5 Lies You Might Be Telling Yourself About Money

Plan With The Tax Man

Are you telling yourself financial lies? Discover the top 5 lies people often tell themselves about money and retirement. Some of these could be severely holding you back, so stay tuned!

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Transcript:

Marc Killian:

Are you telling yourself financial lies? Well, this week on the podcast, discover some of the top lies we often tell ourselves about money and retirement, some of these could be severely holding you back, right here on Plan with the Tax Man.

Hey everybody, welcome to the podcast, Tony Mauro and myself back to talk investing, finance and retirement. And we're going to talk about some money lies we maybe tell ourselves about how we deal with things and handle things. I think it's something that we all do in various walks of life. We kind of, I don't know, little white lie ourselves, kid ourselves, whatever you want to kind of call it. I think we all can probably admit that we do it about various different things, and certainly money is one of those ones where we can do that.

So I thought this would be a good conversation for Tony and I to dive into today because, Tony, you see people doing these kinds of things on the regular. They kind of come in and you hear these different excuses that we make or things of that nature. It doesn't mean you're a bad person or a bad investor or anything like that. It just means it could be something that's causing you to not be as efficient or where you'd like to be in your retirement journey. So I thought it was a good idea to talk about that. How you doing bud?

Tony Mauro:

I've been doing well. How about you?

Marc Killian:

Doing pretty good. So do you kind of see these kinds of things often where people, they kind of rationalize, maybe that's a better word. We kind of rationalize how we have made choices we've made or how we feel about certain things in our money standpoint. You have to kind of show them how it's holding them back from reaching their goals.

Tony Mauro:

We do. We hear it all the time. And we can make probably a list of 50 of these babies and we could be here all day.

Marc Killian:

Okay, well we'll just do five. How about that?

Tony Mauro:

Yeah, I picked top five, but you're exactly right. People say these kinds of things all the time because obviously they do them.

Marc Killian:

Sure.

Tony Mauro:

And most of them go against your bigger goal and your plan. So that's why I wanted to talk about some of these today.

Marc Killian:

All right, well let's jump in and do the first one. I love this first one for the fact that you got to be honest with yourself folks as you're listening to this. The first one is, I'll pay back the money that I've taken out of my savings or borrowed from my own 401k. All right, come on. Let's be honest. How many times through your life have you said, "All right, I'm going to take some money out of whatever account to do some thing and I'm going to put it back." We never pay ourselves back. I shouldn't say never, but many people wind up... Life always gets in the way, Tony. And so it's kind of hard sometimes to truly pay yourself back.

Tony Mauro:

It is. And just like you said, I would never say never, but I almost never see clients do that and pay themselves back. Hardly ever.

Marc Killian:

I guess the 401k, you kind of have to, if you did the loan thing, right?

Tony Mauro:

If you did the loan thing, you have to. But many times they'll just say, "I just took money out of my 401k," and we'll ask them why, and it's not really an emergency. And they'll always tell us, "But don't worry, I'll pay it back." And a year or two goes down the road, they haven't paid it back.

Marc Killian:

And boy, that's like a triple whammy. Well, I guess it could be, depending on your age, right? If you hit with the tax, the penalty plus the loss of compound.

Tony Mauro:

Yeah. All that comes into play. And then you also have to, if you take all that in and really do the math, you have to pay more back than you borrowed or that you took out if you factor it in. But the big key we try to tell people in this area is you're saving money for different goals. If you're planning your whole financial life properly, you shouldn't have to borrow from these things or take it out for something that is not that goal. And so it might be a bigger problem that we have to help you try to solve there so that you don't do this. Because if you are constantly doing this and going backwards, you're really not getting any closer to your goals.

The big example I have, and this is true life, happened right here in Des Moines, Iowa. I have an accounting and payroll client who we do the 401k advising for. A young kid, and he calls up a couple weeks ago and says, "I'm not making any money in my 401k. All my money does is go down. But yet the people that I work with," which is only about two or three others, "...they had a great year last year. Why is that?" So he pulled up his account and what he'd been doing is putting in like $200 a paycheck, and every two weeks, he'd take it out. So he actually withdrew everything out that he put in except for like a hundred dollars. And he wonders why last year in the market specifically most funds and everything else went up. He did not. And so it was a very simple conversation of you have to stop pulling money out of this. Why are you even putting it in if you got to pull it out?

Marc Killian:

Yeah, he's sabotaging himself.

Tony Mauro:

Yeah, sabotaging himself. So he's a laborer and he did not know that he was supposed to leave it in there. And I said, "Well, what do you think you're... Why are we even doing this?" And so I had him come in, had a long talk about finances and where he wanted to go and whatnot, and I think we've got him on the straight and narrow. But he actually just thought that this was a temporary savings and then he was to pull it out when he needed it. And so that kind of stuff goes on. I mean, everywhere. Not to that extent, but...

