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Coach’s Corner – Today we’re going to talk a little bit about budgets and bill paying. Uh, we get a lot of questions about best practices when it comes to creating and servicing a budget and different bill paying strategies.

So today we wanted to talk about some of the ways we’ve seen budgeting, uh, maybe work well, some of the ways it maybe hasn’t worked as well, and then, um, maybe some of our kind of personal tactics. What are the most effective ways to kind of manage a budget? Like, people do, [00:15:00] like, old school, like, people did, like, envelopes.

Mm hmm. Envelopes for, like, utilities, for cars, for vacations, for Christmas. Mm hmm. With, like, literal cash. Cash envelopes, yeah. We can all agree that’s probably not the best way to go about it. I mean, it works, but, like, nobody operates in cash anymore. Yeah, and you can, you can Mimic that now with different online tools, right?

Bucketing your bank account, for example, in digital envelopes. But yes, I think the cash piece of it is silly. That’s my goofy way of doing it. Like, I record entries in my, like, electronic My digital checkbook that I run of, like, Roth IRA contribution. Which I’m not making until January of 2025. But, you know, 600 a month.

So it brings my Checking account balance to a negative because I have all these pockets of things that I’m like [00:16:00] putting money aside for Not outside of my checking account but outside of my checking account balance digitally, which makes probably no sense You’ve described to me how you operate your And I’ve never, I don’t think, fully grasped it.

Well, let me try to explain it to you again. Like, I have to pay a life insurance premium of 3, 000 every September. So every month, I put, I have an entry for 250 this month for that life insurance premium. Next month, I change that from 250 to 500. The next month, I change it to 750. So it did it as if it left my account now, it didn’t leave my account right still there, right?

But my system says it left the account. Yeah, I’ve already counted it as out. Yeah, it’s not money. I can use It’s not money. I can spend sure where that kind of [00:17:00] strategy stinks right now is I’m probably losing a couple bucks in interest where I could have that money somewhere else earning and outside of my checking Yeah, I think for me.

I think the best way to run a budget is You have your fixed expenses, which all get debited in one form or fashion, whether it be a check, a debit, an ACH payment. All your fixed expenses get debited from a checking account, monthly. Again, I don’t care how you do it, if you write checks or if you set up automatic payments.

And then everything else you do, you charge through a credit card and pay off every month. And then all of that is all categorized for you for your review at the end of the year. Right, so what are the advantages of a budget? It’s to understand where your money is going. So when you say budget, I’m a little confused.

Are we talking about tracking your expenses or a budget, which to me kind of means you [00:18:00] have figured out how much you’re going to allocate towards various categories of spending in the future. And then you kind of try to stick to that or, you know what I mean? I feel like that’s different. So no, it’s the same.

Oh. Okay, sorry, but no tracking what you spend is not a budget to me. Well, I think tracking what you spend gives you the Ammunition to then create the budget right like understanding where the money is going so you can say well I’m spending too much money going out to eat. Yeah, or I’m not spending enough money on something else So it’s probably saying same.

Yeah one leading to the other doing it my way, which is the best way Allows us to say like right here’s all my fixed expenses And then I can spend, for my lifestyle, 4, 000 a month on my credit card and then pay it off at the month. That, if I [00:19:00] exceed that 4, 000, then I have a system that I can go to and figure out why.

Why I exceeded the 4, 000. Because it’ll break it all down. Wah wah, gas, food, booze, out to dinner, clothes. Hockey. Hockey. Hockey. Hockey. So you tie it to a credit card limit. Like you tie it to how much lands on your credit card? I personally set myself the limit, right? Like if I make 10, 000 a month, fixed expenses are 5, 000, uh, I want to save 2, 000 in my 401k, well then the remaining 3, 000 is what I can use for my lifestyle.

And I’ll charge it all on a credit card. And then the theory is to pay it off at the end of the month. If that exceeds, if it’s 3, 500 one month, then I can go into that system and see why. Seems pretty straightforward, right? How do you do it? Does anybody do you book a vacation and put it on your credit card, that’s a one time, that’s a kind of a one time significant [00:20:00] expense that is outside of your normal 4, 000 in your example.

That is a separate budgeting technique. Now we’re getting to it. That’s when you speak to your partner. Uh, what’s our vacation plan this year? And then he or she says, okay, well for that one, I’m going to budget 500 bucks a month. That’s going to come out of like my spending limit. And it’s going to go into this account over here so that we can pay for the rental at the Jersey Shore when that comes up in June.

Kind of similar strategy, but it just has to be planned for. We can’t just say, oh, let’s take a vacation and then just book an Airbnb for three grand and then not be able to do anything that month. So, okay, I get it. You do it differently? It sounds like you do it differently. Yeah. Yeah. I don’t think I’m going to like your way.

But, but before that, so people that use debit cards, so I don’t use a debit card ever for anything. Yeah. Every single thing that can go on the credit card goes on the credit card. Something that wouldn’t would be [00:21:00] somewhere where they’re going to charge me 3 percent for something that’s a big. God, I hate it, dude.

