Want to know what critical mistakes could be blocking your path to millionaire status? Whether it’s failing to invest, not saving enough or letting debt and lifestyle creep erode your finances, we’re uncovering the errors that can have a major impact on your financial future. We also talk with Creative Planning Director of Medicare Jameson Moulder to learn about the changes coming to Medicare in 2025. All this and more on this week’s episode.
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 your host, John Hagensen, and today I welcome Jameson Moulder, Creative Planning’s director of Medicare who will help us navigate the changes coming in 2025 and there are some big ones. We’ll also rethink a common piece of financial wisdom that you’ll most certainly have been taught, and of course listener questions as well. Now, join me as I help you rethink your money.
You might be surprised to learn that there are more than 22 million millionaires in the United States. That’s a little less than 9% of American adults. In fact, the US is home to nearly 40% of all the world’s millionaires, and that’s interesting because it’s despite having just 4% of the global population. Back in the 1980s, there were only about 5 million millionaires in the country. Fast forward to today, as I mentioned, that number is more than quadrupled.
So becoming a millionaire, it’s not easy, but it isn’t some far-fetched, unreasonable dream that only the super rich can accomplish. Although I think that can sometimes be the perception, it’s wrong. It’s attainable. And many people achieve it through simple, consistent steps like saving and investing. I’ll show you how you can achieve this without making millions of dollars every year or feeling like you need to save 50% of everything you make. You just need the right strategy.
I had clients who came to me in their ’50s. I’ll call them Dave and Sarah, who exemplify The Millionaire Next Door lifestyle. I hope their story offers you encouragement. Dave worked at Intel. Sarah was a nurse. They didn’t start out with massive income. I remember them telling me as we got to know one another that they were barely getting by in their 20s. They were making very little. But even then, they knew the importance of consistent savings. Every two weeks, like clockwork, money went into their investment accounts.
It wasn’t a lot, but a little bit went in. As Dave’s career progressed at Intel, his income was increasing, but rather than inflating their lifestyle, they increased their savings. Now, they certainly lived a little better as well, but they didn’t allow that lifestyle creep to absorb the additional income. They were disciplined. By their 40s, their household income was up to around $220,000 a year. And sure they splurged on a family cabin up in the White Mountains, get out of the heat in Arizona when they could in the summertime, but that was always part of their long term financial plan, and they accounted for that as they progressed toward retirement.
And one thing they did later in life, they maxed out their 401K’s and used strategies even like a mega backdoor Roth in his planet Intel in the few years prior to retirement. Today, they have nearly $2 million in liquid assets built not from striking it rich, not from finding NVIDIA before everyone else, but through consistent savings, thoughtful spending, and smart investing.
Here’s a humorous moment that always stuck out to me. Dave once joked, and this was before I had kids, so I didn’t really understand it. He said, “John, with three kids in sports, orthodontist bills, college tuition, I wasn’t sure if we were building wealth or funding our own circus.” And as a father now to seven myself, I’m like, “Hey, can I borrow your tent?” I get it, that’s me. But despite the chaos, they stayed the course and they avoided debt. They lived within their means.
Another story, you may have heard of this one. It’s a famous story of Ronald Read, a janitor and gas station attendant from Vermont who became a multimillionaire through consistent savings and investing. Check this out. Despite earning only $12 an hour, Ronald accumulated $8 million by the time he passed away at 92. He did this by investing in stocks, holding them essentially forever and living frugally.
He wasn’t flashy. He wasn’t a high income earner. I mean he was the opposite, but he knew how to make his money work for him. And Ronald’s story is a powerful reminder, I think the lesson for you and me is that building wealth is a lot more about saving and investing consistently than simply earning a high income.
Warren Buffett once said, “The stock market is a device for transferring money from the inpatient to the patient,” and that is exactly what Ronald did. He was very patient. Now, on the flip side, let me tell you about Dr. Smith. Yes, that is not his last name. This was an actual prospective client of mine, came to me in his mid-60s. He was earning over $500,000 a year. He pulled up in a brand new Corvette to the office. When I started building out his balance sheet, he had less than $200,000 tucked away.
Yeah. He was in his mid-60s. You didn’t mishear that. His health wasn’t great. He knew he couldn’t continue operating as a surgeon forever, basically looked at me and said, “What do you think I should do? How do I turn this thing around?” I mean, it wasn’t totally hopeless, but it’s difficult telling someone who’s lived a certain way for 30 years to reduce their lifestyle by 60 or 70 or 80% and hope they can save enough in the final five or so years of working to have a bit of a retirement.
You see, despite having his high income, he had no savings plan, he had no financial plan. He didn’t invest consistently. He spent as if the good times would last forever. I mean, his lifestyle was great, but he had sacrificed his future as a result of it. Classic example of someone who earns a lot, everybody admires. They see everything they’ve bought, but they just don’t follow basic financial principles for success.
