Episode 19: Moving the Financial Goalpost!

Isaac Wright: Welcome back. We have a nice episode coming up a Wright Money Tips. I’m Isaac Wright. We’re in the early stages of football season, so imagine this, if you will. You’re watching your favorite football team and they need to kick a 50-yard field goal to win the game. And lo and behold, right before the kick goes up, the referee blows the whistle, not because of a flag, but just arbitrarily saying that they’re going to push the team back five, 10 more yards to see if they can make this a game winner. Well, I know that sounds a little crazy, but quite frankly, in a way you can do this to yourself when it comes to your retirement and your financial plan.
And we’re going to talk about what that means here today. On this episode, we’re going to call it, “Moving the Goalpost.” A lot of people, when it comes to developing their plan, kind of shoot themselves in the proverbial foot. They could be ready to do certain things, but they can’t quite get over the hump, mindset wise or are mentally putting themselves in a position to be successful during this transition.
And again, I’m going to focus a lot on retirement today and with our guest, Mr. Ricky Lafon. You all probably know Ricky by now. He is our senior advisor here at Financial Dynamics. We’re going to talk a little bit about some of the small things that occur that really do mean that you’re pushing the goalposts back.
Ricky, let’s start off with this conversation for those listening today, making sure that they don’t do this to themselves, what I call, “How much cash do I really need?” So why don’t we open it up with that? Why don’t you share a little bit about what we found with some people when it comes to the cash that they have on hand at the bank?
Ricky Lafon: Sure, absolutely. So clients will come to us and say, I need X amount of cash to be able to start investing. And maybe that goalpost is 25,000. And what we typically see is once they save that 25,00, that’s what they want in their bank account. And all of a sudden, they say, “I want 50,000 before I start investing.”
Then that becomes 75,000, which is fine. We can talk about how much each person needs for emergency fund planning. And that’s going to be different for every client. But if we don’t start investing, we’re not going to create a retirement plan. And outside of being a pro athlete, a football player, we’re probably not going to have a successful retirement plan without investments somewhere along the line.
Isaac Wright: Well, and you all are hopefully listening a little bit on that. So, you know, a lot of times people are accumulating money in their savings account. They really want to get to a certain number, but when they hit that certain number, instead of turning around and using some of that cash for investments that can grow long-term compound to give them a better lifestyle, they get infatuated with just simply keeping the money as cash.
Now, again, dependent upon how you invest that money, it doesn’t necessarily mean you have to put all that in high flying stocks, but you do want to have a situation where you have some liquidity with some of those additional assets not sitting in cash.
You already know that when you go to the bank, you’re lucky to make 0.1% in your savings account and you have to do better than that because you have inflation eating at every dollar. So, that is a very big problem when it comes to just compounding money over time that people just don’t pay attention to.
Let’s jump into the second kind of conversation related to moving the goalpost. What I call, “I’ll get serious about saving money next year.” You know, I’m going to get serious. You could almost fill in the blank on this. You could almost say I’m going to get serious fill in the blank next year. But let’s talk about why that is kind of a defeatist way of looking at things.
Ricky Lafon: We hear anything from, “I’m going to start saving when my kids are out of college or I have to remodel the kitchen, I have to put on a new roof, I have to buy a new car.” Whatever the case may be, there’s always going to be something in life that may preclude a person from investing, but it’s all about forming good money habits. If you’ve got extra money, hopefully leftover at the end of each month, if you budget your money, accordingly, you need to be investing that because that can compound over time. We’re not talking about investing hundreds of thousands of dollars at a time. We need to start small and have those habits, those healthy financial habits take hold in a person’s life for a financial plan.
Isaac Wright: Yeah. You know, maybe another thing as I sit here and think about this, postponing investing, let’s call it with money that could be invested. You know, people always talk about they had that big purchase, that pie in the sky thought of what they’re going to do with money, house remodel, brand new car or something like that. But in a lot of respects, because I think in today’s road, you almost want to be able to look at financing some of that with the low interest rates that we’re in. I don’t mean that you have to necessarily leverage a lot of money by any means, but I just want you to be aware that you don’t have to kick the can down the road just because of a very small “what if.” But you have a legitimate situation that’s coming up in six to 12 months, that’s one thing. But a lot of people just continuously say, “I’m going to get to putting more money in my 401(k).”
Here’s the other thing, you absolutely want to consider putting money into your 401(k) or your workplace retirement plan if you’re getting matched. So, if you are basically not putting in enough money with the match that is made available to you, you’re missing out on as much as maybe a hundred percent return. If they’re matching a hundred percent of the dollars that you put in up to a certain amount of your salary or certain amount of your income.