Yeah. No, it’s not just if it’s big. Yeah. Yeah. No, you’re right. It pretty much a hockey registration tryouts for a hundred dollars. That’s a, they charge 4.9%. Yeah, that’s a good example. Jeez. Which I ate. So you just pay that ? No, I, well, I put it on my card. Oh. I paid the extra five bucks to put it on my credit card.

Yeah. Because I got points for it. . Well, that’s the thing. I mean, the points are I got 1% in points and paid 5% in fee. . No, but no, you’re right. Stupid. You’re right. You do. You get one or maybe two. But um, for the stuff that is not. There is no surcharge for it. It’s like, why would you not put every single thing on a credit card that you could?

If you don’t have Do the people that use debit cards just know that they have no self control? Yes. And they have to put it on a debit card because they know the money’s there and if they put it on the credit card, they’re not gonna, they’re gonna end up buying stuff that they can’t afford. Yeah. I think that’s a big part of it.

I think, and even if they don’t, if that’s never happened to them, I think they’ve been [00:22:00] Scared. They’ve been made to feel scared of using credit cards. Like, I think it’s completely psychological. Yeah. That’s it. I don’t know how, again with my system, I can’t use a debit card. Because I, I like schedule all the payments or I have things scheduled that come out of my checking account at different times of the month, right?

Car, 529 contributions, like all this stuff. So just looking at my balance on one day doesn’t give me an accurate balance. Sure. You’re right. I guess. So how can you use a debit? I mean, I guess if you have a 50, 000 buffer in your checking account, you can debit away. Yeah. You don’t need a 50, 000 buffer. No, but like, let’s say you have a 3, 000 buffer, it can easily get debited away.

That’s why I don’t like auto pay. So I’m, I’m a little bit of a control freak in that sense. You? I do limited auto pay stuff because. Like when I [00:23:00] get utility bills or anything that comes in that’s a regular monthly thing, I, I like manually make the payment. I do online bill pay, but I don’t set it up to automatically debit for that reason.

Because I want to, I don’t want to be like, Oh shit, like I forgot about that auto pay for my homeowner’s insurance or you know, whatever it is. And then like forgot about it. Right. And then didn’t have enough like balance a 75. 89 charge for T Mobile. Yeah. Yeah, I hear you. Yeah. I manually, like, e pay everything from TD Bank.

For the most part. Yeah. I’m with you. And then I have, like, probably half I do that manually, the other half, like, like my mortgage I do manually. The T Mobile just gets debited from the account and I just record it every, every, um, the 529s get pulled from Vanguard, from my bank account, I just get recorded.

So it’s just I don’t know how you would debit unless you had a pretty significant buffer [00:24:00] because I don’t think anybody’s like balancing their checkbook No, no those days are over I mean, I do like when I was like do it every month out of college and stuff because I was kind of like told This is what you were told today.

Yeah, and then after a while you’re like, why am I what am I I do it every month? Why and like the purpose being? Yeah, I mean it’s a legit question. To make sure that like I have everything and I know how much is in my account. Like I know what came in and I know what went out and it’s all accurate. And I didn’t miss anything.

Yeah. I, I’ve never No, no, and I, I understand that like the, the cash flow is a little bit different. I just, in, in any case, the, the balancing of the checkbook, the actual act, when you have, with the click of a couple buttons, the ability to scan transactions. It just, it doesn’t make sense to me. I have a lot more [00:25:00] transactions than you.

Yeah, okay. So maybe that makes it a little easier if you just scan the four transactions that you have in each one. Alright, alright. I’m starting to hate again, I don’t know why. So back to your comment, Meg, um, you mentioned that, or maybe it was Jeff, that some people like have this fear of credit, using credit cards.

It’s funny because I made, Caroline and Will made them. I did, I made them get credit cards. And I’ve said just when you spend, don’t use a debit card, use a credit card, and then set up auto pay for the balance at the end of the month to link it to your thing and pay it off every month. Um, cause you’ll, you’ll build credit and then also, you know, you’ll, you’ll get 3 worth of points at the end of the month or whatever.

But, um, but they were the same way. Like they were like, I don’t, I’m, Caroline was like, I’m, I’m, I’m really scared to use a credit card. She was just like. You’re naturally reluctant. Yeah, do it. It’s weird. How many times have you had to go into their accounts and add money? [00:26:00] Like on short notice because their auto pay was gonna happen and there wasn’t enough not yet Nothing yet.

So my credit card is the only bill that’s not on autopay. So I’m the opposite of you like Uh, everything is autopay. If it’s auto payable. Yeah, I am. I don’t care what day of the month I would just me going in and manually paying a bill, uh, that’s would lead to me forgetting. Right. So what you’re describing, like your active balancing your checkbook to make sure nothing was forgotten.