Marc Killian:

Right, but it's how we get in our own way. And again, the point is these things can severely hold us back or even wreck our strategies. So we certainly don't want to do that. And it's always hard to pay ourselves back. I mean, it's bad enough this old adage about not borrowing money from or not loaning money to family, right? Because they know, "Well, you're family. I shouldn't have to pay you back." That kind of thing. Same kind of thing with yourself sometimes. "I shouldn't have to pay myself back."

But again, you're kind of paying future you back, or you're not paying future you back, I suppose, by not doing it. So, all right, good one there. That's certainly a good one to think about. All right, let's go to the next one here. And it's, "You'll only live once. Might as well spend it now." There's a bunch of people who can certainly, I can even identify with this somewhat, Tony. I mean, there's lots of times where you're thinking, what is the old saying, Tony?

There's not a Brinks truck following the hearse, right? On the way to the funeral or to the cemetery, so might as well enjoy it. And we want to enjoy it, but you got to be a little bit responsible. And this is the point of a strategy or a plan because it seems like people fall in two categories. They either have saved fantastically, they got a ton of stuff that they'll never be able to use, and then they're still afraid they can't use it so they don't enjoy their retirement. Or you got the ones who blow it a little too much and they're worried about not making it all the way through retirement. You got to find a happy ground in there somewhere.

Tony Mauro:

Yeah, the keyword, you just mentioned it, is balance. And you have to balance everything there, which is why you want to have a plan in the first place. So I look at this one as this is the people that don't even start with the last topic we just discussed. They don't even save any money to even pull it out. They're just spending every dime.

Marc Killian:

They're just big wheeling it. Okay.

Tony Mauro:

Yeah. And I agree that, yes, we can't control when the end is for each one of us, and so I get it. And this is a great topic where if you get a plan in place and then learn to live without, you can have a little of both and still have some fun in life and have a great retirement towards the end. But you can't do that. You can't just live above your means and constantly not save. You'll never get to where you're going. And believe it or not, we have a lot of tax clients that they've gone all their lives and they're now in their late seventies, early eighties, and they've done this. And only now are they scratching their head saying, "Man, I probably messed up a little bit. I shouldn't have done all that and I did it incorrectly." And they don't have any more time. So for them, it is what it is and you got to take what you have. But especially the young, you got to get out of that habit.

Marc Killian:

Gotcha. Well, talking about young, let's go to our next one here. "I'm too young to start saving for retirement." So that fits very well to what you were just saying. But man, I got a 27-year-old daughter, she's had a good career now in last three or four years, and I've been harping on her. You're in a great place. Put more away than you think you can while you can because you don't have any kids and things of that nature right now. That stuff's going to change. And so don't act like, "Well, I'm 27, I'm young, I'm having fun, blah." Great, but still. Put 15% away, man, don't be a dolt.

Tony Mauro:

Yeah, I think it's never too young to start saving. Even if it's 10, 20 bucks a paycheck, get in the habit of saving.

Marc Killian:

Heck yeah.

Tony Mauro:

You can always add more as you make more. But as you said, life starts getting in the way. Kids start coming for the young people, marriage, all kinds of things, and-

Marc Killian:

Of course, look at the cost of housing now, right? They're terrified they can't even afford to buy a house. So they feel like, "Well, how am I going to save for retirement when I'm trying to save for a house?" I get it. But to your point, God willing, future you is still standing down the road waiting, Tony. At some point, you're going to be 70 and you're going to really wish that younger you wouldn't have been a goober and not put anything away.

Tony Mauro:

It's interesting too, you get with an advisor and start asking them, "Well, if I put away say a hundred dollars a month now and what I'll have at say age 70 versus if I start in five years from now, what will I have?" And let them show you what those differences are, and they are pretty large. So delaying is a bad tactic because it's going to cost you a lot more. You're just going to have to spend up, and we're going to talk about that in a second. You're going to have to save more later and it's going to be a lot more and it's going to be a lot more painful.

Marc Killian:

Yeah, very true. And we don't want that, right? The painful part is what we're trying to avoid by hopefully-

Tony Mauro:

Try to avoid that, yeah.

Marc Killian:

... building a nest egg early on. And again, to your point, and you can go do some crazy, you can go out there and look at some really cool interesting things. You can use some calculators. Just putting away 30 bucks a month starting at 18 or 20, what it can do by the time you're 65 is crazy. Some good stuff out there that you can certainly be doing even when you can't afford it. But especially if you are in your twenties and you are making a decent living and you can put a little extra away because you don't have some of those extra things going on and maybe it cuts back your partying or your going out or your whatever. It's worth it in the long run. Just a little bit here and there to do that so that you can kind of let that compounding interest really kick in over the next 35 or 40 years. So never too young.

