Aging Answers - Episode 12: Financial Literacy Transcript - Norris McLaughlin, P.A., Attorneys at Law

Episode 12: Financial Literacy

Transcript: Shana Siegel, Michelle Feeley

Shana Siegel: Welcome to Norris McLaughlin’s Aging Answers, a limited podcast series discussing the key topics of elder law planning and long term care. I’m your host, Shana Siegel, practice group leader of the Elder Law Group and member at Norris McLaughlin. In this episode, I’m joined by Michelle Feeley, money coach. Hi, Michelle. How are you?

Michelle Feeley: I’m great. Thanks for having me.

Shana Siegel: Thanks for coming. So, talk to me about what it means to be a money coach. How’s that different from being a financial planner or financial advisor?

Michelle Feeley: So, Financial advisors and financial planners tend to focus on long-term financial goals and money coaches focus on your current financial situation. A financial planner and financial advisor is typically licensed to help you with investment planning. They will run scenarios to look at. Your future financial situation and retirement based on your expected rate of return, your risk tolerance, they can help you with asset preservation, with tax guidance, potentially offering insurance options. In contrast, Money Coach, like I said, is focused on, right, your short-term goals, your current money situation, helping you. Establish good money habits right now. People would typically come to a money coach for things like earning a great income, but not like living paycheck to paycheck, not sure where your money is going. Potentially they want to get out of debt and don’t know where to start. Or they have a change in life circumstances, and then they’re trying to navigate new expenses like daycare costs, mortgage costs, elder care costs. A money coach is going to have the time and capacity to work with you at a regular cadence on your budget and you’re establishing your money habits, but whereas a financial planner might touch on budgeting, they don’t have that time to invest. We typically meet with people at a weekly or bi-weekly cadence and taper to monthly or quarterly until people kind of graduate. The goal would be at the end of a money coaching program, you would be in a spot to invest on your own or We can help you get in touch with the financial advisor and financial planner. We can even sit in on those initial meetings, help answer questions, translate things, et cetera.

Shana Siegel: That’s very, very helpful. So, it sounds like a lot of the focus is on budgeting and some people tend to kind of bristle at that word, right? Like, they find they think it’s restrictive or it’s tedious. How do you get people to embrace the concept?

Michelle Feeley: Yes, absolutely. You know, people definitely dread budgeting. I know some money coaches don’t even like to use that word. They call it the word or they use a spending plan instead of a budget. But reality is, if you’re earning a good income, you can really flip that and look at a budget as a tool that helps you know what you are able to spend, where each month, it helps to start with getting clarity on what your financial situation is and what your goals are. Once you have your goals established, it’s much easier to spend accordingly, and you can start small with your goals, but you should also have stretch goals, because once you start paying attention to your money, you’re going to be amazed at what you can accomplish. And once you have those goals, for example, if you’re planning, like a luxury vacation and you want to splurge on, you know, a Wednesday night door dash delivery or a Saturday morning, shopping spree at TJ Maxx. When you stop and think about your longer-term goal, it will help you decide, do I really want to spend my money that way? And maybe you do, maybe you’re going to go and buy one new outfit and not 10. And kind of split the difference and have money, you can still set aside and save and still enjoy life a little bit along the way. The other thing I would say is that people, when they start to budget or pay attention to their money can get overly restrictive too quickly. So, if you’re typically eating out three or four nights a week and you say, Hey, I’m just going to cut it out and not eat out at all. Yeah, you’re going to save a-lot of money, but you’re also probably not going to stick to that plan for very long. It’s much better to start with cutting back to One night a week, cutting about one night of eating out and maybe working your way up to just eating out one night a week, plus a bonus night every month, something like that, just like if you go on a diet and you’re too aggressive, you’re just not going to stick to it.

Shana Siegel: That makes sense. You know, if there’s somebody who they want to kind of figure out their spending, but they’re not ready to really sit down and focus and create a detailed budget. Where can they get started?