Autopay gives me confidence that nothing will be forgotten. Now, could I get charged double what I’m supposed to be? Absolutely, would I notice? Probably not in a particularly timely manner. That’s another reason, I’ve busted many a vendor for trying to overcharge me for stuff, or you just, you’re like, wait, I’m on, I’m on like this plan, and I should, like that kind of stuff, you’re right.

Yes, so I definitely like try to pay attention, but it’s [00:27:00] not, there’s no like system in place to double check, so if I notice something that looks incorrect, I’ll figure out why it’s incorrect, but it could be like, So neither one of you understand the stress of like, putting all the debits in, putting all the deposits in, and then there’s, it’s off like 2.

96, and then having to go back and figure it out. No. Uh, uh, no. The going back and figuring it out part, that’s a waste of time. You would just click reconcile. Whatever. Yeah, whatever button you click. I don’t even know what that is. For 2. 90, that’s a rounding error. I mean, if it was 1, 000, I’d be like, all right, I messed something up.

My bank, so I have my checking account and then I have like a, they called a reserve and then they have like long term savings. So I have. My everything goes in and out of my checking my reserve I use as like my travel account So like [00:28:00] every time I get paid I put some money there So if I do want to book something on a whim and don’t want to add it to the credit card I have like a little bit of a buffer and then the long term one is just where I put like the tax money but because of that reserve Being like overdraft protection or whatever like balancing to the scent Doesn’t matter.

I have a buffer now. It’s not a 50, 000 buffer, but it would Theoretically cover me if I Venmoed somebody 500 bucks and didn’t mentally account for it or something Jeff where does your gambling account reside? within the app Just within the app. I make a deposit in the beginning of the year. I hopefully have winnings and to this point, like, we’ve never gone negative.

So I’ve been basically playing with house money. So I guess to get back to maybe something constructive, um, [00:29:00] Budgeting and understanding lifestyle is important because it allows us to, one, again, kind of fine tune month to month, are there opportunities to save more, are there opportunities to service debt differently or more effectively, and then it also allows us to project, right?

If I need to live off of, or if I’m living off of X today, well now I can do some rough math and figure out how much I should have saved by a point in time, maybe when I want to retire. So there’s value in this information. And I think we often find people who are like, Oh, should I go out to dinner one less time a week?

Or, you know, like making decisions around the budget that while they’re probably important and impactful, the broader conversation, in our opinion, should be like, again, how much we can save, right? And are we doing and spending in a way that Maximizes our saving, [00:30:00] savings opportunities, right? Yeah, and if you’re doing like the, if you don’t want to do the credit card thing that we do, then it’s like, I make 10 grand, have everything auto pay for your bank, 5 grand is that, it goes out, I put 2, 000 in my 401k, you know you have 3, 000, you can debit during the course of the month.

And you can’t go over that number. Right, and there are tools, you know, Mint is one of them. There’s other apps where you can load all of your lifestyle and spending information. It’ll help you with the categorization that we’re talking about our credit cards doing. So there are tools that can help compile the information.

But ultimately, like, the effectiveness of it is up to you. Yeah, I think one of the biggest, like, Mistakes people make is they don’t account for those like quarterly or annual ones and break them down monthly and set that aside. Right? You have to [00:31:00] do that. If you have a quarterly payment that’s due for whatever, you gotta take money each month and put a third of it into, like, aside.

I 100 percent agree with that. You have to kind of, it’s the way businesses account for their own expenses that are One time lump. Yep. They don’t it’s not an expense that quarter It’s it’s spread throughout the year and they account for it that way and that way you you recognize that it’s a It’s an expense that covers like the whole year’s worth of stuff and Jeff the way you do it is perfect because you’re Doing exactly that we have clients that don’t do it that way that are retired and they like live on a fixed budget And that screws them up and screws up their plan every year all the time It’s like yep.

All I all we need is five thousand bucks a month. We send it to them and then I get an email. Hey, um, you know that that auto and homeowners and uh, Insurance bill just came in. Can you send us six grand like? Six grand. That’s a big [00:32:00] number. Like, why don’t we just send you an extra 500 a month? Cause they just can’t, they’ve never done it that way and they can’t do it.

Yeah, I think that’s, that’s part of this too, right? Is like, people come to us and ask for advice. Um, with tracking expenses, or with building a budget, or sticking to a budget, and it’s like, whatever you’re gonna do, like, whatever is going to be most effective to you, um, and, and I would say most honest, because I think a lot of times people are, maybe intentionally so, or not intentionally so, kind of forgetful of expenses, and it leads to that.

These one off things that, aren’t actually one off. So in terms of building and compiling the information and sticking to it, it’s a matter of a system and that you’ll stick with. Um, and then again, hopefully promotes conscious spending with the ability to save. [00:33:00] Yeah, the one other thing I’ll say is, um, I think it’s so important for young people especially, especially, which is you paying yourself first.

