was at seven or 8%, and you are potentially locked in at a 2.75% interest rate on your mortgage, why in the world would you ever pay that off? Remember, that payment is fixed, meaning in 20 to 25 years, it feels like only half the amount as when you first took out the mortgage, and it gets easier, and easier even quicker in high inflationary environments. And that doesn’t even factor in potential tax benefits being received from that mortgage.

It’s time for this week’s one simple task. This week’s tip is to get a handle on your debt. Debt can put you in a trapped cycle of borrowing, and it absolutely can create stress in your relationships, certainly a marriage. It’ll limit opportunities for you achieving your long-term goals, such as buying a home. They’re going to do a debt to income ratio, and if you have a lot of other payments and obligations, you’re probably not going to qualify. It may also be hurting your credit score, and absolutely hinders your ability to maximize your savings for retirement, any of your bad debt, any of your situation specific debt, the sooner you pay it off, the better.

There are two primary strategies used for paying off debt. One is the snowball method, made popular by Dave Ramsey, which is you simply take your smallest debt first, pay it off as quickly as possible, you make the minimum payments on all of your other debts. Once that’s paid off, you roll that entire payment into the next smallest debt, and as the term says, snowball that, until eventually you’re making massive payments, and you’re paying everything off quickly.

I probably prefer that method to the avalanche method, which is where you take your highest interest rate, and pay that off first, and then continue to roll them, but it is situationally specific, and you should use common sense. If you have two debts that are $40,000, and $41,000, and the $41,000 debt is 16% interest, and your $40,000 debt is 1% interest, yes, it’s the smaller one, but don’t use the snowball method. Pay off the $41,000 one first, with the massively high interest rate. Otherwise, I think the snowball method creates momentum, and optimism for accomplishing your goals.

Well, it’s time for listener questions, and one of my producers, Britt, is here to read those questions. Hey, Britt, how’s it going? Who do we have first?

Britt Von Roden:

Hey, John, it’s going great. Up first we have Dan from Michigan. Dan is looking for some practical strategies or tools that he can use to start saving, and investing for his children’s future financial needs. He shares he has two kids, a 14-year-old, and a 10-year-old, and can’t believe how quickly the years go. Are you able to help John, or is he too late?


Well, Dan, it’s never too late. Today’s always the best time to start. What I want you to do is buy a whole life insurance policy for them, so that they’ll always know that they’ll have insurance. And if you’ve listen to the show at all, you know I am 100% joking. That is the worst advice. I sound like a few people that I unfortunately know who make a living selling insurance, and that’s actually sadly what they would advise.

Here are a few good options for you. You can open an UTMA account. Where that can work well is if you want to have an open architecture for them. People that want to buy individual stocks, or teach their children about specific investments, you have full freedom in that type of custodial account. Once your children reach the age of maturity, the account’s owned by them automatically, and there’s nothing you can do, if they’re irresponsible, to prevent them from selling everything in the account and running off the Vegas with some friends. So, maybe you do that with a very small amount. I don’t love UTMA accounts for that reason.

529 is probably the best tool, as it can be used for college, which is the main use case that people think of when they hear 529 plans. In some states, you’ll receive a state tax deduction. There in Michigan, you can deduct the first $5,000 of contributions if you’re single, or 10,000 if you’re married, filing jointly, and there are many low cost index fund options within several states. You can’t buy individual stocks, and things like that as you can in the UTMA account, but here’s the cool part about 529s today, that hasn’t always been the case, and that’s that they’re pretty flexible.

529 plans can be used for K through 12 expenses, not just for college, and other post-secondary education. 529 plans can now be used to pay off a portion of student loan debt. They can be used for vocational school expenses, and if they’ve been maintained for a minimum of 15 years, they’re eligible for transfer, and this is the big one. The golden goose is a Roth IRA. 529s now are subject to a lifetime maximum $35,000 transfer into a Roth IRA. So, essentially you’re dumping money into an education fund, or a Roth IRA.

I’ve had some people say, “They’re going to get scholarships, or I may just pay out of pocket for their college, and my plan is at the 15-year mark to roll 35,000 into a Roth for my kids, so they have a headstart on retirement in a tax-exempt account.” And if you like the idea of the Roth for your children, another option along the way if they have earned income as they get a little bit older, and potentially have jobs, you can contribute on their behalf into their Roth IRA up to whatever their income was for the year, with a $7,000 max. We have offices there in Michigan, Dan. If you have more questions on this, feel free to reach out and we are happy to help. Britt, let’s go to Laura over in the Lone Star State.


Absolutely. Laura mentioned that you talk a lot about diversifying and managing risk, especially given our current state. It was recently recommended that she should have more than one brokerage account to help with this. Is this true?


Yes and no. We have plenty of clients with millions of dollars all at one custodian, but I’ll give you considerations, because I think this is one of those areas of personal finance where it’s probably more personal than finance. Two smart people could arrive at different conclusions. Let’s first define a custodian. It’s the financial institution that holds securities for safekeeping. Think Schwab, Fidelity, Pershing, Robinhood. Here’s where I think multiple custodians can make sense. Maybe you buy and sell individual stocks with high frequency in one account. It’s your play account, you enjoy trading, and one custodian charges nothing for trades. Whereas maybe the one where your other assets are held, that custodian charges $10 a trade. That wouldn’t make sense. Maybe you have your assets that are managed by an advisor at one custodian, and your trading account at another, or maybe your 401k is held at a different custodian that you don’t really want to work with, but that’s your company plan.