Here’s what I found to be the three most common mistakes that could stop you from becoming a millionaire. Or if you’re already a millionaire that could prevent you from having additional millions. Number one is that you’re not investing. Now, this sounds weird. What do you mean not investing? I mean not growing your money. It’s really hard to build wealth, which means outpacing inflation if your money is sitting idle.
So it’s not just about saving it, it’s about investing it. Compound interest is the magic sauce that turns small, regular investments into large sums of money over time. Einstein called compound interest the eighth wonder of the world. And to illustrate this, let me share with you a visual example. If you have a pond out back your house, and I told you that algae is going to double every day in the pond until it’s completely covered on day 30, how much of the pond is covered with algae on day 29? The answer, only half.
See, the algae covers half the pond on day 29 and in one single day it covers the entire rest of the pond. That’s how exponential growth works. The last phase is where the magic happens. Let’s put some actual numbers around this. If you have a hundred grand and you have 25 years to let $100,000 grow, at 10%, you end up with over $1 million. At 5%, you don’t even have $350,000. That’s the power of investing.
Returns matter. Investing in the right types of investments relative to your time horizons and your ultimate objectives and goals, it’s really important. So mistake number one is not investing, not optimizing growth. The second mistake that prevents millionaires is an intuitive one. You just don’t save enough. Saving a little here and there might feel good, but will it really get you to where you ultimately want to go?
Let’s do some math again. Isn’t this fun doing math? And this is all in your head because it’s audio. I’m making this really hard. Let’s use the same 25-year time horizon example. And let’s suppose you scroll away $2,000 a month. If you’re married, it’s a thousand each, and I’m not even counting matches. If you made 8% per year annually, you end up with a little less than $2 million.
So you’re a knucklehead. You don’t even start saving until 35 years old. You save 2,000 a month from 35 to 60. You make 8% per year on your money. You have just under 2 million. Let’s now suppose you don’t save 2,000 a month. All the other facts are the same, but you only save $500 a month. You don’t even end up with a half million dollars. You have a quarter what you had by failing to save that extra $1,500 a month. It just comes down to how much you put away regularly. And here’s the key.
It’s hard to know how much you should put away regularly without a financial plan, without a written documented detailed plan that shows you those forecasts, that can be adjusted along the way to ensure that you stay on track, that can back into the math and reverse engineer a plan so that when you hit that age maybe of retirement or where some other goal is looking to be met, you’re not hoping or wondering or wishing on a prayer that you have enough money.
So mistake number one, you’re not investing properly. Mistake number two, you are not saving enough. Mistake number three, that prevents people from millionaire status is too much debt. Put another, lifestyle creep. Put another way, caught up in the comparison trap. Put another way, keeping up with the Joneses. Fill in the blank. But this is an absolute killer to financial progress. Whether it’s credit card debt, auto loans, student loans, debt is like a ball and chain that holds you back.
All the examples of compounding and exponential growth, they work in reverse when it comes to debt. Let me give you an analogy. This summer at the beach, my two and 4-year-old daughters, they were trying to cart water from down at the ocean in the waves and bring it up about halfway up the beach to get the sand wet for their castle.
Well, there was a crack in the bucket probably because my second-grader was pounding on it with his baseball bat or doing what little boys do, destroying things. So more than half the water was gone by the time they got up to the dry sand. This is exactly what happens when you’re servicing debt, being charged interest. It erodes your ability to build wealth. Every single dollar used to pay down debt is a dollar that cannot be invested.
So those are the negatives. Creative Planning president Peter Mallouk spoke a few weeks ago on the Signal or Noise podcast on how to leverage your 401K as a key to becoming a millionaire. Have a listen.
Peter Mallouk: The reality is, and this isn’t even debatable, right? There’s more Americans that are millionaires from their 401K than from anything else, not from being business owners, which is mythology, not from real estate, which is mythology, it’s 401K investing. Just taking a little part of your paycheck, putting it away every paycheck in your 401K, getting the match, keep investing over and over and over again, and you wake up in your late 40s or your early 50s. If you’ve been doing it since your 20s and you’re a millionaire. And even people who started later, they become a millionaire in their 60s.
And that’s the number one way Americans become millionaires. Systematic, disciplined, repeated, small chunk investing. But I think to know the people that have accomplished that, you have to be with people that are generally employed and yes, have been doing it a long time like 20 years plus so in their 50s and older. But the data is indisputable when it comes to the number one path to becoming a millionaire. And this is it.
John: Peter makes an important point. You don’t need to reinvent the wheel, you don’t need to find something extravagant. Sometimes the simplest tools like a 401K can do the heavy lifting for you. So now that you know what to avoid, what are some hacks to make this simpler? Because it’s not always the knowing that’s important, it’s the doing. Simple things are not always easy to execute. I love finding hacks in life. So the one that’s going on in our family right now is my wife gets up really early way before all the kids goes and takes a walk, does her workout, gets her exercise in. That’s probably why she’s in a lot better shape than I am, and she’s smart.