So like Jeff, you mentioned your, your savings thing is, is there. So like when I started my first job out of college, I made 17 grand a year and so like 1922, it was a recession, but seriously, and, and, but at the time I put, I set up the automatic like 50 or 100 or 150, whatever it was a month to go directly into like some mutual funds.

Yeah. Right. So, and that, and that was just systematically set up from the get go. And I, that was going on for years and it ended up being huge because it provided number one, the habit of doing it. And number two, You know, it compounds. I mean, we talked about that separately. It’s just, it’s so important.

And I think that’s, um, something that that piece of advice I think is [00:34:00] critical for young people to whatever, however little it is just systematically set aside from your 401k contribution. You do that, you know, up to the match or whatever the company you’re working for, if there is a match, but aside from that, Even if it’s 25 bucks a month, do that and don’t touch, don’t touch it cause you’re, you’re, you don’t even think about it.

It’s gone. It’s at another, it’s, it’s, it’s not like landing in your bank account and then you have to do it. It’s gone. So I, I would, I would say that’s really important. No, I’m like that advice is good, man. I think that’s what holds most people back is when they think about, well, it’s only 25 a month.

That’s only 300 a year. Right, but it’s 300 that you save that year that you would otherwise would not have and it’s the habit. Yeah, because then the 25 You don’t even feel it and then when you get a raise like well, maybe I’ll make it 125 Yeah, I’ll make it 50 and then it starts to become something because it’s habitual now.

Click here to listen to our discussion about bonds, their performance, and their place in your investment plan.

Click here to listen to the full Untucked Episode 91. You can also listen on Apple, Spotify or Google podcasts.

Ep 91 Bond Market

Meghan Tait: [00:00:00] Um, so today we’re going to talk about an article written by Ben Carlson, um, who has a blog called The Wealth of Common Sense. The article’s titled, The Worst Bond Bear Market in History. Um, with long term bonds in a nearly three year decline, we’ve often gotten asked, specifically this year, why we continue to own them.

Today we want to discuss the reality of bonds, their relationship to interest rates, and why certain, why certain investors should continue to

Jeff Mastronardo: own them. So I was kind of Interested in this topic because I’m just I’m not tired of it. I’m just I guess tired of it I’m tired of getting the question from clients like bonds are so bad They’ve been and that’s and that’s very recency bias.

Like they’ve been so bad the last 24 months Or 18 months or however, whatever the time frame is like, why do we even have them? Like what are we doing? Shouldn’t we get out of them because I don’t see any hope for them in the near future And I happened to be in a client [00:01:00] account yesterday and I looked at one of like that aggregate bond funds or just kind of a total market bond fund or something or an intermediate term bond fund.

And I saw that in the cost basis it was down like 15%. I’m like, wow, that’s a lot. And I went back to see when it was purchased. I’m like, oh my God, it was bought in 2014. It’s like almost 10 years ago and it’s negative 15. But then I realized all dividends, all interest were reinvested over that time. So.

It’s really not down 15%. I didn’t go back to add up all the interest, but bonds pay interest every month. So I mean, that fund is definitely up. Bonds are definitely up over that decade, right? You would imagine. I haven’t like done, done the research in the back, like I haven’t gone back, but over the last 10 years.

Bonds are positive.

Mike Traynor: Total return, yeah. Just because you gotta count the interest. Sure. So

Jeff Mastronardo: total return bonds are up. And we’re in this time frame now where interest rates have [00:02:00] skyrocketed which drove bond values way down. So they’re at losses from when you bought them if you bought them a year and a half ago.

So is now the time to get out? Get rid of bonds? And just park your money in a 5 percent money market instead of bonds? Okay, so

Mike Traynor: I would say no, uh, because, you know, interest rates are going to go up. Interest rates are going to go down. It’s the most common thing that people, a lot of people say. They have conviction in what interest rates are going to do and there is nothing more unpredictable than interest rates.

Literally, it’s the hardest thing to predict. Professional, amateur, or anything else. There’s so many factors that go into what drives interest rates up or down. Um, and the reason to own bonds is not whether they’re recently up or down. It’s because they are the counterbalance, [00:03:00] typically, to stocks in a balanced portfolio.

If that’s what you believe in, that’s what you do. Um, most times when stocks go one way, bonds go the other, or don’t go. Anywhere or vice versa. And that’s, that’s the whole point of having it’s diversification, et cetera, et cetera. Um,

Jeff Mastronardo: Lots of

Mike Traynor: people will just take what happened to your point about recency bias, observe that interest rates have gone up and just say, well, they’re going to continue to go up.

So bonds are going to continue to go down. So why do we have, um, If and when the opposite happens. For whatever the reasons. And you own bonds, you’re going to be pretty happy because interest rates go down. Bond prices go up just like they went down. That’s just math. So to me, it’s just that simple. Um, it’s not at all about looking at what has recently done what you would do the same thing with stocks.

You don’t say, well, stocks have [00:04:00] been shit for the last 18 months. So why do we have them? Right?