Another consideration is, if you remember during the meme stock craze in 2020, when GameStop was going nuts, well, Robinhood shut down trading for a period of time, which angered a lot of people that were trying to make moves, and if you owned GameStop at another custodian, you would’ve potentially been able to make trades over there. So, I’m talking about risks that I would consider on the peripheral, but they’re a factor. But, adding multiple custodians can lead to confusion, hassle, less synergy of your plan, more complicated reporting, especially at tax time. It’s way easier to have overlap on your investments, to get consolidated reporting. It can create confusion in retirement when you’re trying to take income, and satisfy RMDs.

I personally wouldn’t diversify custodians. I would want to have the fewest possible, but I’d be mindful to use a large one. I wouldn’t diversify wealth managers, but I’d be mindful to hire one that you feel like has a lot of competency, and experience, has been around for decades, and I absolutely would diversify your investment strategies, because whether you have one brokerage account, or a dozen, the most important element to protecting yourself is that you’re well diversified, you have many different types of investments that have dissimilar price movements to one another, that respond in different manners to different variables, and that your overall plan is tailored to your goals, your timeframe, and your overall risk tolerance. Thank you for those questions. If you also have a question, email those to radio@creativeplanning.com, and I’m happy to do my best to answer that for you, either on the air, or directly to you.

Well, this last weekend was Father’s Day, and I spent time this week reflecting on a great Sunday. As a father to seven amazing kids, with two already stepping into adulthood, Father’s Day holds a special meaning for me. I know everyone has a different experience, not always positive with their fathers, which I just want to pause and say, I’m sorry for that. Maybe Father’s Day is a day of a lot of pain for you, and that’s really sad and unfortunate. Beyond the cards, gifts, and words of gratitude, Father’s Day is also a moment for us as fathers to reflect on the legacy we are creating for our children. That word legacy, it’s often synonymous with estate planning. We think of legacy as the material wealth that we pass to our children, but in reality, the most valuable legacy that we can leave, it’s not measured in dollars or assets. It’s the wisdom we impart, the values that we instill, and the love that we share while our children are still in our home.

I was sharing with my wife on Father’s Day… By the way, this was during quiet time where we still have one napper and then the rest have to go read a book for an hour. It’s kind of funny. It’s Father’s Day. It’s like, “All right, dad needs a little break.” 90% of the time we spend with our kids happens before they turn 18. It’s a startling statistic, and it reminds us that our most crucial investment isn’t in stocks. It’s not in real estate, or bonds, but it’s in the moments, and lessons that we share during our kids’ formative years. These are the years when our influence is most profound, and our presence is most impactful. For me, each moment is a unique opportunity to teach, and to learn, and to guide and to grow. And whether it’s helping with homework, coaching a team, having a heart-to-heart conversation or simply being present, you’re just setting down the cell phone, getting off email, not worrying about the score of the game. These are the investments that yield the greatest returns.

More is caught than taught. I love that saying. Our children are keen observers. They watch how we handle challenges, how we manage our finances, how we interact with others. They learn from our actions far more than our words, and that’s why it’s so important to demonstrate values like integrity, and empathy, and responsibility as fathers. See, passing wisdom to our children means more than just sharing advice. That’s the easy part. That means also listening to their dreams, and understanding their fears, and supporting their journeys. It’s about creating an environment in the home where they feel heard, and feel valued. Let me tell you, that emotional investment is far more crucial than any financial one.

But, we should consider with our children how we manage and discuss money with them. Money is a tool that will be needed in their lives, and the better they are at stewarding it, it’ll have positive implications on other important aspects of their life. Teaching them the value of a dollar, the importance of saving, the principles of giving, can set them on a path for financial independence, and to be generous people. But beyond that, we need to show them how money can be a tool to support their passions.

I’ve seen this with my two older children as they step into adulthood. It’s encouraging, because as you know, as a parent, the days are long, but the years are short. The lessons they’ve absorbed, the values they’ve embraced, and the wisdom they’ve inherited become apparent. As dads, we may still worry, and wonder about their future, but we can take solace in knowing that we’ve given them the foundation to build their own legacies. Let us cherish the time we have with our children now. Let’s invest in their hearts, listen to their voices, and guide them with love, and patience. Happy belated Father’s Day, all you fathers, grandfathers, and father figures. May we continue to inspire, teach, and nurture the next generation with the wisdom and love that truly matter. Because remember, we are the wealthiest society in the history of planet Earth. Let’s make our money matter.


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.


The preceding program is furnished by Creative Planning, an SEC registered Investment advisory firm. Creative Planning, along with its affiliate, United Capital Financial Advisors, currently manages or advises on a combined $300 billion in assets as of December 31st, 2023. John Hagensen works for Creative Planning, and all opinions expressed by John, or his guests, are solely their own, and do not necessarily represent the opinion of Creative Planning. This show is designed to be informational in nature, and does not constitute investment, tax or legal 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 the show, will be profitable, or equal any historical performance levels. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed. 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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