Michelle Feeley: So, one thing that we find can be very helpful is to start by separating your recurring bills from your variable spending. So, these days it’s very easy to set up a second checking account with a lot of the online banks They have no minimum fees. They don’t require minimums. They don’t have fees So ideally what you would want to do is Figure out what your net take home pay is. For example, if it’s 10k a month, quickly add up your bills. If they are about 7k, maybe you leave 8k in that main account and you’re transferring 2,000 over to this variable spending account linked to a debit card. And then after a couple months, you can start to see, okay, my bills every month are 7k. My variable spend is 3k, and I want to be saving $1000 where can I renegotiate some of my bills, like my auto insurance, get a new cell phone plan, things like that. What things can I cut out? And then let me look at my variable saving in more detail and figure out. Is there things there that I can cut? And then from there, once you have a good number that you like, maybe it’s your, you want to be transferring $2,000 a month to variable spending. You don’t have to track it line by line. I have $500 for groceries. I have $200 for eating out. You can just spend the money throughout the week or the month and monitor it to see kind of what you have left. So maybe you don’t want to transfer all $2,000 at the beginning of the month. Maybe you do 500 a week and you kind of keep an eye on how you’re spending. That can be a big help to help you get clarity on your spending without having to sit there and track every penny. The other important thing to try to do is to smooth out your expenses. So, a lot of times people will start a budget, they’ll feel great. And, you know, a month into it, they get their insurance bill and their budgets out the window and they think, well, okay, next month is going to be better. That was one curveball I wasn’t expecting, but next month you get your kids’ camp bill and it’s the same thing. So, what you ideally want to do is figure out what your large expenses are throughout the year and save towards those each month. Now you may say, I need $3,000 a month, and you may not have $3,000 a month extra right now to put towards those future expenses and start with $300, $100, whatever it is, you want to start to create that habit. And over time, you’re going to make more money. So, you’re going to have more money to contribute. You’re going to earn interest on it, and you’re going to find ways to save because once you get into these mindsets, it’s Much easier to start to find ways to save and to have that desire to save and spend your money a little bit different.

Shana Siegel: Great. So, let’s talk about debt. What happens when an individual has a-lot of debt? What are some of the best things they can do to help?

Michelle Feeley: Yeah. So again, you need to assess the situation. So first you need to figure out where do you have, what are all your debts, where all your credit card debt, your student loan, your car loan and a great place to get all that information is by running your credit report. You can run your credit report for free at a no credit report dot com. Be sure you’re going to the right site because you have to put in your social security number, which is sensitive information. But when you’re there used to be able to run it once a year, you can actually run it right now every week. That’s crazy, no one needs to run it every week, but know that you can kind of run it whenever you want to. So, you run the report, you’re going to see what all your balances are on each account you have. There’s three different agencies that do the reporting. I think it was TransUnion that looked the best online that clearly showed you total debt for each account and your minimum payment. Any remaining information that you need, such as your interest rate, would be on the statements from each lender or you can log on to each lender site and get that information. Once you’ve accumulated all that information, you can go to a free site like undeadit.com, which is a website, or you can go to Vertex 42, which has Excel and Google Sheets that are debt calculators, and you plug this information into these spreadsheets. So, your debt balance on each account, your interest rate, your typical payment, your minimum payment, and it will calculate for you, um, one, how long it’s going to take to pay off all the debt, and two, it will show you, your total interest if you just continue to make the minimum payments. That interest number is staggering and Whenever I show it to people, it really motivates them to take action to start to pay down debt. It’s just unbelievable how big that number can be. If you’re just paying your minimum payments, there’s two standard techniques that people like to use to pay down debt. One is the snowball, where you take your smallest balance and pay that first to get it out of the way, so you have like, less accounts to look at. Or the avalanche, where you look at your highest debt, or your, sorry, your most expensive debt, which would be the one with the highest credit card rate, or, you know, interest rate if it’s a student loan or a car loan, and you pay that down first. A lot of times, it doesn’t matter which scenario you use, you’re going to get almost the same results. And in that case, I like the snowball because you get some quick wins and start to feel good and there’s less clutter to look at. But either way, the nice thing about both of these free sites that I recommended is you can look at both methods and see which one is going to be better for you. So, there’s a ton of flexibility. And also, the other thing I meant to mention about these sites is what’s nice is you can. If you’re now paying $150 a month towards your credit card, that’s your minimum and you know, you have an extra $150 you can throw at it. You can put those in those numbers into the, these free tools and they’ll show you how much more quickly you can pay down all your debt and also how much money you’re going to save in interest. So, you can play around with different numbers. So now that you’re motivated to try to tackle your debt, you have to think about You know where you can get this extra income. So, there’s lots of ways you can do that. Can you work overtime? Can you do a side hustle like walking your neighbor’s dogs, house sitting? You know, there’s always like things like Uber Eats and things like that. Can you do seasonal work, especially at this time of year? It’s a great opportunity to do that. And just can you sell stuff in your house? Can you have a garage sale? Can you list up on a garage sale? Facebook marketplace and just find money to throw at this, that, and it’s just going to make an amazing impact.The sooner you can throw money at it, even if it’s a little here and there, the sooner you’re going to have great results.