She doesn’t put the phone right next to her bed on the nightstand. It’s all the way across the room. The main reason she puts it over there, in addition to wanting to be kind to me, her husband, she’s a sweet wife, is that she wants to get out of bed.
She wants to make sure she gets up and when she’s tired, if it’s right next to her bed, what’s she going to do? You’re going to hit the snooze button. By the way, the research shows if you hit the snooze button multiple times, you’re actually more tired. You think that getting the extra seven minutes or nine minutes or however long your snooze is, that little extra sleep is going to help you. No. Research shows you end up waking up more tired by doing that. But that hack of just putting the phone away from you, so you have to get out of your cozy warm bed to turn it off is a good one.
And guess what? Reaching millionaire status has similar hacks. Small changes that make a huge difference. Number one, increase your savings by tricking yourself. Every time you get a raise. Pretend the raise is only half of what it actually is. So if you’re making a hundred grand and now you’re going to make 1/10, pretend that you’re only going to make now 105,000. Why would you do that? Because you take the other five grand, add it to your savings.
Now, if you’re someone who likes to give money, take 2,500 and save it. Additionally, and take 2,500 and add that to your giving. Imagine just how generous and how wildly high your savings rate would be if you were to do that with every raise over a 25 to 35-year working career. And all the while you’re increasing your lifestyle, you’re enjoying the fruits of your labor because you just went from a hundred grand to 105. So that’s the first hack.
Number two is save first. If you want to have enough money for retirement and you want to be a millionaire, don’t save what’s left over. Save at the very beginning. If you are someone who gives money, I suggest you even do that before you save. So you give, then you save, then you live on what’s left over. And number three, automate all of it. Every possible thing that you can automate should be automated. That’s why 401K’s can be so helpful. All you see is your paycheck, and then you log into your 401K three years later and go, “Wow, there’s quite a bit of money in there. Did every two weeks you have to go down to the bank, deposit something into an account?” No, of course not. You’d have way less money if you did it that way. So the three hacks are trick yourself every time you get a raise and pretend it’s only half, give and save first, specific to becoming a millionaire, save first, and then automate all of it.
I’m joined today by Jameson Moulder. Jameson is the director of Medicare Advisors. Here at Creative Planning, he lives in the ever-changing, often confounding world of Medicare. I’ve asked him to help us make sense of what is most important for you to know. Jameson, welcome to Rethink Your Money.
Jameson Moulder: Thanks, John. Excited to be back.
John: Medicare’s annual enrollment period is a big deal for a lot of folks. Jameson, when is it and what should people really be looking at during this time?
Jameson: So the annual enrollment period happens every year. It’s from October 15th through December 7th. It’s when you can make changes to certain parts of Medicare coverage for the upcoming year. Their annual contracts, the networks change, the coverage change. Sometimes carriers will choose to no longer offer that plan. So anyone that’s on an advantage plan needs to be looking at that every single year. And as time goes on, we’ve seen the trend of those benefits keep diminishing, so it causes those people to keep evaluating.
John: So why would anyone do a Medicare Advantage plan?
Jameson: If someone couldn’t afford a supplement premium, something is better than nothing, or in my opinion, if they’re not looking at total cost correctly. Because, yes, I would rather have a lower premium, but I want a fixed cost or protected cost on the backend. The second reason, it’s what the insurance companies push. They have managed care so they can control cost, annual contracts. They can change the coverage to their liking.
There is no supplement coverage for it. So you’re going to share that cost with them, and there’s some kind of network dynamic where they’re pointing you to their provider. If they had their choice, they’d want you on the advantage plan.
John: Why don’t you share with us then how Medicare supplements contrast with these advantage plans?
Jameson: The main 30,000 foot view difference is when you’re on an advantage plan, the private insurance company replaces Medicare as the primary, so they call the shots. With a supplement, it’s still private insurance, but it’s working as secondary to your Medicare and it makes things way different.
John: Also for travel, right?
Jameson: Better for travel.
John: That’s another component.
Jameson: Yes, anyone that travels. There’s also something in terms of the advantage plans is they can control and dictate your care and your provider. So even if you could afford the out pocket, you want to have as much freedom in control with you and your doctor over your care, not the insurance company.
John: It’s what everybody hates about the old school HMO plans versus a PPO, right? I mean, that’s probably the easiest comparison for somebody who’s never been on Medicare.
Jameson: Right. So if you’re on supplement and eventually health does change, you don’t want to worry about which providers I can go to. I can’t travel. I need referrals. I have more out of pocket. You want things to be easy, and that’s what’s created. Main differences between those two coverages, I touched on it earlier. It’s the managed care. So let’s say there’s a situation where a doctor recommends a certain treatment or procedure. Well, it’s up to the advantage plan.