Jeff Mastronardo: Well, let me, let me ask you this. If bond, if interest rates stayed exactly where they are now for the next three years, wouldn’t you get higher than money market yields on bonds? Yeah.

Mike Traynor: If you own… So that’s why you own them.

If you own… Again, I guess the answer is it depends because it depends on what the… You know, what longer term bonds are paying versus intermediate or

Jeff Mastronardo: short or whatever.

Mike Traynor: But generally speaking, yes. Especially if you have like corporate bonds that are paying hard. Like, so yes. You

Jeff Mastronardo: can’t hold a money market at 5 percent and then take risk by taking debt in a company and get paid less over a longer period of time.

Correct. It just can’t happen. The market doesn’t work that way. Right. And I just don’t understand why people don’t understand that. Am I just blinded by… They’re like our, our, our clients and investors emotion. I

Meghan Tait: not blind. I don’t think you’re [00:05:00] blinded. I think they’re looking at their bank paying five and then they see the performance of their, the bond portion of their account being off.

And it’s like, why wouldn’t I just swap them? Right. Why wouldn’t we just do that instead? I don’t

Jeff Mastronardo: think you’re blinded by anything. I guess I’m feeling this way because I really never had to feel this way before. Like over the last 20 years, if money markets were paying 5, you obviously wouldn’t sell your stocks to go there because over the long term stocks are going to do better.

Right. There’s no question they’re going to outperform money markets. And bonds have always kind of held up over the last 20 years because interest rates went down. And I’ve never had to really defend them. Until until today.

Meghan Tait: Yeah, but then just remember all of the other factors at play today, which again, I would argue I’ve always been in some version of themselves, but people are [00:06:00] nervous and scared and there’s uncertainty.

And I think it’s just there’s an element of right money, market funds, banking products that. Provides assurance. So I think it’s more psychological capital than anything. So you’re saying I haven’t had to defend them I don’t know that it’s bonds specifically, right? It was stocks last year. It’s like I can go get five at in safe money Right.

I don’t, I don’t know if I can tolerate the, the ups and downs in the volatility. And I think that’s, at least in my, that’s more so what I’m, what I’m dealing with or what I’m hearing.

Jeff Mastronardo: And I think it just takes time for people to start, if they even pay attention to it, which I would say 80 percent of investors don’t.

Like if you have half your money in bonds and you grab your year end statement this year and you look at the, the total income generated in your, in your account, it’s significant. Right? Like you have a high yield from those, from the bonds that you own. So I think it might just take time for people to [00:07:00] start realizing that, that they, they do pay interest instead of just looking at, you know, the value and how that’s changed.

Yeah, I agree. Yeah. And I think

Mike Traynor: the problem was last year still, which was unprecedented in so many ways in which stocks were down anywhere from 10

to 30, depending on what kind of stocks. And then bonds were down, you know, 10 to 15. Yeah. Never happened before. That’s a, that’s hard to take. Especially for people who expect the, what normally happens to happen, which is that, Oh, well at least the bond like 2008 bonds held their held serve while stocks got pummeled.

That didn’t happen this

Jeff Mastronardo: time. So last year, like. Um, we, we said that it was kind of like, it’s never happened before to that degree. And it was to that, to that, a length of time, because obviously stocks and bonds move the same way a lot of times, but never for that long of a [00:08:00] duration. Is that correct? And that’s severe.

Yeah.

Mike Traynor: The double digit declines in both asset classes is just like unheard of.

Jeff Mastronardo: So now is when like all the articles start cropping up that like 60 40 is dead balance portfolios are dead because that’s like. It’s so easy to pick on that at this point. We all kind of disagree with that, that that stuff is dead.

Yeah. Yeah. And like every other conversation that we’ve had when it was the other way around, when people were questioning stocks, my follow up question, after I defend bonds, when people say, should we get out of bonds? I defend why we want to keep them, but then say, like, what else would we do? Like, what else are people looking for?

You know what? Yep, we should get out of bonds and we should, um, use an income. Our income play and our safe play is going to now be Bitcoin. Like, it can’t be stocks because now you’re just 100 percent stocks. You can’t park it in cash because then you’re going to miss the run up of bonds if [00:09:00] and when interest rates go down.

And over the next 3 years or 4 years or 5 years you’ll probably be worse off sitting in cash. Yeah, because some

Mike Traynor: people would say, well then why do we, if cash is paying 5, Sell all the bonds and just have everything in cash and stocks. That’s great. So long as nothing changes and what you just said would be the good example.

If interest rates go from, I’m using round numbers, they go from five to two. Well, now your money market’s paying two and the bonds that you ditched have appreciated significantly and you missed

Jeff Mastronardo: all of it. So I’m going to play devil’s advocate. I’m the advisor. I’m the, or I’m the client. I’m the investor.

I’m going to say to you, I’m going to just keep it all at 5%, and when the Fed meets, if they raise it 25 basis points, then we’ll, or if they drop the interest rates, 25 basis points, I’ll jump. We’ll jump back in bonds then nine times out of 10. If you go to the client and say, Hey, they dropped points, uh, interest rates, 25 basis points.