Shana Siegel: Yeah. And some of those things you just mentioned, they would also be really good for seniors who find themselves kind of on a fixed income and feel like their budget is too tight. That some of those things that you mentioned could bring a little extra resources to them.

Michelle Feeley: And I will say like as a mom, I, a lot of times I see posts that where people who are looking for people to take their kids in early in the morning, like mom has to be out the door for work by seven, school doesn’t start till nine, same thing at pickup. That is a great way that seniors could help.

Shana Siegel: Wonderful. We work with a lot of families who have individuals with developmental disabilities who maybe just need a little bit more support in terms of thinking about money and budgets. Could you share maybe one tip for parents of Children with special needs to be able to help them kind of grow their monetary intelligence.

Michelle Feeley: Yeah, that’s a great point. So, one of the things that I like to do with my own son is talk about the tradeoffs of what we can do with our money. So, I think that’s something that you can talk to people like at any age about will be in a store and he Always, always any can go into the store without seeing something they want to buy. So, I’ll say to him, okay, yes, do you want that $10 item, which you absolutely have money in your piggy bank to buy? Or do you want to save that for baseball gear you’ve been talking about? Which is 50. And in the beginning, when we had these conversations, he would still want to pay the 10. But now nine out of 10 times, he’ll say, yeah, I don’t want to, or he’ll like, look at three or four things in the store. And then say, you know, you know what, we’ll come back another day. Or I tell him kind of delayed gratification, you know, Okay. I know you really, really think you want those baseball cards. If you still want them in two weeks, come back to me and we will go back to the store. And he never comes back to me and says that he wants them. Does that answer your question?

Shana Siegel: Yeah, I think that’s really, that’s a great tip. How about yourself? What are things that you like to spend money on?

Michelle Feeley: Yes, so there is this, uh, Misconception. I think that if you watch your money, it means you’re potentially, you know, depriving yourself and not enjoying life. And, that’s definitely not the case again. I look at it as a way to see where you are able to spend your money. So, one of the things that my dad instilled in us is he always prioritize having experiences over, buying materialistic things. So, I am a big believer in spending on vacation experiences like concerts and sports. I also like to spend money in ways that will allow me to have more free time to spend with my family. I’m a big believer in the concept that I had heard from somebody else years ago, where, you know, you pay others to do things that you’re not good at so that that brings you up to do the things you are good at. So right now, for example, we’re having our house painted. I could save money and do it myself, but it’s not my skill. It’s not my interest. I’d much rather be spending my time helping other people with their money than. doing that. So those are the kinds of things I like to spend my money. Also, things that I know will give me long term value that I’ll like use forever and ever, even if it’s a sentimental value type of spend.

Shana Siegel: Makes sense. A lot of times as people age, their children or other people close to them begin to take over some of their financial management. I see that with my practice a lot. Are there steps that you can suggest for setting up your financial affairs to make it easier for a loved one to step in?