The private insurance, if it’s covered or not. Maybe it is, maybe it isn’t. Or oftentimes what’ll happen is they’ll say, “We’ll consider covering that, but we need you to do X, Y, and Z before we’re going to consider covering it.” Now, it’s a huge frustration versus if you’re on Medicare with a supplement, if it’s medically necessary, it’s got to be covered and the supplement picks up the rest.
And something that’s interesting, John, is when I meet with clients that are retiring, doctors, physicians, nurses that have been in the medical field, the first part of my presentation is doing a side by side comparison of the main differences to emphasize why we’re recommending supplement and those individuals in that field, they stop me before I even start and they’re like, “No, we do not want to even discuss the advantage because they’ve seen that frustration play out with patients.”
They would rather have that certainty with the Medicare. So that’s one dynamic difference. The second one is with supplement. Once you have it, it’s on autopilot. The coverage, the benefits, they never change. That provides peace of mind long-term that I have the best coverage possible versus the advantage plans, they’re unpredictable because their annual contracts. Every year, everything is subject to change and I have to reevaluate. Those are probably the two biggest amongst other differences.
John: What can we expect from Medicare in 2025?
Jameson: In the seven years I’ve been in the industry, this is probably the most significant change. It’s a good change, but significant. As part of the Inflation Reduction Act, starting in January of ’25, anyone on Medicare drug plans, they’re going to do a flat $2,000 maximum out-of-pocket limit. On the most, the insured will have to pay for medication. So this is a big win and basically what’s happening is the drug plans and the drug manufacturers are going to share way more of the cost than they have in the past with expensive medication.
If anyone is on generic medications, this is not going to change copays too dramatically. But for those clients I meet with that take blood thinners, high-tier medications, cancer medications, massive win. The most they would ever have to pay beyond premium is $2,000. So it’s going to give them a cap. Now, the other shoe on that would be what are the drug coverage companies going to do to make up that difference? And they haven’t released what all of the plans look like until October, but it’s very logical they’re going to increase the premium.
John: Jameson, when someone first transitions to Medicare, there’s a lot of talk about locking in a supplement plan early. Why is that so important?
Jameson: Great question, John. When you first go on Medicare, it’s the only time you can get a supplement without requiring health underwriting approval. So let’s play out a scenario. That doesn’t happen at Creative Planning a lot. Most of our clients get supplement, but I’ve had it happen previously where, let’s say, a client goes on to Medicare at 65 and they’re healthy, they want to save the premium, “I’m healthy. I don’t go to the doctor very often. I don’t want to pay an additional premium.”
Well, it’s a huge risk because, let’s say three, four years down the road, they want to revisit supplement. Well, now it’s all about their ability to get approved through underwriting and it’s a yes or no proposition, and it’s a huge risk. The other thing is if someone is healthy and they’re on an advantage plan, they’re not properly testing the coverage. Every insurance out there is probably pretty good for your once a year doctor’s visit or your preventative screenings and all of those things. It’s not until health is changed and you’re needing procedures done, rehabilitation done, then you’re testing the coverage and if that is occurring, well, the likelihood that you’re going to be passing underwriting is probably diminished.
John: So to be clear, when in doubt, if unsure at all, it’s easy to go from a supplement and transition to advantage, but may not be depending upon your health going the other direction. One of the other big mistakes that I see people make along with getting advantage because they don’t understand the differences and then they can’t qualify for a supplement has to do with their income and how it affects what we refer to as IRMAA. If someone finds themselves hit with this extra charge, are there any ways to appeal it? Let’s just go through what IRMAA is and the options around it.
Jameson: Everyone that’s on Medicare pays the standard part B premium. Part B is the medical portion of Medicare, and whether you have supplement or advantage, you have to pay that standard premium. Currently, it’s 174.70. It goes up every year, but that’s every person on Medicare pays that. But then there’s IRMAA, which stands for income related monthly adjustment amount, which I basically call another method of applying a tax is basically what it is.
John: Sure.
Jameson: So it’s recalibrated every year and it’s always looking two years ago at a tax return. So if you file individually or jointly, social security pulls that adjusted gross income line item. And if it’s above a certain threshold, they add surcharges or basically taxes on top of your Medicare premium. So it’s a good news, bad news situation. Good dynamic to have, but it can really significantly increase your Medicare premium. If you do nothing, it’s going to self-calibrate every year.
So anyone on Medicare in 2024, it’s based on ’22 tax return. In ’25, it’s going to look at ’23. But if there’s been a life-changing event, which often happens, especially with retirement that has happened within the last two years, you can proactively appeal that with social security and it can be the difference of hundreds of dollars a month depending on what your AGI level is.