Let’s go do that bond move that you talked about. What are they going to [00:10:00] say? No, no, no.

Meghan Tait: I’m getting five on

Jeff Mastronardo: my mind. They’re not going to do it. So you’re going to, and, and then you have to have faith that they’re going to continue to cut. Rates, which who knows?

Mike Traynor: Yeah, it’s again, the most unpredictable thing, no matter how many, how confident people are in writing about it and talking about it.

It’s silly to try to predict the direction of interest rates in the short or intermediate term. In my opinion,

Jeff Mastronardo: it all comes back to like, investing is boring. Just pick your strategy. Stick with it. Don’t change it. Like unless something. Unless someone figures it out and there is some formula that comes along that solves the mystery of What’s going to happen in the future?

But today like no one’s figured it out Yeah, people just don’t want to hear it.

Meghan Tait: I think in in their defense that they’re being the [00:11:00] people like Over the last almost 24 months now, it’s, it’s sucked to hear, like, I, I know it’s what we’re supposed to say, I know it’s what we’re supposed to do, and I feel convicted in that, um, but it sucks, like, it’s been ugly, and, and to say, like, it will get better, um, I think it’s just, we’re reaching a point in time, you said this in a meeting the other day, like, we’re reaching a point in time where I think people are kind of hitting breaking points.

Um, and that’s, I think, normal from a, from a human, you know, behavior standpoint. It’s why we exist. To make sure that, you know, bad decisions aren’t made at these times, but I’m trying, I think we’re all trying to have a little bit more kind of empathy as it relates to like where investors are today compared to, you know, 12 months ago compared to 24 months ago.

Like the [00:12:00] change over the last two years has been. Or three years, I should say. It’s been, like, dramatic.

Jeff Mastronardo: So, September and October I’ve heard. Because I felt like people were starting to feel better. Yeah. Because the stock market was doing well. Yeah. Through the first half of the year, and then so quickly they gave it all back.

Mike Traynor: But it kind of wasn’t. Like, I mean, last year was last year. Last year was, everything was down. Nowhere, nowhere to hide. This year is, I think I just read where more than half of Stocks and just using the collective group stocks are down over 10 percent year to date more than half. Yeah, that’s bad but yet you have like the magnificent seven or whatever they call the stupid tech stocks that are just Still up huge and there are so they’re so massive that they’re dragging Certain indices like higher and they’re kind of masking what’s going on underneath.

I think that that is real and people [00:13:00] Maybe feel that, um, because certain funds or certain investments they have are not up. And, uh, and, and certainly I think if you’re like a stock picker, I

Jeff Mastronardo: can’t imagine what you’re dealing with. Yeah, small and mid caps are kind of

Mike Traynor: struggling this year. Yeah, big time. Um.

And value too. Like everything other than big tech is, is.

Jeff Mastronardo: I mean, it’s, it’s needed though. Like, I mean, we, we’re not going to get the four or five years consistently of good markets unless you have pain points like this. And it sucks. It’s brutal personally to watch your investments go down. It’s brutal to talk to clients all day that are just still disappointed after 18 months.

I mean, they’re, they, they have faith and they believe and they’re hanging in, but it’s, it’s awful. It’s, it’s miserable to go through it with them and for them when they look to you as, They’re professional and you said it, Meg, like we got to have that empathy. We have to be convincing in a meeting, [00:14:00] like the reason we’re not going to move to a money market and you have to trust me, Sally and John, is that you’re going to stay in bonds and believe me, three, four years from now, five, you’re going to be better off by owning those bonds and they have to feel that conviction or they’re going to like.

They start scratching their head and then they start worrying more and then they start losing sleep and like that’s our job to be Empathetic and it’s good to hear you say that because I start to like it’s hard. It’s hard to keep that as an advisor every day all day When it’s just hey, look, you know We’re only we’re only up three percent this year, but hey, it’s better than being down 20 like we were last year and they’re like, yeah Nobody’s leaving the meeting high fiving man.

It’s tough

Mike Traynor: Yeah, and I I think I still think one of the hardest things to remind people ever talk about is just that you got to disconnect the geopolitical stuff and the corrupt politicians and all the other things you want to point [00:15:00] to from The markets and the investments because they are, I mean, it’d be stupid to say they’re not related, but they are, they’re, they’re not related because it’s always the case that you have big stuff going on in the world and the tendency to just very simply look at the, the impact it has on the investments and say, what are we doing?

I mean, things are going to shit. So why are we, why are we doing

Jeff Mastronardo: this? That stuff is part of the market, but it’s not the market, right? The market’s way bigger than

Meghan Tait: that. Yeah. I feel like, yeah. This year more than I can remember recently, like the asking for predictions questions come about like, what are you feeling?

What are you thinking? What are you guys seeing? I’m feeling pretty

Jeff Mastronardo: shitty right now, John. Don’t push me.