Some people are really focused on paying debt. They’re paying down all their debt and the interest rate on that debt is at 10, 15%, let’s call it. If it’s a credit card, don’t forget about the matching money. The matching money is giving you a hundred points. So, I just want to organize your thoughts around that a little bit tighter because that can definitely cause a kind of pushing the goalposts back about putting money into your plan. I think that’s something needs to be, or at least you need to be aware of. And I would say too, when it comes to this feeling of hopefully kicking the game winning field goal, if you will, should I reduce my risk or I should reduce my risk. Kind of openly discussed what we’re talking about when we say that.
Ricky Lafon: Yeah. And I think that’s going to be an open conversation between us and the client because everyone’s definition of risk or being aggressive or being conservative is going to be a little bit different. It’s also going to be different if you have one income coming into your household versus two incomes coming into your household.
That’s the reason we sit down with our clients, and we get very granular when it comes to income versus expense. Goals: What do you want to do in retirement? When do you want to retire? to see how much cash do we need sitting on the sidelines for an emergency fund or a slush fund. And then what do we need to invest the rest in according to their risk tolerance.
The last thing we want is to have another COVID economic event where the market crashes and they’re too aggressively invested or they’re too conservatively invested in and they can’t keep up with cost-of-living adjustments, inflation. That’s a hot topic these days, things of that nature.
Isaac Wright: Again, if you think about where the stock market’s been for the last 10, 11 years, everything’s been riding high. People sometimes even though they want to invest more conservatively, simply feel like they’re going to miss out, but the opposite happens that they get kind of whipsawed maybe at the point where they do want to retire with the market being down. We haven’t seen that in a while, but it doesn’t take to get hit over the head once with a shovel to remember that feeling. So, these are again where if you think about where you stand.
If you’re watching today and again, if you’re getting closer to retirement, maybe you’re in a position where you have more money than you otherwise may even need for retirement. Sometimes people are ready to retire, and they don’t even realize it because they don’t have a plan. These are the areas where I would say, “Should I reduce risk?” Well absolutely. If you’re already at a point where you won the game, what kind of game are you trying to play?
If you’re trying to be the richest person in the cemetery, then you’ve lost that game. But if you’re trying to be a good steward of your money for you and your life, your lifestyle, your family, I want you to listen to what we’re saying here today. Reducing risks could be a very big component of what you’re trying to accomplish when it comes to your financial plan. We can help you whether or not it’s going to be next week, next year. When you’re ready, we’re here to help you understand whether or not that risk tolerance is going to be in line with what you’re trying to accomplish.
Last, but not least, is what I would call picking a retirement date. This is probably the biggest goalpost move of them all because you literally are picking up the goalpost. Let’s say you could have retired at 65 and you decided you wanted to keep working, then I mean, metaphorically, you are kicking the goalposts back. So, let’s talk about why that potentially could be a problem.
Ricky Lafon: Yeah. I think it’s a level of comfort. If you don’t have that plan and you’re working towards something, there’s a high level of anxiety anytime when you’re working and you go to retire and there’s no more income coming in, it’s just easier to keep working at some points. As long as your work-life balance is there and you’re enjoying what you’re doing, creating that coordinated plan so you know when you can retire and working towards that, is going to mean the difference of continuing to work because I have to and working because you want to. And what we want to create for our clients and their work-life balance, and their perspective is, here’s the date when you can retire, if you choose to work past that, because you enjoy your coworkers, the socialization aspect, what have you. You’re going to do that because you absolutely want to, and you know, at any time, if your situation changes health wise, workwise, whatever, you can retire and have a comfortable retirement.
Isaac Wright: I think sometimes it’s the fear of whether or not I’m going to be able to have a nice routine, the financial wherewithal to retire. I’ll say this on behalf of both of us. I’m not trying to pick on anybody because it’s easy to do. But you may be very well in a position at 65, 66 years old, you could retire. But many people don’t retire at that age because they don’t have a financial plan yet. So, they really don’t know whether or not they’re ready for retirement. You know, they’ll do what I call “eyeball it.”
So, what we can do and what we do here at our firm, is we can create projections based upon cost of living, estimated expenses, wants, needs, wishes, goals. We can kind of reverse engineer what kind of money you would need today and how much you would possibly need to get through your life expectancy. And Ricky, sometimes life expectancies can be anywhere between 80 years old to a hundred years old. People have different medical conditions and there’s not a one size fits all approach to this. Please, if you don’t have a financial plan, many people decide to keep working just because of that fear of the unknown.
Ricky, I can’t really think of much more when we talk about retirement. The way we ended that I think, says it all. But, anything you want to end with?
Ricky Lafon: I think that was excellent. And, you know, the analogy using there of a football game and moving those goalposts, I think is perfect in the world that we work in. We want to make sure that as the clock expires on your working years, that we’re putting you in a good position to win that game and enjoy the spoils of everything that you’ve been working so hard for. Let’s go ahead and enjoy that in life.
Isaac Wright: Or if we’re going to move the goalpost, let’s move it closer and not move it farther away. So, thank you all for tuning in to Wright Money Tips and I look forward to having you back here really soon. Have a great day.
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