Ellevate San Diego Event: How to Build Your Dream Life with Your Money

Ellevate Network San Diego Chapter’s How to Build Your Dream Life with Your Money event featured financial advisor Renee Cohen and wealth management advisor Chantel Bonneau Stewart. Renee is a leader in the Ellevate Network LA chapter. This event was sponsored by Women Moving Mountains and held at the company’s event space at the Aventine in UTC.

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Disclaimer: This is not official financial advice, only an event recap.

Chantel, author of the book Finding Your Financial Type: Clearing the Hurdles to Financial Wellness, started the discussion. Though hearing about how to make your money work harder can feel overwhelming or confusing, she and Renee make sure that you are empowered, educated, and understand the different strategies out there, so you accomplish your goals.

For example, most people have a goal of exercising more, yet 94% of Americans failed getting the recommended 30 minutes of exercise a day. Only between 10-20% of people that lose over 5% of their body weight keep it off long term, showing how people regress on their goals even after achieving them. One sixth of females would rather be blind than obese, which shows how much we say or think these health goals are important.

Chantel said most the time, the right mindset about money is what’s missing. “There’s a lot of great advice out there about what you should do and all that’s wonderful. But if we’re not executing on it, and it’s not working, it doesn’t really matter.” She compared this mindset problem to setting New Year’s resolutions and breaking them before February (unless you are a motivated Ellevate member … no one in the crowd has a current example). Most resolutions tend to be about getting healthier, getting more exercise, and saving more money. “Obviously it’s important to people but most people tend to fail to execute on that … people keep making the same mistakes and continue to fail because they are using a one-size-fits-all strategy.”

Ellevate Network San Diego, wealth management advisor Chantel Bonneau Stewart

Different people are inspired to achieve health goals based on different reasons, such as competitiveness and what types of exercise you like and dislike. Chantel explained that people react the exact same way when it comes to achieving financial goals. “We have this way in which we function in society, you’re supposed to do things this way, you’re supposed to save this much into these types of vehicles. You’re supposed to constantly feel bad about the amount of money that you save, right? We get a lot of advice telling us how to do things, yet it doesn’t take into consideration how we plan, how we think about money, what our relationship is with money, and that’s how we prioritize things.”

Chantel and Renee’s slightly different spin on financial wellness includes first defining who you are and how you connect to money so that you can build a plan that has a higher chance of succeeding long-term. Transitioning the discussion to money, 44% of Americans cannot cover a $400 emergency, and it increases to 66% if the emergency becomes $1,000. 25% of workers do not contribute enough to their 401k to get the full match. “The match is free money, it’s literally someone saying, ‘Can I please give you this free money,’ and 21% of people don’t even take that up.”

Chantel then asked us what year we thought savings hit a rock bottom at 1.9% of household income, which was in 2005 when the economy was fine. “So what this statistic tells us is that savings for financial behavior has very little to do with the balance sheet, and it has everything to do with an attitude and a mentality.”

Only 24% of millennials demonstrate basic financial literacy, yet 69% consider themselves highly knowledgeable. “So there’s a little bit of a disconnect. It’s not necessarily their fault. There are lots of articles you can read that make you feel like you’re up-to-date on things.” More scary statistics ahead! The median net worth (assets minus liabilities) for Americans between ages 35 and 44 is $14,000, and for people ages 55 to 64 it is $45,000. Two-fifths of adults in a committed relationship have committed financial infidelity, which is hiding or lying about significant financial information. 31% of people say that they would rather their spouse cheat on them than lie about money. Chantel says she hears it all, “That’s our job, it is 9% finance and 91% couples therapy.”

How can you build financial wellness?

Starting to think about it just like health and mental wellness, “as a lifelong journey that’s going to have some good and some bad. It’s really about building financial self-esteem, so you feel good about the constant progress that you’re making.” One of the ways to build financial self-esteem is to shorten the financial execution gap, which is the point in time from when you decide you need to do something, to the point in time when you actually do it. There are lots of very smart people that technically have enough money, but when they finally come to the conclusion that they should be doing something with money, to the point when they make an appointment to execute, can be 10 months or 10 years. Shortening that gap is what can help us execute on our goals, Chantel said.

What also holds people back from that financial implementation is clear goals. Some people don’t have have enough information, so they don’t know how they can make a decision. Some have a fear of missing out on the alternative (“I don’t want to max out my 401K because I might want to put my money somewhere else … where, I don’t know, a fictitious accounts that has no tax, immediate liquidity, gets a 20% return, that does not exist.”) It is hard to be held accountable for your financial wellness, since most of us have day jobs and it’s hard to do everything in life. The final reason is it can be hard to find a financial advisor you have a good relationship with.