John: Jameson, this has been great information for the listeners who have questions about Medicare. Obviously, a lot of changes as you mentioned are coming next year. If you’d like to chat with Jameson and his team, you can do so by visiting creativeplanning.com/radio. Thanks, Jameson for joining me on Rethink Your Money.
Jameson: Thanks, John.
John: Let’s rethink some common financial wisdoms together that I’m sure you hear often. These are ideas that on the surface they sound pretty reasonable, but when you dig deeper, they might not be as helpful as they seem. Today, I want to tackle three pieces of conventional financial advice and see if they hold up. Common wisdom, number one, DIY is the most affordable way to go. Now, this isn’t a blanket bad idea. Doing things yourself can certainly save you money assuming you know what you’re doing. But here’s where it gets tricky. The expense of doing something yourself adds up if you don’t actually know how to do it right.
And I’m not just talking about your finances, but this also applies to home repairs and all sorts of other areas of life as well. In fact, I was just confronted with this. Last week, I discovered we have termites. Our pest control came out to inspect and give us a quote. The initial install seemed fine. It was like $800. I mean, I didn’t want to pay it, but it seemed somewhat reasonable for what they were doing. But then they started talking about the monthly ongoing fee to have this system in place.
And I started thinking, “Do I really want to pay a monthly fee for this? What are you going to do every month to justify me paying $27?” So like any good DIYer, and by the way, generally I’m a much better delegator than a DIYer, I researched online and I found a cheaper solution. This one looks pretty similar to what they’re talking about and I’d be able to save that monthly cost. But here’s the thing, it wasn’t as high quality as I dug in a bit deeper and it was going to take me three to four hours to just do the initial install, and then also I’d have to maintain these bait stations regularly that the pest control company will do on my behalf.
Now, my wife Brittany, she laughed. She’s like, John, you are not going to do all of this maintenance. What has gotten into you? Why are you so hung up on this? Less than $30 per month charge? Just let our pest control company handle it. They’re great. They do everything else. They’re already here on a regular basis and they’ll be able to check on these things. And she was right. I Docusigned the documents. After talking to her, I walked back into the home office, click, click, click, okay, fine.
I give in. The do-it-yourself route may have saved me a few bucks at first, but I wasn’t going keep up with it. And if the termites continued, the damage obviously could be huge. And this applies to your finances too. Sure, you could manage your own money, attempt to create your own estate plan online, file your own taxes. And at first that might save you money. It may be less expensive on paper than hiring a professional, but the key phrase there is at first.
If you don’t keep up with it or don’t know the ins and outs, it can cost you way more down the line. What’s worth exploring, and I think a question you want to ask yourself is how do I know if I should be trying to do something myself or should I hire someone else? I’ve got three easy to answer questions that are a great starting place when it comes to your money.
Number one, do you have the desire? If you don’t want to do this, you’re someone who says, “Well, I don’t want to revisit a financial plan regularly, and log into my accounts and rebalance and look for harvesting opportunities and keep up with tax laws and make sure that my estate plan is up-to-date.” If that’s not something you have any interest in, nothing else matters. Because if it needs to get done and it’s important for not only yourself but your family, you then need to pay someone because you don’t want to do it.
Now, let’s suppose you say, “I am interested in this. I do have a desire.” The question to ask yourself is, “Do I have the time?” Managing your personal finances, which again is not just your investment accounts, it involves risk management and taxes and estate planning. It’s much more broad than solely your investments.
Well, that’s like maintaining the termite bait stations. It takes consistent effort. If you are not going to do it regularly because you are too busy, then you need to hire someone. If you answer both of those questions, “I want to do this. I have the time to do it.” The third and final question is, “Do I have the expertise?” You need to know what you are actually doing and it’s dynamic, and it’s changing. Here’s a good tester question. Would anyone else in your life hire you to manage their life savings?
You are hiring yourself when you manage your own money. Now, if you answered yes to all three of those questions and you have the discipline and the behavioral fortitude to stay on top of things, then doing it yourself might actually be a good option for you. But here’s the kicker. If something happens to you, who’s going to take over?
If that answer isn’t clear, like you answer yes to all of those, but your spouse is going, “Well, I answer no to all of them, then what’s the plan for continuity?” The truth is whether it’s financial planning or home repairs or termite control, hiring the right professional if you decide to do that can actually save you money in the long run and who you hire makes a lot of difference.
I’ve had good doctors and I’ve had bad doctors. I’m sure you have as well. As an airline pilot, I flew with great pilots, average pilots and pretty bad pilots. Could I have landed a plane on the Hudson River like Sully did? Probably not. He was in that top 1% of pilots. Thank goodness he was flying when those bird strikes took out both engines. The same is true with financial advisors and the wealth management firm that you hire. A great one can make all the difference.