Meghan Tait: You know, and, and like, again, you want to, we’re in it too. Like all of this affects us personally, professionally, like, and, and there’s of course shit to worry [00:16:00] about and be concerned with. Um, so you don’t want to dismiss or diminish those feelings, but like there, there isn’t a prediction.

Like there isn’t a, an answer to that other than I don’t know. And again, I feel like if there are two years of just really tough markets, the I don’t know is harder for people to accept.

Jeff Mastronardo: Good advisors will give you the, I don’t know, but this is what we’re going to do about it. And this is

Mike Traynor: our plan. Which is why so many advisors. Uh, succumb to that temptation and they have an answer is like, here’s what we’re going to do. We’re going to rotate out of this and into that. And we’re going to, and it’s just some made up activity that makes it seem to me.

That’s an easier thing to do.

Jeff Mastronardo: Oh my God. It’s way easier. And it makes people feel so much better. Right. Yes. I talked to my person, man. They I mean the reasons they gave me for why interest rates are going to go this way and what we’re going to do about it And the [00:17:00] changes we made whoo. I feel so much better and nine times out of ten.

They’re worse off because of it Yeah, we see

Mike Traynor: it all the time. Yeah. Yeah

Jeff Mastronardo: All right,

Meghan Tait: things will get better right? Hey clients,

Jeff Mastronardo: you can still bring your bond questions to me I promise I won’t lose it

Click here to listen to our discussion about Dave Ramsey and the reality behind his claims.

Click here to listen to the full Untucked Episode 90. You can also listen on Apple, Spotify or Google podcasts.

Episode 90

Meghan Tait: [00:00:00] Want to get into Coach’s Corner? Let’s do it. Uh, so there was a clip, I don’t know that it went viral on Twitter, I mean it made its way onto my Twitter, but, um, it is a clip of Dave Ramsey making the statement that it’s not hard to beat the S& P 500. I guess Dave has some sort of like, quasi podcast radio call and show where people call in with their situation and look for advice.

And we’ve obviously made our feelings on the Dave Ramsey’s, the Susie Ormans of the world very clear. Uh, but we wanted to maybe tackle that statement in particular and why it’s just. Irresponsible,

Jeff Mastronardo: so what are I should have done this research prior to today? What are Dave Ramsey’s qualifications? What does he think?

What

Mike Traynor: does he do? He doesn’t have any qualifications at all from a Professional standpoint. He’s literally just a [00:01:00] guy who’s written some books launched a radio show and talks to the American public via those platforms and, um, tells them what to do with their money. He, I mean, very, in a general sense,

Jeff Mastronardo: not financial advice.

Meghan Tait: So people will call into a show and give a, you know, 15 second summary of their situation. I have X amount in student loan debt. I want to buy a house. I make this much and I have this much credit card debt. And he tells them what to do.

Jeff Mastronardo: And that’s

Meghan Tait: allow what? Yeah. And is also extremely critical of people’s situations.

Mike Traynor: Yeah. And so, yes, he, in his defense, he, he consistently tells people to don’t ever get yourself in credit card debt. Um, don’t spend more than you make those kinds of basic things that [00:02:00] so he like

Jeff Mastronardo: basically tells people like. Breathe air and drink

Mike Traynor: water. Yeah. Yeah. Captain obvious for sure. But he also, um, on the other side of things, way overstates the impact of what you will have if you invest over time.

Uh, cause he uses expectations of probably like 12 plus percent returns. Um, he doesn’t, he, he, he advises. Anyone and everyone, no matter their age or situation, to have everything in stocks. Um, and he’s, and he’s really a douchebag about how he treats people and talks to people and ridicules them for their, the situations that they’ve gotten themselves in, which is probably the most off putting thing about the guy, in my opinion.

Jeff Mastronardo: I completely agree. Okay, I’ve seen a little bit of him and that’s what I’ve taken

Meghan Tait: away. So there are people who subscribe to his philosophies and as Mike said, a lot of it is like anti debt and most of the time in, in a good way, like paying down credit card debt, attacking high interest debt or whatever, [00:03:00] but there’s, you know.

Pay let’s accelerate our mortgage payments, even though we have a two and a half percent mortgage. It’s like there’s not a lot of I’ll say he’s very black and white. I guess maybe a good way to put it

Jeff Mastronardo: So in this in this clip, he basically tells his co host that He’s averaging most years and and averages most years he gets 13 percent per year on his investments and Averages about 12 to 13 percent per year because it’s not hard To beat the S& P 500 because the S& P 500 is just an average

Mike Traynor: of the market.

Which it’s not, but that’s what he

Meghan Tait: said it was. That’s what he said. That was the clip that he said. Yes.

Jeff Mastronardo: So yeah, explain. I was, I was a little scratch in my head when he said the S& P is an average of the market. What did he mean by that?