Shortening the Financial Execution Gap

You can shorten this financial execution gap by building a plan that matches how you function. This is where Chantel’s method of finding your financial types fits in. There is a quiz that you can take about which of the five types you are:

  • DILIGENT SAVER
  • IMPLEMENTER
  • CAPABLE STUDENT
  • HURDLER
  • ANALYTIC

“Has anyone read about the five love languages book and find that you and your significant other have different languages, so you have been communicating differently? The same thing applies to money.”

Ellevate San Diego Renee Cohen

The Analytic

Chantel talked about the analytic category, people who love research, who have attempted to create lots of spreadsheets or systems, who act like they don’t need the tools institutions have spent millions of dollars to create because they can build a better way. Analytics tend to have a lot of money in cash, and asking for help is a struggle because you know that you’re smart enough to find the solution if only you had time. A lot of physicians tend to be analytics because they are used to be very competent. “And yes, if they suddenly had a year off, they could probably study a lot and come to the same conclusions [as the financial experts].”

The Diligent Saver

The diligence saver is very aware of where their money goes and very conscious of how much it costs to live their life. They concentrate on budgeting, think frugally, and they think about the opportunity cost of time. “They think, why on earth would I buy a ten dollar green juice when I could make it for 75 cents? Whereas other people think, because then you have to clean the blender.” They tend to save in cash and they’re always worried about downside possibilities, the worst that could happen.

The Implementer

The implementer can usually follow a plan that someone has given them. They are the kind of person that hires a personal trainer. They want someone to come in and say, “This is what you need to do.” They like guidance and asking for help from experts. They want others to handle micro details, they value specialists, they would hire a closet organizer, they tend to have a job where they manage other people so they can delegate.

The Capable Student

Capable students have the best of intentions and really want to learn, but they’re afraid of making the wrong decisions. Financially speaking, they want to build new habits and stay motivated. They are focused on that wellness component. This category usually spends the longest time in the financial execution gap because they want to know everything and they forget they have to execute. If dieting, they would buy all the Ketones diet books, watch all the documentaries, they would study if they should be a vegetarian, etc. They gather all this information and get analysis paralysis because they’re so eager to learn and it’s a lot of conflicting information.

The Hurdler

The final type is the hurdler, someone who feels their financial status and financial planning is overwhelming no matter how much money they make. If your CPA sits down with you and tries to explain a complex saving strategy, you walk out thinking, “I don’t know what I’m going to do.” You can never find the right time to begin financial discipline, and often catch yourself saying things like, “when I get that raise … as soon as my kid’s out of preschool… all of a sudden I’m going to have an extra thousand dollars a month and everything’s going to be different.” They tend to have consumer debt, and have tried various approaches to budgeting that haven’t worked.

When financial planning, what do different financial types need?

The key is that for each of these different financial types, there are certain components of financial planning that needs to be handled very differently. Many times, you get advice or you read an article and it says, do it this way. There’s a very small demographic that’s actually going to use that way, which is written by financial professionals. The articles are usually for diligent savers and implementer, not for everyone else. “Follow-through is very hard for a lot of people, to actually execute and continually execute, so this is where things also have to be done very differently.”

  • For example, if an implementer who makes $16K needs a budget, they may need to save $4000 and spend everything else. Don’t worry about how much of the remainder they’re spending, don’t count dollars. They’re a macro thinker, they need to think about putting money where it needs to go, and then they’ll execute instead of getting stuck in the details. An implementer needs 5-10 year goals.
  • The diligent saver is not going to love that macro approach budget. They would say, “Well, in my calculation and I actually need to save $3792 so we need to go back to square one because we don’t seem to be on the same page.” They will enjoy tracking expenses, and they want to see everything in percentages.
  • For the hurdler, you want to think small, such as just finding the biggest money drain, which could be Starbucks or going out to eat. We’ll track what you’re spending in that one category to try to make progress plugging that drain. That is a lot easier way to see progress instead of overwhelming them by tracking everything. A hurdler tends to need very short term goals, 30-60-90 day goals.
  • A capable student loves learning about everything, so we find one thing we can make a decision on. It can be as small of a decision as your emergency fund goal, just building the habit of making a decision instead of getting really excited about thinking about how to possibly begin.
  • For the analytic, start with the most logical, basic thing, where every habit has to be tied to a goal that becomes obvious. The analytic will try to find all of the arguments for why something is good and bad. Try to get them to a logical place so they can actually implement and move forward.

Q&A

Renee and Chantel asked for questions, with a disclaimer for all financial advice answers that it depends on the situation. For example, how much to save for retirement depends on how much money you have and what you are used to living on. Most of the time, people need a combination of products that can work together for retirement: pre-tax, post-tax, market-based, non-market-based, liquidity, longer duration. “If you are a hurdler, retirement savings works best when it’s set up to automatically come out of your paycheck and you cannot figure out how to stop it. It’s where the behavior side of money plays a role.” They also noted that if you are a household making $350K a year and you think just saving into a 401K is going to prepare you for retirement, your math equation is flawed because that will not be nearly enough to support your current lifestyle level. “I think what’s most important is knowing the 401Ks came into existence because we no longer have pensions. You don’t have those fixed sources of income in this generation. We are the owner of our paycheck later on, so we have to create that.”