Common wisdom number two, this one really makes me scratch my head. The prime years for making smart financial decisions are in your 50s. Sure, by the time you are in your 50s, you’ve lived more life. So the statement is true. But I’d like to rethink a nuance, a takeaway in light of that. You have more financial knowledge than you did in your 20s or 30s certainly, but the bigger reality of that is that by the time you are in your 50s, you have a lot less time for those decisions to really pay off.
The compounding effect is much more powerful the earlier you start. Anyone that understands compound interest knows this. Think of it like this. If you invest 10 grand in your 30s and it grows at 8%, by the time you retire, that investment could grow to 160,000. But if you wait until your 50s, the 10 grand grows to about 45,000. The difference isn’t that you made a bad decision. The difference isn’t that you invested the money with a much more conservative approach.
It’s just that you didn’t have enough time for the money to compound. And what I’ve learned for years with clients is that self-awareness is key. Some of the smartest people, in fact, I’ve met are not the ones who think they know everything or want to do it themselves. They’re the ones who know what they don’t know. They understand their limitations and recognize their blind spots.
In my experience, the women in my life and female clients that I work with, they’re a lot better at wanting to get it right and sometimes as men and husbands, we like to be right. We have to deal with our egos and that pride component a little bit more, and of course I’m painting with a broad brush, but generally speaking. So whether it’s parenting, it’s marriage, it’s your career, the ability to acknowledge that you don’t have all the answers can lead to better decisions.
So here’s the practical takeaway. If the convergence of your experience while still maintaining an optimal physical and mental state occurs in your 50s, but that’s a little late to make the biggest impact, well, then there’s value in your 20s and 30s and 40s to find someone older than you, a parent, a grandparent, a friend, a mentor. Maybe it’s a financial advisor who has that experience and can offer that guidance to you due to their experience and their past history while you’re still in a season of life where it most significantly moves the needle.
Because when you’re making decisions in your 50s, you’re a lot closer to retirement and you have a lot less room for error, and that’s why finding someone in your life, having that accountability. Again, this doesn’t mean all roads lead to Creative Planning. You need to hire Creative Planning. But any good financial advisor, this is one of the biggest values they provide. I mean, when I sit down with a client and they tell me about their situation and it’s the first time they’ve gone through transitioning jobs or having a special needs grandchild and the estate implications of that or trying to pay for college or can I retire or which accounts should I draw from first in retirement?
I’ve seen it a thousand plus times. So I’m looking at it and yes, it’s unique to them and I’m treating it specific to their situation, which may have some unique nuances, but at a broad level, I’ve seen this over and over and over. And the experience I can provide through that perspective is valuable. This the first time they’re retiring and it’s the first time they’ve had to navigate all the ins and outs of that situation.
Finally, let’s rethink this idea that you should always take the job that pays the most. I know it sounds tempting. Who doesn’t want to earn more money? We all do. But focusing solely on immediate pay when looking for a new job can lead to some bad decisions. Your initial compensation package is often, I know this is going to sound weird, the least important factor when it comes to career growth.
What’s far more important, the growth potential as well as the culture and who you are working with. If you are surrounded by incredible people that push you to grow, they challenge you. They help you develop your skills, that’s priceless. I mean, you’re spending a third of your life at work. The people you surround yourself with can have a huge impact on your success and even on your happiness because they change your mindset. The environment is impacted by those people.
In 2012, at the Harvard Business School graduation ceremony, Sheryl Sandberg said something that I loved. She said, “So I sat down with Eric Schmidt who had just become the CEO, and I showed him the spreadsheet and I said, ‘This job meets none of my criteria.’ He put his hand on my spreadsheet and he looked at me and said, ‘Don’t be an idiot. Get on a rocket ship.'” When companies are growing quickly and they’re having a lot of impact, careers take care of themselves.
If you’re offered a seat on the rocket ship, don’t ask what seat, just get on. The point is it’s not always about where you start, it’s about where you are going. I see this mistake all the time in people’s financial lives too. They get focused on the immediate gains, trying to chase the highest investment returns, make a quick buck without zooming out to see the bigger picture.
We’re all guilty of this. We can all be creatures of the moment if we’re not careful. It’s human nature in both your career and with your investments. Short-term thinking can lead to long-term regrets. Sometimes the best opportunities don’t come with the highest pay upfront. In fact, often they don’t, but if they offer growth and the chance to work with amazing people, the long-term payoff is worth it. So when you’re thinking about your next move, whether it’s with your money or your career, remember, zoom out. Focus on the long-term potential, not just the short-term reward.
It’s time for this week’s one simple task, and that is to freeze your credit. If you’re not planning any big purchases soon, like buying a house, financing a car, or wanting to get a new Amex card, there’s little reason to leave your credit open. Freezing your credit is one of the most effective ways to protect yourself from identity theft and credit fraud. It prevents criminals from opening credit accounts in your name without actually affecting your credit score or your ability to use existing lines of credit.
