Four Dangerous Excuses

Welcome to Mr. Stillman's Opus. I'm Ron Stutz hanging out with Jon for a little while here today.

Jon Stillman, the founder and the president of Rosewood Wealth Management. Thank you for listening. And Jon, it's good to be with you today.

Good to see you as always. Let's call this conversation Making Excuses. What you're great at. You're a great excuse maker.

You think I'm hmm. Yeah, like a couple of years ago when you couldn't come into work for a while and you blamed it on the fact that your voice was gone. Oh. You were not allowed to talk for a month. Uh-huh.

It was an awfully convenient excuse to not come to work. You think I made all that up? Just saying. Well, I can tell you a little secret.

I actually came to work every day. Yeah. I just couldn't talk.

You just pointed at people. I was doing stuff behind the scenes. Yeah.

I was writing, etc. But very often we see people who know that the financial decisions that they're making aren't really the best decisions, but they try and create excuses or explanations for why they're doing what they're doing to kind of justify their actions, I guess. Let's talk about why these certain excuses usually don't hold any water. Okay.

You ready? Well, when someone wants to start their Social Security at age 62, they can make up excuses. What are some of the things that they say? Well, so they'll probably say something like, well, you know, I paid into the system all those years.

I want to be sure I get my money back before it goes bankrupt. Right. There's something in the back of their mind that's telling them, you know what? We shouldn't actually be taking our Social Security right now, but we want to go ahead and create that income. We want that additional income.

We don't have the discipline to wait until full retirement age or even later. So let's come up with a reason in our logical brain to try to convince ourselves that our logical brains are in control when really it's our emotional brain that's in control. But we need the logical brain to pretend like it's in charge because the logical side of your brain is a much smaller piece of your brain. And the emotional side, but it's very narcissistic in that it likes to believe that it's in control. The logical brain does.

And so it has to be tricked into thinking it's in control. So you come up with things like, well, the system's going to go bankrupt. If I don't start my Social Security benefit now, I might not ever get it. Well, if you're old enough to be in the position of making that decision, Social Security just isn't going to be an issue for you.

Yes, there are problems in the system that need to be addressed. But if you're in your 60s, it's not going to affect you in your lifetime. Just not realistic for that to be something that you worry about.

I didn't realize you were such an expert on narcissism, but well, thank you very much. Try to observe people I know. How about when someone is taking too much risk with their money?

What kind of excuses do you hear from from someone in that situation? So sometimes it's, well, I feel like I'm behind in my savings and I need to make up for it. I need to make up for lost time. So you feel like you didn't save enough in your 30s and 40s. And so now you're in your 50s or 60s and you're trying to close the gap by hitting some home runs, making up for lost time, which could work. Or it could pan out very badly for you and you'd be in worse shape than if you just tried to take no risk and leave everything in cash. So you have to really think about, okay, if you feel behind, first of all, let's establish, are you actually behind or not? Because sometimes people feel like they're behind. They feel like they don't have enough saved. But when we actually look at the situation and figure out how much income you're going to need in retirement relative to how much you have, you might actually be okay. I mean, sometimes people maybe still have kids on the payroll, still have a mortgage payment. And fast forward a few years to retirement, well, the house is going to be paid off and the kids will be completely independent.

Well, this is suddenly monthly expenses that you won't have. Your income needs in retirement won't be as high as you think they are. So let's first establish if you're actually behind or not. And if you are behind, let's determine what is the best way to make up the gap. Usually it's not by taking more risk.

Usually it's by saving more or working a little bit longer maybe than you'd originally planned or just accepting a different lifestyle in retirement than what you'd originally imagined. I mean, there are different levers you can pull. You're not in charge of making the decision, but usually just trying to have all of your cake and eat it too by taking more risk and hoping things work out is usually not the best way to go. And we often talk about people who have too much money in cash. And I know that you meet with a lot of people for the first time and find out they have a tremendous amount of money in cash, but what kind of excuses do they make to you for why that's so?