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What’s the difference between buying random stocks on my own compared to having a 401K?

Tax shelter. For the 401K, you pay tax either now or later, but for the stocks “it’s tax today, tax later, tax all along the way. The government has their hands in it more times, which can be costly because that can be an extra 10 or 15%.”

Do you have any advice for a relationship with a diligence saver and a hurdler? “That’s some therapy, the third section of my book is different relationship examples and I think that’s a tricky one. A diligent saver and a hurdler are opposite ends of the spectrum. First of all, if you were two diligent savers, you probably never would have went on a good date, got married, or encouraged anything fun in your life. Two hurdlers never probably pulled it together enough to go on a date. Opposites attract.” To work together, the diligent saver has to understand that the hurdler is not going to respond well to certain kinds of feedback, such as tracking the hurdler’s expenses and nitpicking every dollar spent. There needs to be an amount of money the hurdler can spend without judgment, and commitments to accomplish goals have to be very tactical, like sign up for your 401k. “A lot of it’s about communication and it’s a lot easier if you have specific goals, like in retirement you still want to go to Starbucks, or saying you want that new house in five years … It might be easier if you both have very connected money goals because in the analytic’s mind, he’s making spreadsheets [about his goals] but they might not be your goals.”

What about platforms like Robin Hood or Acorns? Would you suggest using those?

It’s less about which platform as about thinking if it is going to help you. Usually hurdlers or capable students hear about it from a friend, went on the website and signed up, and then they never look at it again. The novelty goes away. It is better than nothing, but “nothing is better than conscious decision making. I would rather someone say, ‘No, I choose to save $100 a month into an investment account, not accidentally saved nine cents on a $1 purchase. That doesn’t change your behavior. That’s what builds that financial self esteem is saying, ‘I choose to save $100 a month into an investment account because of my goals. And because I want to own that choice.’ And then based on who you are, you want to set that up in a way that is either easy or very hard to edit.” The other big problem with many fintech companies is people open those in non-retirement vehicles and don’t realize there’s taxation all along or didn’t realize the risk profile. You have to develop habits versus just trying to give it to an algorithm to invest for you.

A member’s husband is an analytic and stays up for two nights stressing out to file his own taxes. He’s a lawyer. How can she convince him to hire a CPA for their taxes? She takes care of her business’s taxes.

Chantel said there is a small category of people that are natural implementors, who tend to have big jobs and get a lot done because they have really great delegation skills, they see things in a big picture, and they can get work done through people. Many other people, as they progress in their life, have to add implementor qualities to continue progressing. He has to learn to let go of some things (delegate) even though he’s good at taxes. Analytics, if they had time, are totally capable of doing a lot of things but do not have time to do everything. So for him, acknowledge that he can totally can do this, but why don’t we take the stress off because now you have a very good job. You’re a lawyer. Also – Do you know how relatively inexpensive CPA work is? Maybe if you distracted him with a different project like estate planning, because he’s a lawyer and yet you probably don’t have that planned out. “I can’t tell you how many cardiologists to try to do their own taxes … if you were doing heart surgery on my family member tomorrow, I don’t want you up all night doing your taxes!”

Do you know or recommend any good budgeting platforms?

It depends how you like to see things, there are different levels of budgeting. Everyone should have a pulse on what it costs to live your life monthly, because everything is predicated on that. First go through each of those spending categories. That should be a six minutes exercise. It does not need to be perfect, it just needs to be general, there are things you’re going to forget, and you want to think of averages. “I’m always so hesitant to send people budget sheets, because then I know they might put a significant number of hours on it. Six minutes, just bust through it.” Then determine if you need to go to a next level of budgeting. If you make $10K and spend about $7K, it’s different than if you make $10K and spend $11K. Then we need to figure out where the holes are, what we’re going to do about it, and what you’re willing to give up. For over-spenders, the expenses are usually in one or two categories, they are not over-spending across all categories. Sometimes you can find places in the budget that don’t really mean that much to you. The only problem is that you can’t have everything important to you: you can’t have travel AND be a foodie AND spend a ton of money on beauty, for example. If you’re banking with the bigger banks, you can easily see those different categories on your credit cards and bank accounts. Basically, think about your non-negotiable expenses and remove other things.

If I have a lot of cash and want to start investing slowly with short-term options, what are your suggestions?

