Lies We Tell Ourselves
Let’s explore some of the financial lies people tell themselves, and some of the consequences that go along with them.
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John Stillman: Welcome once again to Write Money Tips with Isaac Wright, Chartered Financial Consultant, President of Financial Dynamics and Associates and author of Navigate Your Way To A Secure Retirement. You can find more about Isaac online at wrightmoneytips.com, that's Wright with a W, wrightmoneytips.com.
John: You can reach out by phone if you'd like to speak with somebody at Financial Dynamics (804) 777-9999 is the number to call.
John: We're talking today about lies that we tell ourselves. Isaac, I always lie to myself and tell myself, "Look, yeah, I could have that bag of Double Stuff Oreos around the house and not eat all of them in two days", but that's never how it goes. I always eat all of them in two days.
Isaac Wright: Yeah or the lie that we tell ourselves is the fact that we don't lie to ourselves.
John: Right. Yeah. Oreos and Girl Scout Cookies. I just can't have them around because I'll just plow through way too many of them to quickly.
Isaac: You know sometimes a lie that we want to tell ourselves, it's just I'm going to have my New Year's resolution, I'm going to be in the best shape of my life. Obviously, let's call it the small percentage of those that say that actually do it, but managing expectations is always important, but I thought today we'll just have a little wider show today. Just talk about some financial lies that we sometimes tell ourselves and just keep these in mind. Of course, anything that we cover today, you know you can always call and talk to myself and anyone in our team, 777-9999.
John: So one of those lies is, "Yeah, well I'll pay back that money that I've taken out of my savings or borrowed from my 401k or I raided the emergency fund for a trip down to Myrtle Beach." A lot of times we tell ourselves lies to justify why we're taking money out of a place that we know we really shouldn't.
Isaac: Yeah. Maybe the thing is is to be honest with yourself and realize that you may be able to pay some of it back, but it's going to be sometimes difficult to pay it all back.
Isaac: Over my 20 years I've seen people take money out of their IRA accounts and try to get that money back in their IRAs within 60 days and not figure they have to cover any taxes, and low and behold A, B and C happens and they don't get that money back in and it's a problem.
Isaac: Same goes for your 401k and also, by the way, if you're borrowing money from your 401k, you know it is hurting the account. I don't want to go into all the details about that today, but if you are borrowing money from your retirement money in a lot of respects, normally doesn't turn out to be in your best interest.
Isaac: But if you do borrow money from a 401k, a lot of times people just pay that back over a period of time. If you change jobs, you may have a job situation where you may not be able to pay it back and all of a sudden it becomes a taxable situation, maybe even the penalty on top of that.
Isaac: So just be careful about taking money out of your quote, retirement savings. It's all I want you to realize and maybe just have a conversation. Sometimes people don't realize they are lying to themselves because they don't know the rules about how to take money out of these plans to begin with. So if you have any, again, concerns about your retirement savings, working with somebody and building that relationship, that's a big one.
John: Now another lie you might tell yourself is "Well, the bank is the safest place to keep my money right now" and in terms of principle being protected, well yeah, I guess we could say it's safe, but why might the bank not be safe?
Isaac: Well, just keep in mind, depending on how much you have at the bank, you still have some FDIC limitations. People are really hypersensitive when you hear the word safe and they're automatically thinking it's like literally putting in the vault and that's why banks sometimes, again, kind of mentally put you in that place.
Isaac: I just want you to realize that if you're only making you know, 0.5 or one or 2% on your money, even in some respects, you should always have money in an emergency fund, money at the bank to get to, but there's a lot of opportunity to be able to diversify money outside of the bank that can be insured, that can be in a place where it has low risk or low volatility.
Isaac: I think the new definition of what I would call quote, safe, is a level of diversification where you don't have all your eggs in one basket, but in my life I've never seen more people come in that have huge amounts of money sitting in cash in their bank, savings, money markets, paying 1% and thinking, "Hey, I got it safe at least." Yeah, well as your costs of your health insurance goes up at 8% per year and as the cost of your other expenses go up, really how safe are you being because the purchasing power of that money is really not safe.
Isaac: So what I want people to realize is it's time to have a more honest conversation, maybe even more of a detailed conversation, about what your definition of safe is and start to address what I would call the old school definition of safe, is just simply having money at the bank.
John: Another lie, financial lie, that we might tell ourselves is "You know what? I'll just rely on Social Security. If I have a little bit of savings, that's good, but I don't need to focus on that too much."
Isaac: This is something we don't see as much of because people are becoming more educated about Social Security and the system itself, but let me tell you what this means.
Isaac: The lie people will tell ourselves, or let's say potentially tell ourselves today, is the fact that back when, maybe say 20 30 years ago, when they say quote, I would rely on my Social Security, it's because you had a pension from your employer that you could also depend on. In a lot of respects you would have a pension check, you'd have Social Security. Of course if you had investments, great, good, but people also had lifestyle expenses, I feel like, more under control to, kind of the good old days where you had two main sources of income and of course, in today's world, very rarely does that same situation apply. So even though the mentality of your parents may have been, "Hey, I'm good with my Social Security check", they didn't really fill out the rest of the formula. They didn't have to because they had other income that they could depend on.
Isaac: I just want you to be aware, as you go to and through your retirement years, relying on Social Security, obviously, is not going to cover all the expenses.
John: And one final lie that we'll mention today is YOLO, You Only Live Once, might as well spend it now.
Isaac: Yes, the good old let's just throw the money out the window.
Isaac: Listen, you need to have experiences in life. Absolutely. You need to have fun. I think really a lot of people enjoy being here working with us at our firm, is because we encourage the spending of your money, not necessarily you have to invest every dollar with us, but I want to be very clear here as well that you have to have some, what I call guardrails, to whether or not that statement you can live up to. So defining might as well spend it now, be careful. That's all I want to say.
Isaac: If you want to, in the earlier stages of your retirement, maybe even before you retire when you're making a good income through work and you have five weeks vacation or whatever the situation is, go out there and knock out what you want to do. My context is this, is just be careful about the amount and we actually can help you run some analysis of whether or not pulling out a certain amount of money as a lump sum on top of your monthly expenses is doable. How many of y'all would appreciate that? I mean, I think to me, that's a big question that gets, unfortunately, not enough press.
Isaac: These are just quick things we want to cover today. Nothing heavy. I know we've had a couple of longer shows in here in the last couple of weeks.
Isaac: Just thought we would want to quickly share some lies that if you are being honest with yourself and you maybe have said these things, we're here to maybe help course correct that mindset.
Isaac: So again, give us a call. Here to help. 777-9999.
John: (804) 777-9999, that's the number to call if you'd like to get in touch with Isaac and the team at Financial Dynamics and Associates.
John: Isaac, always a pleasure. Thanks for your wisdom.
Isaac: Very welcome, John. We'll talk soon.
John: We'll do it again very soon right here on the Wright Money Tips. Have a great day.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action. Advisory services offered through J.W. Cole Advisors, Inc. (“JWCA”). Financial Dynamics and Associates, Inc. and JWCA are unaffiliated entities.