Combatting Popular Excuses For Poor Financial Decision-Making

Plan With The Tax Man

Very often, we see people who know that the financial decisions that they’re making aren’t the best decisions, but they try to create excuses or explanations for why they’re doing what they’re doing. Let’s talk about why these excuses usually don’t hold water.

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Transcript:

Marc Killian 00:00

Very often we see people who know that the financial decisions that they're making aren't the best decisions, but they try to create excuses to explain why they do what they do. So let's talk about that this week. You're on playing with the tax man. Look up in the sky. It's a bird.

Announcer 2 00:17

It's a plane. No, it's the tax man. He may not be a superhero. But Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for a plan with the tax man.

Marc Killian 00:31

Hey, everybody, welcome into the podcast, Tony myself here to talk investing finance and retirement, Tony and myself and on the Why can't talk this week, to have a conversation about popular excuses for poor financial decision making. And really, Tony, I think I've just got like five basic questions here. Look, we are all really good at saying well, I did this because of that, right. And sometimes we know, it's a bunch of BS that we're just, we're just throwing some junk out there. Because we didn't think it through or we rush to a decision. And certainly that's part of life, it's part of being human. But when it comes to the financial stuff, especially as we're getting closer to retirement, you know, we really don't want to be making excuses for bad decisions, because we don't really have the time to fix these bad decisions. So let's maybe try to get it right the first time. Right. Okay. Yeah, no, I agree with that. It makes sense, right? I mean, it makes your job easier to write when we can get it right the first time because it makes it easier for you to build that plan for us, right.

Tony Mauro 01:27

So let's talk about a few places where we might get this wrong and make an excuse. And obviously, we're going to start with Social Security. Clearly, the whole turning and on at 62 thing, the excuse being, I want to get it back before it's gone, or whatever thing you want to grab on to, other than just saying, I truly need the money. That's why I'm turning it on. Okay, that's a valid reason, right? But just saying they owe me it's mind, whatever I'm turning it on, well, fine. But you could be costing yourself a ton of money if you do that. A ton of money. The other the other excuse it goes along with that, as you know, they're going broke. Right, right and apply. And, and I just had an email this morning from a tax client asking this very question. And his email went, you know, I, my wife is 67 or thinking about wait until 70. I've asked different people, they'll give me different answers. Of course they do. And they want to know about when they should take it. Now, most people at the younger ages, you know, they may want the money, that's a valid reason. And there's all kinds of things that go into it. But what I can say from a financial planning standpoint is, and we have this and we utilize this for our clients and your visor should have this is there's some sophisticated software that we can run and punch numbers in to show you basically, you know, here's what you're gonna get over your lifetime. If you take it at 60, to full retirement age 70, whatever you want, and show you how long it takes to break even because that's most of the time, what you're asking is, how long do I have to live, but to break even actually come out? Ahead? And there's a lot of factors and there's no wrong answer. But don't just rush to take it at 62. Because you think that, you know, you're gonna get the government, you know, you're gonna show them and listen

Marc Killian 03:14

to them, ya know, and you're thinking to yourself, if you do this wrong, right,

Tony Mauro 03:18

you're staying to yourself, because every year you you wait all the way up to the max, which is 70, they give you a little bit of an incentive to wait because they increase it by about 8%. And then people get confused. And they say, Well, yeah, but I didn't get it for eight years or five years, you know, and that's where we could show them with some software and make it very easy with some calculations. And obviously, we're going to show them in layman's terms, not not show them all this other stuff, right. But it's easy to show somebody you know, if you wait till this, here's your life, you know, based on your average life, yeah, how much you you actually could come out ahead, and then it's up to the course the client to decide, you know, there's there's a lot of factors that go into this. There's health, there's longevity in your family, things like that. And like you said, if you really need or want the money now, no one's gonna say you can't do it. It just might be a bad decision. Yeah,

Marc Killian 04:09

I mean, that's what the stress test is for. Right? So Security Maximization, right? You guys can go through that and and see where you, you know, where it stands, where what makes the most sense, right? What is your breakeven point? So don't just make that excuse, you know, get the answer and then make the decision. Number two, when someone's taking too much risk with their money, often we'll hear excuses like, well, I got behind, right, I'm making up for lost time, right, which is normal. We all feel that way. We feel like we didn't get enough save for retirement. But a lot of times, Tony, you'll hear this when somebody comes in for that initial consultation, and you're looking through their portfolio and you're kind of working on, you know, building something with them. And they're like, you're like, Oh, you're taking way more risk than you probably should be at this age. And they're like, Yeah, that's because I got behind. Well, that's the point of the evaluation is that maybe you're taking more risk and you don't actually have to maybe you're not as bad of shape as you thought you were. That's right.