“We can’t have it all. We can have liquidity where we’re not taking any market risk, but having cash on hand is highly inefficient for the long term. You’re going to have to look at what you want your money to do, and then start attaching the right vehicles for those goals, short-term or long-term. There’s no right or wrong. I know it feels nice to say ‘I always have options’ but if you have money that is meant for long-term and it’s not getting a tax shelter, it’s not getting an opportunity for growth, it’s actually costing you 3% a year in inflation which is crazy over time. For most people, it’s impossible to out-save lack-of-growth right now. That’s where I think it’s important to really come to a conclusion on what exactly is an emergency for your cash emergency fund. It is usually three to six months of living expenses. Then if you have other goals, like buying a house in five years, that can help you dictate the level of risk that’s appropriate. The diligence saver is always thinking about what is wrong with every vehicle as opposed to what’s right with it. None of us would be married and if we were waiting for that 100% perfect person, there’s always a compromise. If you’re waiting for it, it’s never going to come. The diligent saver is always waiting because they find one flaw and with enough time they prove themselves right. When the market goes down, they say ‘I knew it.’ It’s going to go down 25% of the time, but the inverse of that is 75% of time it’s going to go up, which is good in the long run. A misconception with planning or vehicles is that once you once you have this plan you can never adjust it. But there are going to be adjustments along the way, and it doesn’t mean that you should just pull everything out as soon as there’s a little bump in the road.”

“I like liquidity for my life because my husband and I both own companies so we have access to that money instead of having to borrow money when something comes up with his company, if it’s locked up in a retirement account. We split it where we had some money that’s in a traditional retirement account like the endgame safety net, but then we also put it in places where we can take it out. We still get some growth. That’s where I’m very conservative.”

“Sometimes penalties are the best thing in the world, and they are the only thing that prevents some people from deciding that a vacation to Thailand is an emergency. Any dollars that you can say goodbye to until you’re 60 should go away there, even if it’s not a perfect number. The answer to the very first question is it’s usually a combination of lots of things, and assigning a job description to those dollars, such as we need liquidity because we’re business owners. It’s very different than the typical consumer who would say ‘I think I need access to this because I really want to do XYZ.'”

Can people be more than one of these financial types?

Chantel said people are usually a combination of two, just because the types are kind of extremes and the descriptions are general. Millennials tend to be more capable students than other demographics. There are some things you grow out of: you have three kids, a mortgage, a big job and you don’t actually care about researching everything anymore. Sometimes you transition out of types and lean on another type, or you become an implementer because you have to hire CPA. Every once in a while there’s someone like her father who is a 100% diligent saver.

At what point would you recommend someone to work with a financial advisor? Do you have a certain amount of money, or how do you go about that?

“I think it’s really a personal preference, there’s a big range of advisors, both from skill set and then clientele they work with. You want to find someone that if they call you, you’re going to answer the phone or you’re calling back, and vice versa. If someone helps you put a plan in place and you hate talking to them, that’s not helpful at all. Find someone that is not going to be your best friend, but it doesn’t kill you to talk to them, and they actually talk to you.”

“Back to the financial execution gap, where you get to a point where you think you need to do something … that might be a good time. If you are an implementor you usually need someone who’s going to bring you ideas and then help you stay on track because you’re busy doing other things. If you are a hurdler, you probably need someone, whether it’s an advisor or a friend, that keeps you on track. Capable students are probably the one demographic that could get away for a period of time without an advisor. If they just want to research, an advisor is probably not going to be helpful because they’re going to be mad at the advisor for trying to push them to do something if they don’t have the same communication style. They need to find someone who will educate them and appropriately push them.”

“Do you need to have a certain amount? There are some advisors that say you need $5 million to meet with them, and some advisors that charge a fee. Some advisors think if it’s good relationship they see as a long term, they’re happy to work with you from the very beginning. Ask what type of clientele they usually look for, and ask if you’re the right fit. What you don’t want is someone that has $10 million clients, volunteer to work with you on your $100K IRA and think ‘I’m so lucky.’ You’re not lucky they took the 10 minute call with you, I promise they don’t remember your name and are not looking after your account.”

“I think it’s important to know what you want help with, what you want from the relationship, because there are different advisors. Sometimes that word can get muddled, there’s investment management and managing investment accounts but you’re looking for advice to bring in strategic thinking and ideas, and making sure that your money is allocated appropriately. So it really depends on what you’re looking for. Many analytics DIY first and they want fee-based planners who give them information, tell them what they should do, and then they’re going to spin their wheels on it, but that would better than nothing for them because at least it may point them in the right direction. It depends on how you function and your accountability. I think most people in our industry do want advice from other people because it’s so easy to give advice, but like previous examples in whatever industry you’re in, a lawyer doesn’t have an estate plan, most doctors don’t have a medical directive, a high percentage of doctors are smokers … it’s very hard to do what you know and to always be on your best behavior.”

Disclaimer: this is not official financial advice, only an event recap.

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