All right, let's see, what else have we got here, Tony? Like you said, there's like a list of 50 of these we could go through. So let's do this one here. "I can make up for lost time." Okay, and here we go. So I didn't start young. I'm too young, so I'm not going to start. Well, you rolled yourself into number four here, which is, "I can make up for lost time by saving more later on." This is almost like the paying myself back conversation. Are you going to make up for lost time? If you spent 30 years not getting ready for retirement and then you went, "Oh, crap, I'm 55, I better get started." Yeah, it's never too late. I suppose we need to say that, and there's definitely ways you can do some things and there's catch up contributions and things that allow us to make up some ground, but maybe this is more of a willpower conversation, Tony. Are you going to actually put the effort in this time?

Tony Mauro:

Yeah. Are you going to do that, put the effort in? And then if you're going to say that and we show you the numbers, now you're talking a lot of pain, because if you can have the willpower to do it, you are going to have to start saving a lot more. And then you are going to have to really make some tough decisions in your life as to whether I want to get to the end with a certain goal in mind, and do I want to give up that kind of money, not give up, but save that kind of money? Will my lifestyle afford that?

Marc Killian:

Yeah, alter your lifestyle for a little while going into it. I mean, nobody wants to go backwards in their retirement lifestyle. From the ideal, I mean, ideally, Tony, when we're 50-plus, we're hopefully making the most money, right? This is all common sense stuff. We're hopefully making the most money we have in our professional careers. Hopefully the kids are out of the house, we're working our way towards the house being paid off. So yes, there are ways. And you are in a good spot to save more, but how badly have you damaged yourself by not doing any prep ahead of time? Some people it's a little, some people it's a lot. So you may have to truly decide, what am I cutting out to get this extra savings in? It may have to be more than you planned on, so just be prepared for that.

And I'm sure that you've seen people in various stages of this, right? I mean, and so many of us walk into a financial advisor's office for the first time and I think it's pretty overwhelming. I want to say it's like seven out of every 10 people or whatever feel like they walk in and they're already filled with dread because they're like, "I know I'm not in a good spot, I'm not in good shape." And oftentimes they're actually pretty pleasantly surprised to find out they're in better shape than they realize, which is good. Do you see that as well?

Tony Mauro:

We do see that, and I think a lot of people think they're going to walk out of here and we're just going to beat them up over, "Well, you haven't done all this. You didn't start early enough, blah, blah, blah." But it really isn't about that. It really is, "Here's where you're at, and if you want to be here, here's what it takes to get there. How can we do that?" And at least you know, well, maybe my goal is too farfetched or maybe I'm better off than I thought I was and this isn't going to be too bad. And it's good to walk out having some sort of plan.

Marc Killian:

It's a minor tweak, it's a major tweak. It's no tweaks. It could be anything.

Tony Mauro:

Yeah, could be anything. And then try to work that plan and feel like you have somebody on your side helping you with that. And then if you do get off a little bit where you might be tempted to pull some money out of savings to take a vacation, we can be at least a sounding board. Obviously at the end of the day, it's your decision. It's always your money. But yeah.

Marc Killian:

Okay. Well, speaking of advisors, let's wrap it up with this one, Tony. For a long time, and it's definitely gotten better, but here even in 2024, you'll still hear people go, "I don't earn enough or have enough," or whatever, "...to hire a financial advisor. I'm not rich." I think there used to be a stigma about, definitely was a stigma about financial advisors and certainly something like a trust where, "Well, that's only for the really wealthy." And that has changed so dramatically. I mean, so many people in various walks of life have financial professionals that help them out because it's a coach. It's like coaching to be better at golf or your baseball swing or whatever.

Tony Mauro:

Yeah. And I like this one because when I hear that, I try to ask clients or potential clients, "Well, what have you heard? How do you think that we are paid and how much do you think we're paid?" Because it's, most advisors today are either fee only or asset-based, which is a form of a fee. And even if you start young and you don't have particularly a lot to get started with, most advisors are going to help you. The fees are not going to be as high as somebody that has a lot of money, but the complexity is not going to be there either.

Marc Killian:

Sure. Well, you're talking stages of life, right? Because you may hear some people, you'll hear somebody say, "Well, this advisor only works with somebody who has a million dollars saved. And I don't have that, so I'm not rich," or whatever the case is. But again, you're talking about various different types of advisors or professionals out there and what stage are you at? So it's looking for the professional that's maybe helping you with climbing the mountain versus helping you with descending the mountain. You're going to be in both of those points, but find the right person to help you with where you're at currently, right?