Tony Mauro 04:58

And you know, it all comes down to trying to figure that out and backing into it from a good plan a good starting point because that's what their goals are and whatnot. And if they haven't defined that in at least sit down with them, and come up with those goals and what they're, you know, what they actually say their risk tolerance is compared to what they're doing. And I hear this all the time, we tried to tell them, Well, maybe we can get to these goals by you just saving a little more, because you know, the risk you're taking might be far too large. And risk is the risk, you know, if that risk does not pay off, you really going to be in a real bad spot, versus maybe we better back it down a little bit. Yeah, you might not get to where you need to be, but you're gonna have something. That's what we try to go over

Marc Killian 05:42

there. Yeah, great point, you know, so again, you want to make sure that, you know, if you're feeling behind, first find out if you truly are before you start swinging for the fences, right? Yeah. And then if you need to take your visor is going to say, okay, look, we are a little bit behind, here's some of that, here's a couple of strategies that we may need to do to get you to your goal, versus just, you know, willy nilly taking the risk, when you may not need to, or as much risk or more risk than you need to. So sitting on too much cash, right, they'll often explain it, well, you know, I don't want to lose it, like I lost in less than the market went down. Now, I realize that that's changed a little bit these past couple of years with cash, finally paying a little something. But if you're still being pretty hesitant to be in the market, for your long term monies, you're doing yourself a disservice. Because ultimately, even the cash that we're getting right now, 20, which is better, still doesn't keep up with inflation. So you've got to have some growth monies,

Tony Mauro 06:35

you got to have some some growth monies. And this is where a good plan comes into place. Because hopefully, you know, you can be diversified. Yes, you can keep some additional monies in cash, especially these days, because it's it is better than it's been, but long term wise, it's not going to get you to your growth goals, especially if you're a little younger. I mean, it's a little different for retirees. But, you know, at the same time, most of the time, we'll we'll ask them, Well, if you lost all your money, you know, the quote, last time, what were you actually doing? Were you trying to do all this yourself and took too much risk, which we just were talking about, and you had a bad, you know, short term fluctuation in the market, you panicked and sold everything, you know, so we try to get them off of that, you know, trying to time the market and not worry so much about that, and, and base it off? what their plan is?

Marc Killian 07:26

Yeah, definitely. Right. And, you know, I get it, I get having that feeling of, Oh, I feel better seeing X amount of dollars in the bank, or whatever the case is. But again, basic conversation is that you're losing money safely. Even though if even if you are getting four or 5%, which is you know, what we can kind of see right now, it's still not truly keeping up with what we know, inflation, real inflation to be not just those CPI numbers. Okay, number four, when someone has no idea what they're invested in, or what their money is even doing for them? Well, the excuse sometimes is, I don't know, I just I pick this or I did that or, but it's not my thing. So just it's look good. You know, whatever excuse you want to kind of pick, you've got to understand what it is you have and why you have it. Even if it's not your thing, you need a basic understanding of that. And I think a good advisor is going to help you explain that to you. Why they're recommending what they've recommended, and what it's doing for you.

Tony Mauro 08:18

That's exactly it. I mean, it this is my favorite, especially when people come in and they've have money in their 401k different investments, they have no idea what it is in or even what it's done. Yeah. And that, just like you said, that is where it just like we talked about on the last episode, a financial advisor that you're paying a fee to, is going to be able to help you.

Marc Killian 08:41

Well think about like because this is our thing. Yeah, I think about like this, you know, how many people get in, get into a stock? Because they hear it's cool, or because the dad loved it. You know, whatever, right? Like dad had coke, I want coke. That's not an endorsement for Coke, by the way, folks. You know, Coca Cola. Okay, I'll clarify. But you gotta meet like, or GM or whatever, right? You know what Dad always drove Chevy. So I love GM, you know, stock or something like that. That's fine. But is it really like, is it beneficial in your overall strategy? There's, I guess there's nothing wrong with having some favorites. But whenever you're sitting down to craft a plan with your advisor, let them know that there's some personal attachment to that, but also be open to hearing the fact that maybe you shouldn't have this percentage in just that thing, right? Because it's not helping you or whatever the cases. Yeah, I mean, and we have clients that did want certain types of investments for sentimental reasons. Wrong, like you say, right. But it's, it's just part of the overall plan. But if you're just kind of out there, willy nilly and say, Well, I've

Tony Mauro 09:44

got this I've got that because of this or you know, your quote, excuse that may not be or have anything to do with getting you to where you need to be Yeah, with your goals and in your plan. Yeah. And so that needs to be looked at and again, that's, that's where it ends. lasers gonna hold