Now, freezing your credit doesn’t solve everything, but now that it’s free, it doesn’t cost you anything to do it other than your time. There’s little reason not to take advantage of this simple step. Protect yourself and protect your loved ones by freezing and monitoring your credit reports. It’s essentially locking the door on your financial house rather than doing what my father-in-law does, which is leaves the keys on the dashboard with his car unlocked.
I once asked him, why do you do this? He said, “Well, I don’t want somebody breaking a window. There’s nothing really of value for them to take in here. I’ll just leave it unlocked.” Now, don’t do that with your credit. If you’d like to review this simple task and supporting articles and information as well as any of the previous simple tasks, there’s one from each week here in 2024. You can do so on the radio page of our website under the one simple task section at creativeplanning.com/radio.
All right. Well, we’ve made it to listener questions, which is always one of my favorite parts of the show, and I brought in one of my producers Britt to help out. Hey, Britt, how are you? Who do we have up first?
Britt Von Roden: Hey, John. I’m doing great, thanks. Up first we have Bob in Indiana. Bob shares that he isn’t sure if he wants to retire. And because of that, he wants to know if he should be doing something different with his financial plans than those that do.
John: Well, Bob, that’s a great question and it’s one that I get regularly because we’re no longer in a day and age where every person is doing manual labor that physically you just can’t do after a certain point. So if you are at a desk job, you may think to yourself, “Well, just because I’m 67, I don’t need to stop. I’m actually really good at it now. I have a ton of experience. I’m probably better than I was 20 years ago. I’m making more money than I ever was before. Why do I want to give that up.”
Again, your question is not that uncommon. When we are building a financial plan. One of the other common considerations I get from people is like, “Hey, don’t make me live till 99 in the plan. I don’t want to live that long, just have me dying way earlier. And my answer to that is fairly similar to my answer to your no retirement question, which is you can make plans and then how does the expression go? God laughs. I don’t want to build a plan where you’re going to die at 85 and then you happen to be alive at 86 and you happen to be alive at 96. Oh, well, we didn’t account for that.
Sorry. Plan is not going to work. You’re out of money. Go live in your great grandkids’ basement. I was going to say your kid’s basement, but it’d literally would be like your great grandkids basement at that point probably. And the same is true, Bob, with your question. We still have to prepare for the possibility that you might not have a choice in the matter.
Even if you don’t plan to retire, life has a way of making those decisions for you. It might be a decline in health, cognitive changes, or even your employer deciding that you’re no longer a fit and that forces your retirement. I remember a client a while back who was in his 60s. He was still working full time, swore up and down that he was never going to retire. We don’t even need to build that in. I have no interest.
I’ve seen it time and time again, you retire and that’s when you just start going downhill. I want to stay busy. He loved his work and he had no intention of stopping. But of course, I told him exactly what I’m saying now, we have to build in some sort of plan for your income stopping. If it never stops, fantastic. All of these projections are going to be inaccurate to the low end. Your situation is going to be much better. And sure enough, around age 70, he started having cognitive decline.
It was really sad, but because we had planned for it, he was financially independent. His family wasn’t left scrambling. We had a way to drive income from his other assets. And so my advice, even if you don’t want to retire, build a backup plan. You may not need it, but it’s better to be prepared than to be caught off guard. All right, thank you for that question. Britt, who’s up next?
Britt: Andrew from North Carolina is up next. He shares that his nephew is headed off to college and that him and his wife are considering co-signing on his student loan as a way for them to help him with his goals. John, he’s wondering today, if this is a good idea.
John: Andrew, I love your heart. I understand your desire to help your nephew get a great education, achieve his dreams, but cosigning on a student loan is a decision that should not be taken lightly. I’m not going to tell you whether you should or shouldn’t. It’s a very personal choice, but just understand that when you cosign, it’s your loan. You are essentially on the hook for the entire amount if your nephew can’t make those payments. If he just pieces out or says, “I dropped out or I didn’t get a good job, or I lost my job and my back hurts and I can’t go back to work,” I mean, I don’t know. Maybe it’s legit. Maybe it’s not.
But regardless, you are responsible for it and it will impact your credit if you don’t pay. And unlike cosigning on a car loan, which by the way, I absolutely do not recommend, but if you did that, at least there’s a tangible asset that could be sold if needed. Now, of course, the big problem there, just like a boat, which I also would tell you, you’re nuts if you cosign on a boat to finance it for somebody who can’t afford to pay cash for it, but they’re both depreciating assets.
So there’s a tangible asset that’s going down in value. I mean, I’ve got all sorts of stories, but I recently read one about a mother who cosigned on her daughter’s student loan and years later the daughter wasn’t able to make the payments and the mother now was at risk of losing her home. It was just a heart-wrenching story that can strain even the strongest family relationships.