Tony Mauro:

That's it. And you want to ask the advisor, you want to know what they're getting paid just like you would any place else, whether you take your car somewhere or buy it, go buy a piece of clothing, you want to know what you're paying. And you also want to know what you're getting because I think that's the most important point because as long as the expectations are lined up and you find value there, then you're going to be in good shape. Now if you're going into an advisory relationship and you're just starting out and say you're going to start with an IRA and put five, $6,000 a year in it, you can't expect your advisor to meet with you 15 times a year and you're calling, bouncing stock ideas off them, because they just can't be profitable like that. But as long as they set up saying, "Here's what we're doing for you at this stage of life," and you're good with that and aligns with whatever you're paying them, it's a win-win.

Marc Killian:

Yeah, okay. All right. And like I said, we've seen this financial lie or myth or whatever get better through the years where more people are certainly waking up to the idea that they can provide value. And even if you're a do-it-yourselfer, think about the fact that Vanguard, which is one of the cheapest options out there for do-it-yourselfers to use, Tony. They even publish fairly often their findings that advisors bring real value to the table, often in the area of behavioral management, just keeping us from being our own worst enemy. Back to that number one where we take money and do something incorrectly with it.

Tony Mauro:

That's what we're getting paid for these days. And I say this, and this goes against a lot of advisors type of talk, but you really don't need an advisor to go pick investments. I mean, there's so much information out there.

Marc Killian:

So much technology, yeah.

Tony Mauro:

And what you need us for is what we just talked about and trying to keep you on plan and making sure you're trying to hit your goals. That's what you're paying for. And the investment part, even if you go do that part on your own and you're still paying an advisor just a fee, it's really that coaching slash consulting throughout the different stages of life.

Marc Killian:

Yeah. And Tony, and don't sell yourself short too though. I think the downside, the down, I shouldn't say downside. The downward trek from the mountain, it's coming down off the mountain, which is retirement where we're now pulling money out. There's a lot of levers being moved at this point, and it's how these things all play together. It's a lot easier to build wealth than it is to preserve it and then distribute it throughout retirement. That's really where I think the rubber meets the road as well.

The behavioral thing is certainly there because when we get, because we're nervous, right? I don't want to be 80 and without any money, so I want to make sure I don't make any mistakes. And often we wind up making mistakes trying to not make mistakes because we get scared of whatever. So I think it's really both those pieces in my mind, the value you guys bring into the table is that how do all these pieces now play together in this thing called retirement along with the behavioral coaching to say, "Okay, now I get why you're nervous, but let's not do this or that or whatever without really thinking it through."

Tony Mauro:

You're right. That's the favorite part that I like the most anyway, is once you do get to these goals, which is usually around retirement, is okay, now everything changes. Now we got to try to figure out how do we make this money last and so you can enjoy what you just spent a lifetime building. And you're right, there's a lot of different pieces then. And obviously people want to earn as much as they can on the money that they've got accumulated so that they can use this in the ways that they want. So that's where it becomes difficult.

Marc Killian:

Well, and then the behavioral management comes in of don't risk pushing for big earnings and putting yourself in this vulnerable state where you can also lose a lot because you're taking on more risks than you really need to. Hey, the plan says you're good. We've built this plan and you can get by on or not even get by, but you can be successful on 6% return or, I'm just making up a number here. So why are you risking serious pain for 12%? Yeah, I get it. We all would love 12% year over year. It's not realistic, so why risk it?

Tony Mauro:

No, I agree with that.

Marc Killian:

Yeah, okay. All right, well there you go. And of course then there's the tax lever, right? So I'm going to wrap it up here. But basically when we're thinking about retirement, and Tony, obviously as a CPA and a CFP, you've got both sides of this going on in your head there. But when we're building wealth, it's a whole lot easier just kind of putting the stuff in there and blah, blah, blah. But when we're starting thinking about retirement, when you pull one lever about where you take money from and when, it affects three or four other levers. So tax efficiency becomes a big part of this conversation as well.

Tony Mauro:

Big part of the conversation. Absolutely.

Marc Killian:

Yeah. All right. Well, that's going to do it. So five lies we might tell ourselves about money. And of course, if you need some help, especially on that behavioral side, I've been kidding myself, or I've been leading myself around by the nose, maybe I should stop doing that. Well, reach out to Tony and his team if you've got questions, need some help. As always, before you take any action, check with a qualified professional like Tony. Again, he is a CPA and a CFP and EA of 30-plus years in the industry. So great resource for you to tap into. Subscribe to the podcast Plan with the Tax Man. You can find all the information you need at yourplanningpros.com. That's yourplanningpros.com. Tony, thanks for hanging out buddy.

Tony Mauro:

Okay, we'll see you next time.

Marc Killian:

I always appreciate you. We'll catch you a little bit later here on Plan with the Tax Man with Tony Mauro from Tax Doctor Inc.

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