Michelle Feeley: Yes, definitely. So one thing you can do if you want to be aware of, if you’re not like, yet focused on a budget, you just want to be aware of what assets they have and kind of keep an eye on things. A lot of the websites will allow you to add other accounts. So, for example, I know at Vanguard and I think at Fidelity City Bank, and I think most places do this, you have your accounts with them, but you can also link in your accounts from other institutions. So that’s a way that, you can kind of someone could have access to like their parent or loved ones financial situation kind of all in one spot. And then if you couple that with something like a password manager, you would have access to their passwords and a password manager is like last pass and you could both have access to that and you would always know. How to log into that site on behalf of your parents. Another tool you could consider is a Monarch money. That’s about 15 a month. You can link all your credit cards there as well as all your bank account or your bank account, savings account, retirement accounts. And what’s nice about that is it will give you all your balances as well as the day-to-day spending. If someone needed to keep an eye on. How spending was going. And then if you wanted to actually create a budget, um, the website I mentioned earlier, Vertex 42 has tons of free templates that you can download into Excel or in Google Sheets to create budgets, weekly, monthly, yearly, all kinds of budgets are there. And if you use something like Google Sheets, it’s very easy to share. Both you and the parent, your parent can be in Google Sheets. Does that answer that question?

Shana Siegel: Yeah, I think, I mean, I think the biggest piece, which you shared is sharing information, right? Yeah, like, knowing your information, gathering it and, you know, somebody could certainly work with somebody like you to do that and then being able to share it on a long-term basis. Because I find so many times. Children come in and they have no idea where the assets are, you know, and they’re trying to spend hours and hours just locating, making sure that they have everything.

Michelle Feeley: Yeah, so, two other good sources would be a tax return would give you a good clue to where everything is. If you’re worried about tracking down all the assets. And then again, if you go to the credit card or the credit reporting site, you would also have a good picture of all their debts in case you need that information. And I sorry, I didn’t mean to. I didn’t mean to mention that when I work with clients, I do have an intake form where it asks for income expenses, all your ass heads, and I’d be happy to share that if any listeners want to reach out. I’d be happy to share that for free with people as a starting point to kind of know how to take an inventory.

Shana Siegel: Great. So, the other thing I see in my practice, unfortunately, very often is older adults falling prey to financial scams and exploitation. Do you have any advice for protecting yourself or a family member from these types of things?