So just understand what you’re getting yourself into when you decide to cosign on that loan and make sure that if in the event you have to cover the total cost, it’s not going to derail your financial plan. That whole idea, put your oxygen mask on first before attending to others in the event of a loss of cabin pressure. Can’t you hear that ex-air line pilot in me?
Off the right side of the aircraft, you’ll see the Grand Canyon. And meanwhile you’re annoyed because you’re in the middle of a nap. “Can the pilot stop talking? I get it. There’s a canyon out there. Thank you.” But I digress. And to make one final point when it comes to cosigning, you may be very surprised how many current student loans are owed by Americans over 60 years old and know they’re not going back for a master’s degree post-retirement because their parents and grandparents who cosigned on their kids and grandkids loans who now cannot make the payments.
All right, Britt. Let’s go to the last question. This is a really in-depth financial question. I had to do a lot of research on it. I think it came from Jason in New York.
Britt: I’m sure you did. Our last question came from Jason in New York, and I’m guessing it’s in response to last week’s show with Lawrence Tynes. John, Jason wants to know, “Who are your picks for the Superbowl this year?”
John: Oh, Jason, this is such a good question because it does parallel with finance in the sense that good luck predicting these things. If you end up being right, it’s like, “Oh, look at how smart I was.” And it’s really more dumb luck than anything else. Just like how much will the market go up or down over the next 12 months? You can hear smart answers that are basically guesses because of all the variables that occur.
I might be right on this pick and then next week, Patrick Mahomes gets hurt and my pick is a terrible one. I’m going to be really boring and go with a repeat. The Kansas City Chiefs versus the San Francisco 49ers. Playing it safe. But let’s face it, Mahomes is the best quarterback in the world, and Andy Reid knows how to get the most out of him and are more dynamic with more speed and more playmakers than they even had last year.
I think last year was the chance to get them. As for the 49ers as someone from Seattle, it pains me to say Shanahan is one of the most brilliant offensive minds in the NFL and their roster has just stacked. I mean, they made the Jets look so bad about a week ago on Monday night Football. I’d love to pick a little bit of an underdog or the Lions would be a fantastic story, but let’s just be real.
As much as I believe in them, I don’t fully trust Jared Goff. Just doesn’t inspire confidence in me when the game is on the line. Hope I’m wrong. And by the way, I probably will be because while San Francisco and Kansas City have two of the highest odds of making the Super Bowl, they’re still both well below 20% to actually get there.
I had a meaningful experience as a high school junior when I took a trip to Bucharest Romania to work in the orphanages. Like a lot of these types of trips, you go there with the mentality that you are going to help others. But in the end you come back being the one more impacted, more changed and ultimately helped more than those that you were trying to serve. I walked into my host family’s apartment, which was a two-bedroom apartment, concrete high-rises, little rickety elevator that you pull a gate across, laundry, hung out, all over downtown on these apartments, over the railings.
A lot what you may picture Eastern Europe 25 years ago. And they begin to serve me this family with more kids than I have. And I have seven. In a two-bedroom apartment, cheese, tea, all sorts of food. And it was just this beautiful act of hospitality in addition to the parents giving up their bed and sleeping out in the family room so that my friend and I could be comfortable.
I remember even as a punk high schooler with very little perspective, being acutely aware in that moment of the extreme generosity that I was provided. There was one specific thing I asked my translator the next day as it pertained to this dinner and my evening experience on the first night in Romania. And that was help me understand why they served us and sat around and smiled and we sort of played a game of charades because they didn’t speak English, but they didn’t eat anything. Why did they not eat? But we did. And my translator chuckled almost as if to say, “John, you don’t get it.” He said, “Of course they didn’t eat anything.”
And I said, “What do you mean of course they didn’t eat anything?” He said, “They’ve been preparing for you to be their guest for weeks. They can’t afford to serve you that type of food and with a huge family they have also eat those things as well. No, that was because you were their special honored guest.” And you have those moments in life. Maybe you’ve had them and maybe it’s been when you’ve traveled internationally, maybe to a third-world country where your perspective is changed, not because your circumstances are different. When you get back to your house, driving the same car, living in the same home, but because of what you have experienced. And that was how I felt in that moment. Wow.
And the two takeaways that I had that are applicable for you and I, as we wrap up today’s show is that number one, money in and of itself will not make you happy. There are plenty of wealthy people who are miserable, and there are people as I just described who have virtually nothing materially, yet. They radiate joy with every fiber of who they are. And what a reminder and inspiration that is for us as wealthy Americans. But secondly, when you are surrounded by great need and severe poverty, my other takeaway is money is not going to make you happy, but it is an incredibly powerful and useful tool to accomplish things that matter to you and that are in alignment with your values.
It’s not superficial, it’s not meaningless. While it’s not everything, it’s important. And the way that you steward that wealth can have a huge impact on things that matter, on things that truly make a difference. Keep this perspective in mind as you go throughout this week and remember, 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, Male:
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.
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