Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.
Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [00:26.1]
Brad: Welcome to Make your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett, and it's my goal to help you distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve. Friends, today the challenge is no longer the access to information, but rather it's finding the right information, and more importantly, how that information applies to you. And that's my commitment to you here today on the Make your Money Matter podcast, because after all your money matters and knowing how to plan your financial future is vital to your financial success. And if you haven't already done so you can go to our website to find out more about myself or our entire advisory team here at One Capital Management. You can go to our website at onecapitalmanagement.com and there you can click on the media tab and you can download and subscribe to the, Make your Money Matter podcast. You can also download the podcast on any other platform where you would otherwise download a podcast, whether that's Spotify, SoundCloud, the apple app on your phone or Google podcast. Leave us a comment, give us some feedback. It's always good to hear from each of you. I don't want to shout out a big thank you to all of you listening here each week. We've gotten a lot of feedback and so we really appreciate that. And as I say, each show, if you like the podcast, share with someone you like, if you don't like the podcast, I guess share with someone you don't like. [02:02.2]
But today on the Make your Money Matter podcast, I want to go through something that I've noticed recently now. In over 15 years of being a financial advisor, this has come up quite often when it comes to the behavioral finances of people, all of our traits and we spoke about this on an episode recently about the emotional versus the rational part of our brain as it comes to investing. If you haven't already done so, go ahead and take a look at that episode. It is episode 20 of the Make your Money Matter podcast. And today I want to talk about which comes right on the heels of that episode last week of the Money Lies that we tell ourselves. In particular, I came up with over the past couple months, seven money lies. I see very commonly in our clients, in our prospective meetings with clients in a lot of discussions around personal finances. And the first thing I want to say very openly is everyone does it one way or another. So, in the next few minutes, I want you to really be honest with yourself. You don't have to share with anyone if you don't want to, but be honest with yourself, if any of these lies sound familiar to you and find out what kind of damage believing these lies can do to your finances. So let me start out with asking you a question, which is kind of inverse of the title of this week's episode. [03:26.3]
Do you think you're telling yourself the truth about money? Okay, Brad, what are you talking about? So, we may think we know the facts about our finances, but often times what I've found is that our beliefs can often overshadow the facts. Our wishes, our hopes, our fears can tip the scales away from sometimes the truth. So, this makes it easier for us to believe what we want to about money and it can happen, believe it or not, without us even realizing it. And as I was putting this list together of many, many years, being an advisor and talking with colleagues here at One Capital Management, there was also a Kiplinger article wrote by a guy named Ian Maxwell that was actually brilliantly stated as well. When it talks about these same lies that we're going to go through. And I'll make sure to post that on the podcast platform for anyone to look up the actual article as well. [04:21.9]
But continuing with the point about our beliefs, sometimes overshadowing the facts, the money lies we tell ourselves can change the way we think and act when it comes to finances. And since most of us rarely talk about money with our friends and family, the money lies we tell ourselves, tend to stick around that can lock us up into a destructive belief and really reinforce poor financial habits. It's something we express often here at the firm. It's never lost on us, what our clients and our prospective clients that come in for a discovery meeting entrust in us. We know it's a private conversation as such, we have a confidentiality with our clients as a fiduciary to our clients. But it is important to seek counsel and find that person to build trust in, to be able to share this with, to help understand if we have some of these destructive beliefs, that again can reinforce poor financial habits. But no matter what money lies, we tell ourselves it's never too late. I want to be very clear about this. It's never too late to set the record straight. So, I don't care if you're listening to right now. And you're 20 years old or you're 60 years old. It's never too late. So, let's look at some of the most common money lies we all buy into at some point and then the truth behind them. And again, back to my original question, see if any of these lies sound familiar to you and be honest with yourself. Okay. [05:48.4]
Number one, I'll be happier when I have_____ (fill in the blank). So, I'll be happier when I have____. Fill in the blank money. With fill in the blank money, whatever the amount you think is ideal currently, many of my problems will go away and I'd be happier. Have you ever caught yourself asking yourself this or thinking this, does it sound familiar? So, goals and targets for numbers for earnings and savings and budgets are all great. But if you make the mistake of thinking some magic number will flip a happiness switch for you, think again! We've heard this before and I can't tell you how real this is in nearly 20 years of being a financial advisor, when I sit with clients that span the spectrum of wealth, that money doesn't buy happiness. It may give you options, but it doesn't buy you happiness. So, when we tell ourselves this money lie, we put too much emotion into a single number. Again, something I spoke about, about the emotional and rational part of our investing minds and brains on last week's episodes. And we may be setting ourselves up for disappointment, both if we never get fill in the blank amount. And if we do get fill in the blank amount and realize which I've seen countless times before we realize it actually doesn't make us happy as we thought it should and then we wasted all these years thinking it would. What's the good news here? So, studies show that making progress toward our goals can be incredibly satisfying, regardless whether we hit the target or not. So, psychology today came out with an article in June of 2008, so, it's a little bit, a little while ago, but the goal progress and happiness has a lot to do with feeling confident and proud. So, it's not necessarily the goal or the amount, but actually the progress towards the goals. And sometimes you want to keep moving the goalposts. That's a part of growth and purpose. So, number one, lie and careful when you ask yourself this, to be really honest with yourself is I'll be happier when I have ____fill in the blank amount. [07:59.8]
Number two, I deserve it regardless of whether I can afford it. So, I deserve it regardless of whether I can afford it. You might be telling yourself I work hard and I don't treat myself too often, or I could kick the bucket tomorrow, YOLO as the young kids say, or, or I'm getting a great deal. So, these are just some of the rationalizations I would call it. We use to convince ourselves that it's okay to buy something. Whatever legs this money lie stands on it's usually used, and be honest here, it's usually used to soothe the steam of expensive purchases. Those that, you know, aren't really essential and perhaps items we know deep down, we don't truly need. And something that we talk about here at One Capital Management as the firm, when we talk about two categories of expenses or investments or whatever you want to call it currently is needs, or wants. Because our needs and how we do our planning is really needs based analysis. Understanding what numbers, we need to hit, to be able to keep the lights on, keep ourselves fed, keep the loved ones cared for. And the remainder of that goes into the wants categories. So really being honest with yourself about lie, number two, the, I deserve it regardless of whether I can afford it amount had a lot of legs to it because you really got to help yourself categorize need versus want. But then even further, if we don't categorize it very well, or if you are find yourselves lying to yourselves about that, then we have a whole host of other things we have to deal with like debt and credit cards and things that we go out over our skis on because we believe this lie that we deserve it, regardless of whether or not you can afford it. Now I'm not here to say whether or not you deserve it. That's a personal thing. I am just saying to be mindful of the trap that we can get into when it comes to overspending or spending on something we may not actually need. So be careful there. [09:58.1]
Number three, this one I love, I have strong financial willpower. By the way, I should say something very clearly here as we go into number three. Each one of these lies, not only have I seen in the practice for over 15 years, nearly 20 years now. And in talk with my colleagues, we see constantly as behavioral traits in clients, we wanted to again, take the lid off here and let everyone know that everyone deals with these things. And I'm saying this because I as well have fallen into each of these lies at some point. So, this isn't just because someone's an advisor has experienced in cashflow planning and investment and looking at money in a certain way based on experience. Everyone goes through this, we're all human. So, the, I have strong financial willpower always was really strong for me. So, when faced with you know temptation, most of us lie to ourselves that we're great at resisting it. But when was the last time you actually chose not to buy something? You really wanted really think about that. I actually challenged myself when reading this and going through it myself and writing this week's episode was when was the last time, I chose not to buy something that I really wanted. So, when was the last time you made an impulse buy? So, the average American spends at least a couple of hundred dollars a month on what is called impulse purchases based on a PR Newswire article. I thought it fascinating because when you really look at the dollar amounts, they’re talking about, when they say a couple of hundred dollars, it doesn't seem like much, it seems pretty innocent, right? But it adds up as we always talk about in investing, it adds up. And we're more likely to buy on impulse and spend more when we're stressed. Even fell into that trap? That's probably why impulse, they call it impulse spending shot up about 18% in 2020. So that same PR Newswire article in journal came out and really looked at the increases when things were going awry, if you will, in 2020. So, I want to add that those of us who are shopping with credit cards are probably spending more on the regular basis than we realize. It's another trap to get into when it comes to the third money lie of, I have strong financial willpower. The average credit card shopper spends about 10% more with their cards than they would with cash. Seems normal, if you think about it, but it's a scary thought, and that's not even counting the cost of interest if the balance for those that do use the cards isn't paid in full, this is based on a lending tree article that I found. So, number three, money lies - I have strong financial willpower. Be careful to make sure that you are truly honest with yourselves about is that really accurate and true of yourself? [12:46.8]
Number four, this is the start of 4, 5, 6, and seven. That we're going to start getting into a lot of the younger generation I'll say, or if you've been caught in this and you're listening to right now in your forties, fifties, or sixties, and you've been in this environment, this is where we start talking about the money lies that we started telling ourselves of procrastination. This is like the procrastination section. So, number four, I'll save more later. Oh, I love that one. We've all said that before, right? Whether it's all start that tomorrow, or I'll start that next week or next month or next year, it just adds up, right? Most people focus on buying what we need and want now and we tell ourselves we'll start saving for the future later. If we save anything at all, it's likely to be whatever we have left over. In fact, fewer than one in six of us are saving more than 15% of our income. And one in five, aren't saving money at all. This is on a CNBC article I had found on this. So, think about that. One in six of us are saving more than 15% of our income and one in five, aren't sitting any money at all. That's like 15% of all of us are saving more than 15% of our income. Pretty interesting when you think about it. It reminds me of the Warren buffet quote, “don't save what is left after spending spend what is left after saving.” Really something to chew on. So, no matter the reason when we tell ourselves this money lie and put off savings, we're prioritizing the present over the future. So, this can catch up with us on a “rainy day” or whenever we do start thinking seriously about retiring. So, by that time, there can be a lot of heavy lifting to play, catch up with our savings or sadly it might even be too late. So be careful when we start this procrastination section of the money lies, the all saved more later is a scary one. We want to be very careful there. So be honest with yourself about that. And if you aren't doing that today, and you haven't found that counsel with someone and even on the other three to even talk about some of these things that you know what Brad, you're actually, you're hitting on some things I've been thinking about or been thinking about in the wrong way, reach out to someone. And if you want our help, you can give us a call at (805) 409-8150. You can also go to our website at onecapitalmanagement.com and you can set some time with myself or any one of our advisors here at the firm to make sure we go through your goals and objectives. And in today's topic around how we are needing to look at your money for what your goals and objectives are. [15:26.6]
All right, number five, I have plenty of time to plan for my financial future, and I don't even need to think about it yet. This comes right off of the heels of number four - the I'll save more for later. The number five is the, I have plenty of time for my financial future. The future can seem really far away when we're looking at it from a 10, 20 or 30 years out. Wouldn't you agree? I mean, when you were 20 years old, you're looking at retirement of let's call it the normal retirement at 65. That's like 45 years away. I mean, you can't even think to tomorrow when you're 20 years old. So, I understand this, but we need to be careful as we get into our twenties and our thirties and our forties, that we don't realize that gets closer, quicker than we think. So, when we feel like we have a lot of room between now, and then it actually is easy to make excuses to not plan or save for it. Wouldn't you agree? Ask yourself. So, this money lies an excuse for procrastination. It's the rationale we use when we have a hard time managing our negative feelings or uncertainties about our financial futures and it makes us turn a blind eye to the years of interest. I would say that we lose out on when we don't plan. Benjamin Franklin once said, and may have spoken at best about the truth behind this money lie when he wisely said, “By failing to prepare, you are preparing to fail.” And on my comment around the lost interest in those years of properly planning and investing well, Ben Franklin also said, “Money makes money and the money that money makes, makes money.” Pretty simply stated, right? This is the, again, back on the old compound interest quote from Albert Einstein, “compound interest, the eighth wonder of the world, he who understands it earns it.” It's really important to make sure that it's not just about the planning and setting the goals, it's also making sure we're not losing out on good investing along the way. So number five, the, I have plenty of time to plan for my financial future lie is something to really ask ourselves. [17:28.7]
All right, number six, there is good debt and bad debt. Okay. This is a tricky one, to be honest. And I actually spoke about this on our episode regarding debt. It was actually episode six on how to manage debt of any amount. And I think the lie here is, is not so much debt is bad or good is that we get caught up into believing that one is good enough that we can have a bunch of it. So, we tend to assign, you know, moral value to debt thinking of mortgages and student loans in particular as “good debt,” and then considering maybe credit card debt or unsecured debt as bad debt. So, this money like gets us to think the wrong way about debt. All debt comes with some costs and it's critical to understand how every loan affects our current and future selves. So instead of focusing on whether that is good or bad, we want to concentrate on the total cost of interest over time, which is often higher than we think. And on deciding whether the loan is really helping you achieve your goals. So, to give an example of what someone would think is good debt. I mentioned it before, but largely we think of good debt having three components, it's typically lower interest than bad debt or unsecured debt. It's deductible, or has some sort of tax benefit associated with it for many people and it's for an asset or for an investment. And so, the two that come to play right there that are the biggest ones we talk about are mortgages and student loans. So, take mortgage, for example. Right now, they’re around let's call them around 3% or so. You know, you compare that to a 15% credit card, significantly lower, then you add the tax benefits to it, because for a lot of us, we can write that interest off on our mortgages, on our scheduling deductions and it's for an asset it's for an investment in your home, in a house in real estate. So, although it can be used as good debt, it doesn't mean to go get a large amount of it or keep adding to it. That's my comment around not necessarily focusing on whether it's good or bad, but concentrating on the total cost of interest over time, because if it is an investment property, right, we need to be mindful of our cap rate. How much rental income we're bringing in relative to the debt we're paying and servicing that debt. And believe it or not about half of us seem to already be on track with the thinking saying that we expect to be out of debt within one to five years, which depends on how you look at is a good thing, but we need to actually put wisdom to that. And that's, that came from a Statista article I found on personal debt duration and the timeline. So, number six, the lie, there is more of a misnomer, if you will. It's more about putting into context, our debt. Not getting so hung up on, oh, it's good debt. I've heard it's good debt because of those three reasons so, I can just have more and more of it. That's not necessarily the case. So again, seeking counsel to understand where your investments lie and your equity to those debt ratios stand is all really important when you categorize your debt. [20:38.2]
Okay. Number seven. So, after all of the six things I've mentioned here of the lies that I've noticed, and then many clients and prospective clients over many, many years, we tend to behave really tell ourselves. Number seven is a lie that I want to be careful because it almost knocks off the other six. And the lie is wanting more is bad. Cause you're only thinking Brad for the past 15 minutes, you've told us all these lies that we get caught up into that I'm sure any of you listening right now has got caught up to a few of these. I know I have. So, you might be thinking, well then wanting more as bad because if I want more, let me just got to take on debt, which may not be a good thing. It may mean I'm overspending, which may not be a good thing. It may be that I'm lying to myself that I actually need it when I actually just want it. But wanting more is bad is a lie. So, while I think we can all agree that obsessive greed is wrong, it's not a bad thing to want more for you and your loved ones. So, when we tell ourselves we shouldn't want more than we have, we agree in that statement to settle for less. So, we may be tricking ourselves into thinking it's okay, that we're not doing something or enough to improve our financial situation. This money lie actually holds us back and can make it harder to improve our financial behaviors, believe it or not. So, when we frame wanting more as a positive motivator, it can be easier to take the chances or do the work needed to get to that next financial level we may want. And then putting into context, the previous six “lies,” I've been mentioning to make sure we don't fall victim to those lies and ultimately get to an understanding that purpose and having goals in our money lives make a big difference to the overall success of our goals and objectives when it comes to our money. [22:31.6]