Michelle Feeley: Yes, definitely. One thing, you know, knowing that this group could potentially have different people coming into the home to help in different ways to care for the family member is, you know, don’t leave your sensitive documents, your bank statements, your credit card statements, any of that stuff out. In the open, you know, it’s very easy to just find a place. Even if you have a desk, just put it in a box and put that away. And, you know, well, potentially just lock it up. So, it’s not out in easy access, especially if you’re not necessarily in the room. And then, as I teach my son in school, be a good digital citizen. It’s really important to have strong passwords and unique passwords, especially for your critical sites. I know it gets overwhelming with passwords. So, you know, if it’s a nonsense site, don’t it doesn’t matter. But for all your, you know, savings accounts, retirement accounts, investment accounts, you have to have really good passwords. And like I mentioned before, password tools like LastPass are great because number one, they let you keep all your passwords in there. You just need one password to get into LastPass and you can share that with other family members you trust and they always have access to all your information. Another thing would be periodically change your passwords. Consider something like critical institutions setting up multi-factor authentication, which in English basically means that you log on in two ways. So maybe you log on with your user ID and password, but they also send you a text to confirm it’s you. I do stuff like that with my retirement accounts and things like that because they are so sensitive and I don’t want to worry that someone gets my phone and can just get into my accounts or like my password’s compromised and they can get in. Don’t use, Public wifi. So, if you’re in a coffee shop or in your hotel, you know, sometimes when we travel, our cell phone reception, isn’t as good in a hotel, but I still don’t go on wifi. And if you have to go on wifi, consider getting a tool called VPN virtual private network. They’re fairly inexpensive, easy to download. And that way you would be protected. If you’re going on wifi, never email documents with your social security number or an account bank account numbers, anything sensitive. Don’t open links from anyone. And you don’t know. If you do receive a link from your credit card or your bank, call them and ask them if they sent it because most likely they are not sending you something like that. The next thing is be aware of who you’re dealing with. Don’t open emails and texts from people you do not know. Don’t answer calls from people you don’t know. Know that banks and credit card companies will never call you and your church will never call you and ask for things like your account numbers, social security numbers, your church isn’t gonna call you or press you for money, like just be very conscious who you’re dealing with. if anyone is asking you for your social security number, just pause and ask them why do you need it and if they insist, they need it, you might wanna run it by somebody else confirm that actually makes sense because it’s that anyone is asking for your full social security numbers. Um, know that fraudsters with urgency, like you must read this now, you must do this now, time is of the essence, that’s a huge thing they do to put pressure on you and keep you from thinking straight. And their emails and messages usually have typos. So that’s a big clue. You know, I just got a weird email from a relative the other day, and I just knew from that subject that like, she doesn’t talk like that, you know. So, if they’re talking in a way that that person that you know, doesn’t talk, and that’s a huge red flag. And the last thing I would say is do your due diligence. Run your free credit report periodically or run a behalf on behalf of your loved one periodically and see if there’s any accounts on there. You don’t recognize that’s a huge way to keep an eye on, you know, any identity theft that’s been compromised or anything like that. Scan your account statements for unusual transactions and scan them on behalf of a loved Super important. You don’t have to look at every single line. Just read very quickly through it to see if there’s anything looks unusual and then as a way to kind of cut down on needing to do that, check with your banks and credit card companies and other financial institutions to see what kind of fraud alerts they have available. I know some of my credit card companies will send me a text message or saying, Hey, this is like an unusual transaction. Did you authorize this? And that kind of thing is helpful and cuts down on like the manual work you need to do.

Shana Siegel: Yeah, I had that last one. I had one of my clients set up so that there would get So that the family member would get an alert anytime there was a transaction over a certain amount. And that was great. You know, it really kind of cut down on that thing. One of the other things we’ll often say is, you know, have a checking account, which is just for bill pay. And so you just keep enough money in there to pay the bills. So that then that’s separate from any larger amount of money. So, if somebody gets access just to that account, at least they don’t get the keys to, you know, the whole castle.

Michelle Feeley: Yes. That’s a great tip too. Yeah.

Shana Siegel: Okay. Anything else you want to share with us?

Michelle Feeley: No, I guess that the one other thing I was going to mention is just, you know, if I could get to everyone and, and just make them aware of the effects of compounding interest. You know, there’s a quote that was attributed to Albert Einstein that compound interest is the eighth wonder of the world. He who understands it, earns it, who you doesn’t pay it. And the effect it can have on your life, whether you are saving and earning that compounding interest over time versus. Paying that feeling the effects of compounding interest on the expense you’re paying on your credit card. So, if you have 1000 dollars in a certificate of deposit or an online savings account at 4%, which is a reasonable rate at the day, we’re recording this in 20 years, that will double due to the effects of compounding interest. On the flip side, if you have a credit card with a thousand dollars balance and you have a 20% interest rate, which is common for credit cards these days, a 2% minimum payment, which is also common for credit cards, and you pay that $20 minimum in eight years, you will owe a thousand dollars of interest on that original credit card balance. So, if you went out and did a, like a shopping spree and bought a thousand dollars worth of clothes or new electronic gadgets that really cost you $2,000, and that $1, 000 could have been invested or in a savings account growing for you. So, I think that those are small numbers and conservative interest rates and the power of that as the numbers grow can be extraordinary.

Shana Siegel: That’s really something to think about. Well, thank you, Michelle. I really appreciate you spending this time with us. This has been Norris McLaughlin’s Aging Answers, a limited podcast series discussing key topics revolving around elder law and long-term care planning. I want to thank you, the listener, for being a part of our conversation. And thank you, Michelle, for talking with us. Be sure to tune in next time for a brand-new episode. And if you’d like to learn more about our work, please email me at aginganswers@norris-law.com.