Mike Traynor: We don’t know. Okay. Okay. So, he’s wrong. I highly doubt he’s averaging 12

Jeff Mastronardo: or 13 percent. Unless his average is [00:04:00] over like a, maybe a one or two year period. And he’s also wrong because it is not easy to beat the S& P 500. I mean, I think Vanguard did the research and found that like 80 percent of professional money managers don’t beat the market consistently over time. Isn’t that true?

Mike Traynor: Yes. And the more time goes by, the worse it is, the worse the record

Jeff Mastronardo: people. So how can he make that statement like that information is there?

Mike Traynor: Yeah, well, that’s the thing. I mean, right. He does it. So I pulled up another clip just out of curiosity because I don’t He’s not on my, he doesn’t come across my feed.

Good for you. And in one of them he was railing against people who have expensive car payments. They bought cars that are out of their range. What’s it, what they should be driving. Let’s say he was yelling about people that have a thousand dollar monthly car payments and sell that car, get rid of it, invest that into stocks.

And in [00:05:00] 20 years you’ll have over a million dollars. That’s simple. Like that’s, that’s how he’s talking in this, um, radio show or whatever. And then when you, if you actually look at what he’s claiming, it would require returns that are outrageous for that to turn into a million or more dollars in 20 years, because you’re investing.

240, 000, I guess that’s what it is. Right. Um, and then the market returns would compound that into, not a million, it’s way less than that. It’s still decent. Sure. It’s still directionally the right advice, like don’t spend, don’t blow your money on a ridiculous car payment when you could be investing it.

That is correct. But to make the claim that you’re going to be a, you know, millionaire or a multi millionaire if you just do this is ridiculous. So what we’re

Jeff Mastronardo: trying to like prove or establish in this coach’s corner is what?

Meghan Tait: [00:06:00] Is that beating the market, one, is not easy, shouldn’t be considered easy, and that candidly, like, the goal or attempt to do so is probably unnecessary for most people.

If most people build, a financial plan that’s reflective of their means, their income, their lifestyle, and their goals, getting market returns, getting what the market will give you, is probably enough.

Jeff Mastronardo: It’s most definitely enough.

Meghan Tait: Again, I mean, there’s exceptions where people need to bet it all to get it all back, but like, that’s not

Jeff Mastronardo: a plan.

That’s not a strategy. Like if you live within your means, build a solid financial plan and just get market returns, that’s the best you can do. without just getting flat out lucky. Yeah. So this, this, the fact that this guy makes a statement, it’s what’s wrong with this industry. Because people listen to him and they’re like, Oh, [00:07:00] well, like he’s, if it’s easy, how come my people aren’t doing it?

How come I’m not doing it? Let me hire him. Let me hire that person that says they can beat the market consistently.

Mike Traynor: Yeah. And just another thing that’s so irritating about him and his style and his whole MO is that he. The way that he talks to people, he, you know, he’s this guy from, I don’t know, Kentucky or somewhere, and he’s, he’s just, you know, good old boy who just is talking about how simple and easy it is, and this is what I did, and this is how I’m a multi millionaire.

This is why I read menus from left to right. Up and down the price list. It’s one of his little, which is so cringy, right? And, um, but if you peel back the onion and you look at him and his enterprise that he’s built, which is to make money, the guy apparently makes 30 or 40 million a year from this platform.

He’s currently in the middle of being sued for 150 million by some, [00:08:00] uh, a group of. Listeners, I’ll say, who, um, got completely hosed by one of his sponsors, which was one of these timeshare exit companies. And if you know anything about exiting a timeshare, it’s, it’s impossible. And companies that try to sell you hire us and we’ll get you out of it.

They’re scams and they’re frauds and they’re stealing your money and these are the kind of people that pay him to be on his Program as a sponsor because guess who the audience is it’s millions of people who are buying the shit that he’s selling Yeah, so

Jeff Mastronardo: wow. Yeah, I know that that’s pretty miserable. I did a little research.

Yeah. Thank you for that Yeah, I just think just get the market and stay within your means do the right thing You’ll you’ll that’s that’s the best you can do and unfortunately you start engaging with these people people like this and it’s just I think it leads to poor. Poor expectations and poor

Meghan Tait: results.

And when we say getting the market that’s acknowledging that there’s [00:09:00] gonna be shitty years in the market. Yeah, right. We’re not we’re not saying get the market and avoid 2022 like the suggestion is not that you can time the experience or it’s It’s that you have to, again, build a plan with contingencies.

So if bad markets happen, you have plan B or plan C or something. But like when we say get the market, it’s, we’re being very specific in that. Like that includes the down years. It includes the investments that are down and includes the asset classes that are down for maybe periods of time that make you uncomfortable.

Jeff Mastronardo: You can’t get the market without getting 2022. Right. You can’t. Because if you try to, you’re going to miss part of the upswing. Yeah. You have to just stay in it. There is no ins and outs because ins and outs typically leads to underperformance. You got it. Unless of course you’re Dave Ramsey.