Yeah. And let's establish what we mean by too much in cash. I mean, if you say, well, I have $40,000 in the bank and I probably only need $30,000.

All right. Well, that's not the kind of conversation we're talking about here. What I'm talking about is people who have $100,000 or $200,000 in the bank because maybe they inherited some money, said, well, I'll get around to doing something with this eventually, but stuck it in the bank for now. Or, you know, maybe you just spend two or $3,000 a month less than you're actually bringing home. And instead of investing that money somewhere, it just piles up in the bank and after a year or two, you have way too much in cash. It can happen a few different ways, but it's one of those things you tend to procrastinate and say, well, I'll eventually do something with this. I've seen people who have five or $600,000 in cash, which is an amazing amount of money that's just doing nothing for you.

So you just have to be very conscious of that. But usually the excuse that people give me is one of two things. Either one, well, I just like to be sure I have enough for emergencies. Well, fine.

I agree. You should have an emergency fund. But in almost every situation, we're talking three to six months expenses for your emergency fund. Maybe a little bit more if you have a lot of rental property or chronic medical issues or something like that where you have a need for cash.

But for the most part, let's say you bring home $5,000 a month and that's pretty much what you spend. Well, at the high end, $30,000 is what you'd need in the bank for your emergency fund. So if you're sitting there with $140,000 in the bank and you say you like to have it for emergencies, what $140,000 emergency can you come up with?

Like the Lindbergh baby is going to get kidnapped and you're in charge of paying the ransom? I don't understand what are these $140,000 emergencies. So you have to be realistic about what an emergency might look like in the first place. The second excuse is, well, I lost a lot in the last market crash and I don't want to go down that road again, which is fine.

That's a perfectly reasonable emotion to have. But that doesn't mean that you should just completely retreat to have everything in cash. Let's come up with some more conservative ways to invest in your portfolio other than just sitting in cash. There are ways that you can be invested and still have the potential to earn money without being exposed to a 50% downturn of your assets. So we just want to be conscious of ways to invest conservatively without parking it in a money market fund or just having cash in the bank.

You're listening to Mr. Stillman's Opus with John Stillman, the founder and the president of Rosewood Wealth Management. We're talking about making excuses when somebody, and this happens a lot, when somebody comes in and they have no idea what they're invested in or what their money is doing for them, the kind of risk they're taking, all that kind of thing, but they make excuses. What kind of excuse do you hear? Well, you know, financial stuff just isn't really my thing, a lot of people will say. You know, I just, I don't really understand it.

I'm more of an artistic person or I'm not a numbers person or whatever it is. Financial stuff isn't my thing. Well, it doesn't have to be your thing, but it's important enough that you need to understand the basics of what's going on with your money and not just stick your head in the sand and say I'll deal with it another day or I'll never deal with it.

It'll just take care of itself. I mean, it would be equivalent to me going to the doctor and him telling me I have a significant heart issue and I say, well, yeah, but medicine isn't really my thing. So I'm not really going to pay any attention to this. Obviously, that wouldn't make any sense.

Nobody would ever say that. But you do the same thing with your money with the excuse of, well, it's just not my area of expertise. And part of the issue could be that you've never talked to somebody who can communicate some of these things in a way that you can actually understand and apply to your life.

That might be one problem. Or it could be that you've just never really sought out help and it seems very overwhelming to you, looking at it by yourself. But if you have somebody to coach you along, you might find that maybe it's not as overwhelming as you thought. Well, this is Mr. Stillman's Opus with John Stillman, the retirement planning strategist and financial coach for The Triangle. And of course, John is at Rosewood Wealth Management. And John, thanks for imparting all that wisdom, not to mention the wit, to all of us listening here today. It's what we're here for, man. Always a pleasure and we'll talk to you soon. Have a great day. Carolina Wealth Stewards doing business as Rosewood Wealth Management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general information and should not be construed by any consumer as the rendering of personalized investment advice.