Okay. Quick recap of the seven lies that I've noticed over many years of being a financial advisor that we tell ourselves. And actually, it came through on a Kiplinger article is finding as well. That again, I'll post, but number one, being the I'll be happier when I have a certain amount of money. The number two, I deserve it, regardless of whether I can afford it. The number three, I have strong financial willpower, I can take care of myself in that regard. Number four, the I'll save more later, this is the start of the procrastination lies. So, number four, I'll save more later, which leads right into number five - he, I have plenty of time to plan for my financial future, so I don't need to think about it yet. And number six, there is good and bad debt. And number seven, that wanting more is bad. [23:22.6]
So how many of these lies sound like something you've told yourself? I know in re-saying this today, as I'm was writing this as past few weeks, I fallen into all of these at some point. And at some point, I think we've all tricked ourselves with at least one of them. I mean, we all can agree with that. So maybe we're rationalizing a decision or we're trying to make ourselves feel better about what we wanted to do with our money. And we probably didn't make the best financial choices as a result, but here's the truth. Honesty goes a long way with finances. What we tell ourselves and what we believe about money influences our financial behaviors. I think Ian Maxwell and his article wrote that so well, I want to restate that. What we tell ourselves, what we believe about money influences our financial behaviors. If we're not telling ourselves the truth, our money lies, won't just drain our wallets, they can affect our financial awareness and inflate our confidence sometimes. And they get in the way of maintaining or growing wealth. When we recognize some of these money lies, I mentioned that we believe we can reset our thinking, change our mindsets, and really start taking action. And that really leads me into the conversation I have each week here about finding that advisor, that advocate, that accountability partner, to help walk through some of these lines and make sure that the context you're putting to your money in your planning and your investing is right for you. [24:44.7]
If you haven't already done so you can give us a call at (805) 409-8150. You can also go on our website at onecapitalmanagement.com. And there you can set some time again with myself or any one of our advisors here at one capital management to really put into context how we talk to ourselves about money, which was a topic for today. And again, from last week's episode, with regards to the emotional versus rational feelings that we have around our money, whether it be our income or expenses, our investing, it all goes together to make sure that the cohesive plan that you put in place, we stick to it. And if you don't have that plan, reach out to someone, reach out to us again, you can call us at (805) 409-8150 or go to our website at onecapitalmanagement.com. [25:33.6]
I want to thank you for listening to make your money matter. If you found this show helpful again, you can go to our website at onecapitalmanagement.com. You can click on the media tab and there you can download and subscribe the, Make your Money Matter podcast. Or again, you can download and subscribe to the podcast anywhere you would otherwise download a podcast, whether that's Spotify, the apple app on your phone, SoundCloud or Google podcast, and let us know how we're doing. Always good to hear, have feedback. [25:59.7]
And before acting on anything discussed today, remember speak with a financial advisor near you. If you're not sure where to turn and again, you like our help, you can visit us at onecapitalmanagement.com for a complimentary retirement track review meeting to go through your goals and objectives with your money, with your investing, with your planning and ultimately your retirement. And as we talked about today, really sitting kneecap to kneecap seminar, if you're more comfortable doing it via zoom or with technology nowadays, really opening up to someone about what it is that you are telling yourself when it comes to your money. And until next week always remember make your money matter. [26:39.2]
The information in this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.
To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [27:02.2]