Marc Killian 10:00

true if sometimes we'll hear stuff like, Well, that went to three means I went to three different companies bought three different mutual funds. So therefore I'm I'm diversified because I don't really understand this, but I figured that God has me covered, right? So I've covered myself by buying three different funds from three different companies and somehow thinking that you're diversified. And oftentimes you're not you've really bought three mutual funds with the same junk in them. Same, you know, the same holdings? Yeah, absolutely. Exactly. So, all right, last one, Tony, if you're working with a professional and advisor, broker, whatever, and you're not sure that you want to move on, but you kind of feel like you should. First of all, if you're already asking yourself that question, if you're already saying, Maybe I need to be looking for more out of my advisory relationship, then something's clearly bugging you, right? And you need to get to the bottom of that with the current one. But if you're not willing to walk away, just because the you know, you've had a good relationship, or it's been a long relationship, the excuse sometimes is I just don't want to be hurtful, or they've always done me right, or whatever the case is. And I make this joke often, Tony, but that's like saying, Well, I keep going to my pediatrician, even though I'm 60 years old, just because he's a good guy, or a good gal. Well, they're not the right doctor for you anymore. They work with kids. I mean, so you need to see a doctor who's, you know, helping older folks and things of that nature that specializes in that. And I think the same thing applies with what you guys do, whether it's a specialty thing, or if it's just, you're not getting out of the relationship, what you should be, at this time of your life. Don't be afraid to, you know, look around for a new one.

Tony Mauro 11:30

Yeah. And I think, you know, if you're asking yourself that question, just like you were mentioning, something is bothering you, I think what you need to do is, first of all, figure out what that is, there's some part of the of the value proposition that you're not getting as a client, and that you maybe think you should, first thing you probably should do if you really want to want to bug out in the open is talk to the adviser about it, and just tell him or her that, hey, I think I should be doing this it. Is this fit in what you do and how we're doing it. And if not, don't be afraid to say, well, you know, I think I need that. And I may want to go to somebody else. That's that's the first thing. Because obviously, it's not going to get better unless something has its address. Yep. Communication or something. I had a client like that. And he came over and as a relationship developed, really, I found that he did not want he did not want to do financial planning. All of a sudden, you know, he came in Oh, yeah. Oh, that's great, blah, blah, blah. But really, all he wanted to do was he was a he was a TV watcher, and he constantly wanted us to find equities for him that outperformed the s&p. And we just finally said, You know what, we can't do that. I can admit it. You know, I'm not a stock picker. I'm

Marc Killian 12:48

a planner. Right. Right. And if, if you're not a day trader, you know, you're not a day trader, or a broker. Yeah, no.

Tony Mauro 12:54

Yeah. You know, I, it's just not where I want to be and tried several times to get him and his wife together to, you know, to lead the plan didn't have any interest in that. Finally, I told him, I said, you know, what, I can't be a value to you, you need to go either. Do what you want to do on your own and find another advisor, because I so I kind of actually severed the relationship, because I said, I, I'm, as a fiduciary, we talked about that a little bit earlier, I can't provide you any value. I, you're, you're paying me a fee. And I can't give you what you want.

Marc Killian 13:26

Right? So no, and that's great, right? I mean, you've got to have the right relationship for what it is that you're looking for, and being able to receive, right. So even if you are older, and you know, you need a financial advisor who specializes in retirement or, you know, building those kinds of strategies, but you're not willing to receive that information, and or work the plan that you guys create together, then you're just wasting everybody's time and money, right. So money. Yeah. So you know, it's good to have an advisor that can give you look, we all want to have our handheld from time to time, but you also need that person that says, that gives it to you straight, like I changed my cardiologist, you know, after having heart surgery, because the other guy I had, well, we'll find doctor, his delivery style didn't work for me told me I didn't, you know, like, it wasn't communicating well for me to do the things I needed to do for my, you know, for my recovery. So I switched to a different cardiologist, and this guy got tired of my junk, and he started getting in my face. And it worked. Because that's what I needed, right? I needed someone to be a little bit more stern with me. You'd think that you would need someone to be starting with you and dealing with a heart situation, but I did and so therefore I had to find the right doctor. Same thing, right, same exact thing. Same thing.

Tony Mauro 14:41

Absolutely. And there's you know, obviously everybody knows there's a lot of advisors out there you got to find somebody that is going to be your style so to speak. Yep. And because otherwise relationship you know, it's like any other relationship just like you were saying doesn't work doesn't

Marc Killian 14:56

work starts to fizzle, you dread going you don't really fall go through with things, whatever. Right? So those are some things to think about folks, you know, on a conversation this week, don't make excuses for yourself. We all you know, we're humans, we can do it pretty darn easily. But when it comes to your finances, try to try to eliminate those so you can get it right the first time and have that happy in enjoyable retirement future that we all want. And if you need some help with that, you need to find the right person for you. Well sit down for a consultation with Tony and his team and see if they are the right fit for you at your planning proz.com That's your planning proz.com Tony has been doing this for 30 plus years a great resource for you to tap into. He's a CPA, a CFP, and n e AE. And again a great resource for you to reach out to at your planning proz.com Don't forget to subscribe to the podcast so you can catch future episodes as well as past episodes. And Tony, my friend. Thank you for hanging out. All right, we'll

Tony Mauro 15:48

see you on the next episode. Yes, sir. We'll

Marc Killian 15:50

catch you next time here on plan with the tax man with Tony Morrow.

Walter Storholt 15:59

Securities offered through a van tax investment services SM Member FINRA SIPC investment advisory services offered through a van tax advisory services insurance services offered through an event tax affiliated Insurance Agency investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional