[00:00:00] Speaker A: Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation, or needs and may not be suitable for all investors.
[00:00:09] Speaker B: It is not intended to predict the.
[00:00:11] Speaker A: Performance of any specific investment and is not a solicitation or recommendation of any investment strategy. Welcome to all Things Financial, the show that helps upgrade your financial literacy. Trey Peterson and Yellow Seikoots are retirement planning specialists here to provide a unique and conservative approach to managing your money. Now here are your hosts, Trey Peterson and Yellow Se Koots. Well, hello, everyone. My name is Ryan Moffat with all things financial. With me is yellow say cuts. Today I'm filling in for Trey Peterson. And we've got a number of things we're going to dive into today on our podcast, which, of course, you can find our
[email protected]. all things Financial. Atfpodcast.com dot. But we've got a number of things we're going to discuss. We've got bad habits that can cost you thousands each month. Thousands, yellow say each month we're going to talk about inflation, and we're going to talk about how inflation is going to impact your retirement. And we've got a list of different things that we're going to focus on as far as what Americans like to spend on what we don't like to spend on, which, of course, ties right into inflation. We'll talk about what that means as far as Social Security goes. We'll talk a little bit about budgeting, et cetera. A number of things that we're going to dive into today. So yellow say we've got a number of things to dive into. Why don't you start us off, though, with our quote of the week?
[00:01:39] Speaker B: And now for some financial wisdom. It's time for the quote of the week.
Okay, so this week the quote is from Oren Woodward, and Orin has to say this. You can have a master's degree in making money, but you will still wind up broke if you have a PhD in spending it. And we're gonna talk, I talk a lot about that because not only is that a concern on the household level, but just as a nation, our government spending, what happens when you spend more than what you bring in? And I think it's just, you know, it's very, it's, it's, it sounds like a very basic thing, but something that we encounter folks who struggle with that all the time. And it seems like a pretty easy principle to keep, but not so easy in practice.
[00:02:28] Speaker A: Not so easy in practice. Actually, I will say, if that quote resonated with you, if you're listening to this and you thought, boy, that sounds like me, we'd love to help think, map things out for you. We'd love to go through our retirement analysis, whether that's a simple comparison and say, hey, how do I do a budget for retirement? Or we're looking at all the pieces and diving in and saying, what do my investments look like? What can I rely on in retirement as it relates to inflation, as it relates to my own spending, my PhD in spending? We'd be happy to dive into those things for you. You can reach us anytime. Our phone number is 612-286-0580 or email ryan.com trealth.com t r e ydeene or yellise welk.com y e l I s e y. We're happy to go through those things. That's what we do on a daily basis as we're constantly meeting with clients, constantly meeting with people and trying to figure out, hey, how does retirement look for me? What are my goals? Am I going to be able to accomplish my goals, etcetera?
But why don't we dive in? Let's start with the five bad habits that cost you thousands each month. I was a little shocked by this. That was, uh, bad habit number one. And again, if this resonates with you, uh, uh, take a, take a listen here. But bad habit number one, not budgeting. So a recent study found that 27% of people just plain don't have a budget. Yellow say, do you budget?
[00:04:02] Speaker B: I absolutely budget. I think I budget to an alarming degree. I think by every expense from the last, I don't know, probably ten years.
Yeah.
No one is comfortable by the amount of budgeting I do.
[00:04:16] Speaker A: Why doesn't that surprise me? Alice, my guess is that Trey would also not be surprised by that remark.
[00:04:22] Speaker B: Well, what you're saying, and it's actually, you obviously haven't listened to last week's podcast when we covered budgeting. And there's a Harris poll that we discussed that showed that 74% of Americans actually, so that they had a monthly budget. But one thing that I wanted to point out, the stat that I thought was actually more telling, it was like 80 some percent of them fail to stay within their budget.
[00:04:46] Speaker A: Right.
[00:04:47] Speaker B: I made the point, like, whats the point?
[00:04:49] Speaker A: Yeah, sure. For sure. Well, so the interesting thing and what I want to encourage everyone listening is that there are a lot of different ways to budget. So whether youre the Excel spreadsheet person, whether you're the person that downloads the app on your phone and connect it to your bank so you know where every penny is going. There's a lot of different ways to budget, and I just want to briefly touch on a couple of them. But there are some of the methods that you've heard about. Maybe the envelope, like the cash stuffing budget, that, hey, once my money comes in, I have envelope for every area, and cash goes in. There's the zero based, or the net zero budgeting, which I think we oftentimes talk about here, um, especially when going through retirement plans. Is that really every dollar coming in should have a purpose, right? I shouldn't have this, uh, ambiguous bucket of. Of money that you're not sure where it's going or what's happening with it, but the zero based is saying that every dollar has a specific purpose, and if that purpose is discretionary, great. If that purpose is financial goals, that's great. If that purpose is going directly to savings, to not be touched for a period of time, that's great, too. But those are still purposes, right?
The pay yourself first or the 50 30 20, maybe that's you where, hey, I'm just going to say, what's my income? And I'm going to break it into my individual buckets. 50% goes to all of my normal bills, my fixed expenses. 30% goes to discretionary. 20% goes to financial goals. And of course, those percentages can vary, right. You'll hear one person that it's a 50 30 20. Somebody else says, you know, maybe I want less discretionary and more towards goals. Other people will say, well, your goals, if your goal is a new boat, that's discretionary anyway. Hey, I don't have a problem with that. You know, the point is to know where the funds are going, right?
But the fun one that I think is worth talking about is the no budget budget. And that's really kind of the, hey, what comes in goes out, right? So I know that I save for my. In my 401k, but otherwise, what kind of comes in, goes out. And I would say a number of times in discussion, this is what we find, is that somebody says, this is my net income. I know that my fixed expenses are around whether it's four grand or eight grand or whatever the number is. But then they don't really pay any attention to that discretionary bucket. So ultimately, the discretionary becomes a undefined and unregulated bucket of money, which, of course, drives your expenses up. So, yellow say you track every penny. Would you think that you fall more into the 50, 30, 20? Or are you more zero based or categorically speaking, what do you fall into?
[00:07:31] Speaker B: So for me, it's more of a combination of the two. I do track everything, but that's not what I use as a guide. So I'm a little bit closer to what Trey talked about last week, where he's more of a, more of a margins based budget, where we set aside a certain percentage that goes towards potentially investments or a certain amount that goes towards eating out or travel and vacation, a variety of categories that we have. And I think the majority for most people, if you're barely making it, if what comes in goes out every single month, it's really hard to allocate a certain percentage towards retirement savings. It's really hard to make sure that your emergency fund is as high as it needs to be. And we've talked about this a lot where you should have at least three months in savings.
Actually, if you're married and you're the only one who's working, you should have six months of expenses in your savings account having an emergency fund. And I think that unless, if you don't do it automatically, what we find is it's very difficult to do. Most people just don't have. So if they dont have a certain amount thats being set aside automatically, whether youre doing it by a dollar amount or a margin, a certain percentage of your income, it just doesnt end up happening. But thats how my wife and I do it. We have a certain percentage set aside for each category, and we try to stay within that percentage with the majority or as much as we can going towards retirement savings and investments.
[00:09:03] Speaker A: Casey yeah, I think I would say thats really similar for in my household as well. And you have to identify what the needs are. And, of course, we've got four kids. So I feel like as the kids get older, the percentage it's allotted towards kids activities and sports and camp and you name it, that bucket seems to be growing. Let's say, I don't know if you've reached that yet, but for us, that bucket seems to be growing quite a bit.
But what I would tell everybody and encourage you is just simply that, hey, if you've not gone through any type of budgeting exercise in any capacity, there's a number of different ways to do it. And the first time you do it may not be the most fun in the world, but it's absolutely well worth doing because ultimately, the no budget plan or the not having a budget, you're going to end up having a lot of your dollars, your hard earned dollars that don't have a purpose and end up eating away at your goals, your retirement plan, all of those, all those things. So definitely dive into the budgeting piece of not to, uh, not to focus on that one too much since we covered a lot in the, the last podcast. But, uh, financial bad habit number two is overusing credit cards. I thought credit cards were free money, Elsa. Are they not free money?
[00:10:18] Speaker B: Well, I mean, it just depends. Some people, uh, definitely use it that way because, well, the reason I say that is because, um, I can't remember the exact number, but I know it's up, um, the number of people who carry their balance forward who don't pay off their credit cards. And, you know, we see this all the time. We run into folks like, hey, do you realize your credit card company is probably charging you north of 20%? Like, that's the interest rate for carrying that balance forward. Like, imagine if, like we, I've mentioned this before, imagine if there was an investment that paid you 20%. Like they're making really good money and they're making it on YouTube and you making a very poor decision with your finances. And unfortunately, just looking at some of the national statistics, the national averages, credit card debt is at an all time high. And the more troubling number is our delinquency rates. Those are also at an all time high.
That's a terrible recipe. I know that a lot of what we do is retirement planning, but especially to our younger listeners, that's not how you plan a budget, that's not how you pay for your expenses.
Very expensive way to do it.
[00:11:32] Speaker A: It is. And the national average credit card interest rate right now, and it varies, of course, but the national average rate is 22%. So I like your example of, you know, think of an investment that way, right? Because we would all love to get 2020 2% on investment, but this is a reverse investment for you, meaning that you're not getting it, you're paying it, and it's a ton of money going out each month. When you're paying for your bills like that, theres a number of different people that would look at it and say, dont use credit cards at all or make sure you pay it off every month. I think the most important thing, like yellow say that you said was just you got to focus on not paying that 20% every month on it. Whether your balance is $500 or $5,000, its money lost immediately. Wouldnt you agree?
[00:12:20] Speaker B: Yeah, absolutely. Think of it this way, you know, when you go to the bank and you get a, lets say you get a cd, youre giving the bank your money in return. Theyre paying you up maybe 5% today. Or if you get like a money market account, theyre paying you a certain percentage. Well, the credit card company allows you to use their money, which is what youre doing. You have to pay them 20%. If you keep that balance going like thats, thats an incredibly lucrative proposition for the credit card company. And I think that a big part of that is, we'll talk about this a little bit later. But inflation, inflation is driving a lot of that, making sure that you can keep up with the expenses, the things that you need to pay for. Looking at some of how discretionary spending has changed because things are just more costly, inflation is a very real thing that a lot of us have to contend with. Unfortunately, the solution that many people have found is putting a lot of things on their credit card.
And I think that, you know, I think household debt, the report from last year showed that I think we're up like 4.4% year over year. So household consumer debt is at like $17 trillion, which is a staggering number. You know, in terms of your household debt, it should be about 20% of your net income. That's what your debt should be. As far as carrying it forward. You know, if there's certain things that you have to pay for, your, those expenses should represent about 20% of your net income. That's what I meant to say.
[00:13:53] Speaker A: Yeah, there is a, I don't, I don't watch Saturday Night Live much anymore. I used to, but there was a skit here a while back and I had famous actor Steve Martin in it. And the whole thing was about credit card debts and spending money when you don't have it. It was like based like a commercial. And then Steve Martin's character is like, wait a minute. So what you're telling me is that if I don't have money, I shouldn't.
This giant question, it was actually pretty comical. But it is worth considering that even in jest, like, okay, hold on a second. If the us consumer debt is 17 trillion, does that make sense? Does it make sense for me to contribute to that for my own finances? Right.
[00:14:36] Speaker B: Yeah.
[00:14:37] Speaker A: All right. Bad habit number three. And I'm actually not very excited to talk about this one yet.
[00:14:42] Speaker B: No, I kind of resent this one, too, because I don't, I enjoy it too much. It's one of those things where I've just kind of decided, you know that I, it's, it's, it's not good for me, for my budget. It's not good for my health sometimes, but I'm going to continue doing it.
Something I'm not willing to live with.
[00:14:59] Speaker A: Yeah. If you haven't figured out, we're talking about dining out, so the number of reasons to dine out, right? Maybe it's the atmosphere. Maybe it is celebration of something. Date night, whatever it may be. Or maybe just, you know what? I don't feel like doing the dishes. I don't feel like planning a meal. I know in our household, usually, if it's like the last minute dining out type stuff, we even, even carry out. Usually the last minute stuff is just simply because we didn't plan for the day. We didn't come up with a plan. We didn't decide what we were going to have for dinner. We were either busy at work or it's the weekend, and we did a lot of yard work, or we're out with friends. And we thought, I, you know, it's getting kind of late. Why don't we just order something?
[00:15:42] Speaker B: Well, I think all of us know that, like, you know, cooking at home is probably going to be a lot healthier. It certainly going to cost you a lot less. But, you know, there's something about eating out, and I realize that, you know, not everybody goes to a restaurant. Some people like to order out, you know, or, I'm sorry to have takeout delivered to your home. And, you know, but it's, I don't know. It's just that there's a convenience there. You know, when you're eating out, like, it's not just, that's just the food you're eating. It's the atmosphere. Sometimes it's the social aspect, too, where you just enjoy doing it with friends. And all those memorable conversations and moments that you have, those are some of my highlights, some of my favorite moments that I've had. There's a lot of things that are helping me make a decision that I know isn't necessarily in my budget's best interest.
[00:16:31] Speaker A: Seems like the restaurants do a really good job of making that the assumed date night for my wife and I. Like, what do you want to do tonight? Well, I'm sure we'll go get dinner somewhere. It's like we're not very creative, evidently.
[00:16:43] Speaker B: Well, but also Minneapolis, there's always so many new restaurants that are coming out, and occasionally my wife will send me a link to one that's they're having their grand opening and like, I don't know. I never used to be much of a foodie, but my wife has really just kind of.
I feel like she's brought that out in me a little bit more because now I'm the one who's encouraging us to go out to eat all the time. Like you said, whatever the occasion is, like, it's always going to be accompanied by a nice meal somewhere.
[00:17:08] Speaker A: Right? Exactly.
Number four, bad habit, paying for unused services. So I think we've all probably got at least one unused service. And I think it's always worth looking, whether it's once a quarter, once every six months, once a year, and just pausing and saying, is this something I'm actually paying for? I actually saw recently. Because everything is subscription based now, right? You can have back to the dining out thing. You can actually have these meal packages and things so you don't have to cook dinner, but it's still dinner at home you can subscribe to that. You can subscribe to. I saw pet services. Correct.
So cleaning up your yard, you can have a subscription for someone to come out and clean up your dog's.
[00:17:57] Speaker B: You know, I was actually waiting. Is he going to say that live on the podcast?
[00:18:04] Speaker A: I didn't know what I was going to say there.
But what unused subscriptions? What unused services do you have? Maybe it's the. The car wash. Maybe it's the.
[00:18:14] Speaker B: I don't know if that was rhetorical, because I actually do have what I want to share, and I'm sure that this resonates with a lot of people. My planet fitness membership. Ryan, do you have a plan for this membership?
[00:18:24] Speaker A: I actually do. Oh, you do, too?
[00:18:26] Speaker B: Okay. How often do you go?
[00:18:28] Speaker A: And it's actually a little embarrassing because that's not actually the gym that I go to on a daily basis.
[00:18:34] Speaker B: So I think I've probably had mine for, I don't know, three, four years. And it's. I've probably been there three, four times over the last three, four years. Like, I just absolutely don't use it. But it's so cheap. Like, I kind of just. I mean, it's obviously not a good decision, but I've just kind of kept it.
[00:18:51] Speaker A: Yeah. You know, I think the funny thing is with planet fitness is that I'll go from time to time and it is nice just because they're open all the time.
[00:19:01] Speaker B: Yeah. And they're everywhere.
[00:19:02] Speaker A: Yeah. And I mean, the hydro massage bed thing, that's always nice after a workout tube. I mean, for crying out loud. Yeah, I agree with you. I've probably used it twice this year. Yeah, not, not a great use, but financial bad habit number five is just simply not investing. So when you come to your financial goals, when you go through your budgeting process in any capacity, and then you dive in and you say, hey, how much do we actually want to contribute to our financial goals? Maybe that's a retirement goal. Maybe it's not so much a number. Meaning that, hey, I just know in retirement, I want to be able to travel. I just know that in retirement, my kids are all over the country now, and I want to be able to get to them whenever I want. You know, grandma wants to get to the kids games, or grandpa wants to be able to help kids out with their house, whatever the case is, you know, so maybe it's not even a specific number in mind. Maybe it's just more of a lifestyle. The activity and the actions you want those things you still need to be able to support financially. Right. And I mean, the. The fact is that, yes, you can save, but the money in the coffee can under the mattress. Actually, not under the mattress. I'd be really uncomfortable. But, you know, the money that you just stuff in the house somewhere isn't earning you anything. It's not growing at that point in time.
I mean, so when you look at it, there's, what, 28% of people have nothing saved for retirement, and 39% aren't contributing to a retirement fund. I think that's pretty staggering.
[00:20:29] Speaker B: It is. And I think that it kind of speaks to the priorities that people have or don't have.
You know, there's a lot of things that. There's a lot of things that are fighting for your dollars, right?
[00:20:38] Speaker A: That's right.
[00:20:40] Speaker B: Maybe it's your mortgage.
Maybe you want to pay extra on that. Maybe you're really not good with budgeting, and you spend a lot on going out to eat or vacation or travel or whatever it is for you, but you have to make a decision, what's the most important. And I think unless you've had a conversation with somebody who can help guide you on these things, do you know, is it more beneficial for you to make additional payments on your mortgage, or should some of that additional money that you have, should that go towards your deferred compensation plan at work? Should that go towards your emergency fund? How much should you have in your emergency fund before you consider making those additional payments? And I think that sometimes when you don't have these conversations, you end up doing something that you think is good. Right. It's good to make an additional mortgage payment, but not to the exclusion of the retirement savings payment. Right. So making sure that you have your priorities in order. And on top of that, like not investing or just keeping your money in a savings or a checking account, which is paying you very, very little, that can have additional problems, too, right? It's the opportunity cost, the cost that you miss out on. You don't end up getting that rate of return that you could easily have achieved with other cash equivalents. If, let's say, you're not necessarily looking to invest in the market, but just having another cash equivalent or I financial instrument that's similar to that, where it allows you to maintain your liquidity if you need it for your emergency fund and also getting a decent rate of return.
We'll talk about this a little bit later. And actually, on the topic of some good news related to Social Security, I'll let Ryan handle that in a minute. But one of the reasons why Social Security even has a problem, why we're always asking, hey, what is the latest trustees report saying? When is the trust fund going to run out of money? One of the challenges there is, like the average rate of return on the Social Security trust fund has been 1.4%. Now, obviously, there's a lot of issues with Social Security related dissolvency, and the biggest one is the number of people paying in versus the number of people collecting. That's a huge problem. But imagine if it didn't average 1.4%, how much healthier would the fund be? The Social Security ran a surplus for, I think, three decades, and it wasn't until 2021. And I talked about this a few podcasts ago where they finally had to begin dipping into the trust fund. And that's where the whole conversation on depletion is coming from. So Ryan's going to mention some good news on that a little bit later. But making sure that you are saving, making sure that you're actually weighing all the options, not just making a good decision, because on the surface, it seems like a good decision, but comparing it to other places, what would be the best use of my financial resources? What's the highest and best use of the discretionary spending I have that can be used whether to fund my retirement savings or just investments in general, my emergency fund, you know, various expenses that you do have, comparing the interest rates on those things, you know, the same can be said of paying off your debt. You know, many of us, maybe you have student loan debt. Maybe you have, as I mentioned, a mortgage or a vehicle payment or unfortunately, some of us credit card debt, prioritizing the ones with the highest know interest rates when it comes to paying those down, and a variety of other techniques that you can do to help get a handle on that.
[00:23:59] Speaker A: Yeah, absolutely. If so far we've gone through some bad habits and you're questioning, do I have these things under control? Do I know what my plan is? Do I know what my goals are? If you're questioning that, we'd love to talk. We'd love to go through those things with you. Yelsey said it best just a moment ago. Sometimes just simply having a conversation with somebody other than your spouse or the people in your immediate circle is beneficial. An outside perspective sometimes is really helpful in figuring out where you stand in your financial goals. You can reach us out to us anytime at 612-286-0580 Trey Yellowsay or myself, we'd love to have those conversations with you. But yellow say, let's dive into inflation. What's going on there? The last, been happening the last few years?
[00:24:47] Speaker B: Rails favorite topic? Well, one of the items that has been in the news recently is, you know, like Americans that are spending less on fast food, you know, and even like, places like Starbucks, which is taking a hit. And, like, people don't realize that, like, you know, when you, when you go to a place like Starbucks, McDonald's, Pizza Hut, it isn't just the food that they're serving. Like that food has to be delivered there. If the cost of transportation goes up or if they're serving it on, if they're giving you plastic straws or paper napkins, if all those things begin to go up, that's going to affect the cost. I think that as discretionary spending, people are starting to feel that their budget is tightening a little bit because they don't have enough to make all the discretionary purchases that they used to be able to make.
Sometimes things like your cup of coffee in the morning, sometimes that ends up getting cut out. I think that specifically Starbucks has been in the news for that, and they're trying to come up with creative ideas to increase spending to make it more appealing and more affordable. I think McDonald's recently unveiled some type of plan, too, where they're hoping to get to consumers who are more on a budget and having more of a budget friendly proposition for them. But inflation is really the heart of the issue here.
We've spent a lot of time talking about it, but I'm going to go through it one more time because we have a lot of questions on this. People are wondering how is inflation even calculated.
There's a couple of different answers to that. But to summarize briefly, we have the Bureau of Labor Statistics, they have a number of different measures to measure inflation. One of those is CPI U. CPI is the consumer price index. Think of it as just like the basket of goods and services. And the Bureau of Labor Statistics, they track 80,000 different goods and services in our economy. And there's like a monthly, there's a monthly survey. I can't remember exactly what it's called, but basically they say that, hey, this monthly survey that we have called the CPI U for urban consumers, it tracks the spending habits of 94% of the population, the us population. It's an average. So of course, it may not reflect your particular spending habits, but just on average, the 80,000 goods and services, it's a weighted average. So basically they look at that and they say, hey, more people are probably spending money on things like apple juice. I don't know, compared to beet juice. Right, Ryan, I think you'd agree with that, right? I would agree. So apple juice is probably going to be weighted a little bit more heavily than beet juice. And so they survey Americans and basically what they do is every month we receive a report. And the last report, released in April for the month of March, showed that urban consumers, as measured by CPIU, inflation rose by 0.4%. Now, that might not seem like a lot, but you multiply that by twelve. Now, of course, that continues to ebb and flow depending on the month that we're in, but seasonally adjusted, they determine that inflation is at about 3.5% now, 3.5%. Like if you're comparing that to the last couple of years, maybe that sounds like a huge victory, but really, when you consider the objective goal of 2%, that's quite a bit higher than that, you know, and 2%, I feel like, you know, and Ryan, I think you were mentioning some of the stats on inflation historically. Like 2%. Like it almost doesn't even seem achievable. And how often have we been below 2%? Like, that doesn't happen very often. Right.
[00:28:35] Speaker A: Looking at the last hundred years of, I've got the sheet here in front of me looking at the last hundred years of inflation, and it is a very small percentage where we were either at or below 2%. Very small.
[00:28:48] Speaker B: And 2%, they often talk about, hey, 2%, that's how we grease the wheels of the economy. We should at least have 2%. How about getting to 2%? We're never at 2% of course, there's been a lot of conversation on cutting rates lately. The question now is, can the Fed even do it? Inflation is clearly, it's not under control. And most recently, Jerome Powell assured everybody that we wouldn't see any rate increases, that all the conversation and rate increases is unjustified. And I think that, I don't know, I feel like there's a lot going on. We have an election year. The chairman of the Federal Reserve, he is appointed by the president. And I feel like it's understandable why you wouldn't want to make any rate increases. And the market responded in kind, whatever. So just a couple of days ago, when Jerome Powell made his announcement, the market was rough in the month of April. And now we're back.
We've assured Wall street that we're not going to see any rate cuts. And I think that there's an article that I saw in Bloomberg and it said that Jerome Powell is actually the lowest rated Federal Reserve chairman in the last 25 years, in the last quarter century because inflation is continuing to persist. And according to a Gallup poll, high prices continue to irritate us consumers. So its a problem. And some of the things that they cited in the article was that Jerome Powell and a lot of the other central bankers, they were slow to react to soaring inflation. In 2022. When inflation reached levels that we havent seen since the eighties, they were slow to react. And eventually, when they began to hike interest rates, inflation fell. But now, as we look at the target and what the Fed was hoping to deliver, we're nowhere near that. It looks like progress may have stalled entirely. And inflation is every single month when they're releasing the inflation figures for the previous month, it's higher than what we were hoping, higher than what we anticipated. And really the whole point of increasing rates, like we've talked about this many times, the whole reason why the Federal Reserve is trying to increase those rates is to lower inflation. And the way that we do that is by curbing our spending, creating a restrictive environment, making it so people aren't spending money as quickly as they once were. Right. And unfortunately, what we found is our government spending is at an all time high, consumer credit card debt all time high, delinquency rates all time high. So it isn't necessarily creating the restrictive environment that we wanted. Last year, we brought in $4.4 trillion in revenue, but we spent 6.1. And that's our deficit, our $1.7 trillion deficit for the year. This year we're trending for $2 trillion per year. And as a nation in the last 50 years, we've only run a surplus five times. The most recent title was in 2001. In terms of a household budget and running our household budget the way the, the us government runs theirs, that would be a catastrophic template. We wouldn't want to follow that. Unfortunately, the pressure of inflation is getting to all of us. All of us are feeling it, all of us are experiencing it. And unfortunately, some have resorted to carrying larger amounts of credit card debt.
Unfortunately, that's just the scenario that we're in.
[00:32:14] Speaker A: Knowing all of that, just wonderful news.
But knowing that, how does that directly apply to planning retirement? Right? Because, I mean, well, Social Security gets cost of building adjustment. We'll talk about that more in just a moment. But what are the things that we could typically look at to say, hey, knowing that this is, I'll use the phrase, a little bit out of control and not a great plan, what are the things that we can do to help people plan for retirement? Right. The people that are out there listening, saying, gosh, I thought I had a good plan, but will my plan stand the test of time? What are some of the things that they can pay attention to and look at?
[00:32:52] Speaker B: Yeah, well, and a lot of it comes down to, and I say this all the time, knowing what season of life you're in, understanding what your goals and priorities, what they should be, considering all of your sources of income, don't look at everything. Don't look at anything. Like, by itself, you can't isolate Social Security and just make a decision of that just because you've retired. And that's kind of, that's going to be our next topic here. But making sure you're coordinating all of your sources of income, making sure that you weighed all of your options. Right. There's no one glove fits all. There's more than one way to do something. And sometimes the biggest thing is just understanding how everything works and maintaining a degree of flexibility because life doesn't always cooperate.
You know, when we talk about Social Security, Social Security has some problems.
Social Security, as we all know, in periods of high inflation, Social Security is adjusted by, not CPIU for urban consumers, but CPIW for wage earners and clerical workers. And that adjustment hasn't always kept up with inflation. Every October it's announced by the following January, your benefits are adjusted once you reach the age of 62. But there's many years where that number hasn't kept up, and that's a problem.
As I mentioned, Social Security ran a surplus for three decades. Because they actually collected more in payroll taxes than it paid in benefits. But that's not the case anymore. And the trustees report, Ryan, you just mentioned that to me. The old number was Social Security expected the trust fund to be depleted by 2033. And I think that's improved, right?
[00:34:29] Speaker A: It has improved, actually. Really interesting. Just announced yesterday, as a matter of fact. So it used to be 2033. They're now saying that. Because just to recap that, they're saying, hey, 2033, Social Security was only funded at 76%, right? So we were falling short in 20 to 33 is what it was projected at. As of yesterday, just announced it's actually pushed back to 2035. So actually it gained two years, which is a positive thing. And instead of only being fully funded or only being funded at 76% in 2035, it's funded at 83%. So the amount that it's funded at is a larger amount than what it was projected at before, and it's actually a little bit further out. So we would actually look at this and say, hey, this is a positive thing. I was just having this conversation after the announcement with someone yesterday, and they're kind of grumbling about it a little bit. And I said, I agree. I would grumble, too. But keep in mind, this is an improvement from what they've been saying for many years at this point in time.
So we'll take the win where we can get it right. I mean, we still need to come up with a solid plan, because this will continue to change. And as we approach now 2035, we need to continue to make sure that, hey, if I do get cut by 17% out of my Social Security, what is my plan? To continue to supplement and make sure that the things are good and I can meet my goals and I can have the funds I need to for the rest of my life.
[00:35:57] Speaker B: Yeah. And not to be too critical, but I am curious what contributed to that, how they determine those numbers. As I take the time to read through the report, I remain optimistic. But at the same time, we all know that Social Security has very real challenges, and it's going to affect a lot of people in retirement. And 2033 or 2035 may seem like it's a long ways away, but in reality, time goes by quickly, and we want to make sure that we're not just making short sighted decisions for the next year or two, but as I mentioned, coordinating everything, anticipating those RMD's, making sure that not only have we managed them, but we've incorporated them into our entire income plan. Looking at Social Security, looking at our pension, potentially, if we're working part time in retirement, how does that additional income, how does that get factored in? How does that affect your Social Security?
So these are all questions that we help to answer. We put together plans for people daily, right. People who, in some cases, people who think that they have a rock solid plan. But you add in a few variables like inflation, right. The one thing weve been talking about, and people who have fixed or guaranteed sources like pensions, that maybe dont have a cost of living adjustment, that might seem like a lot of money today. But what if inflation continues at a higher pace than what we anticipated? What does that pension do for you ten years from now? It might seem like it's a lot of dollars today. But when you factor in the cost of inflation and how those goods and services that you used to purchase, that's a problem. And that's something that we need to account for and make sure that we're putting together solutions and strategies that help us deal with things that maybe aren't. So obviously, inflation is an obvious one, right? It's top of mind for everyone. Everyone's talking about it. But there are other things, too that you need to consider, and that's what we help people do daily.
[00:37:51] Speaker A: Absolutely. Well, it's worth noting that if you're not factoring in the cost of inflation into a retirement plan, you're missing an extremely large component to it. And yellows, they use the term coordinating. And I think that's probably the best term that you can because its not just saying this one item. Im making the decision on Social Security. Im not just making a decision on what investments Im in. You really do need to take into consideration every single one of those pieces. Social Security is a great example. When you look at inflation, the Social Security cost of living adjustment that people receive each year is designed to track and follow inflation, but it never is the same number as inflation and rarely is it more than inflation. Its usually slightly less. So a long term average cost of living adjustment on Social Security is 2.75 to 2.8%. But a long term average of inflation is over 3%, more like three and a quarter. And those numbers are plus or minus a couple decimals there. But I share that to say that inflation, historically speaking, on average, is more than what your Social Security cost of living adjustment is. So keep in mind that not only will your Social Security not keep up with inflation, but you also need to make sure that your investments are there to keep up with inflation and everything else. So we're happy to dive into those things. You can get a hold of us again. You can email us. First name? It's trey. Trey at g wealth.com. dot the letter g in the word wealth.com, ryan or yellowsayealth.com. and our phone number is 6122-860-5800 we'd be happy to dive into those things with you if you haven't gone through a retirement plan, if you haven't coordinated all the pieces or just double checking to make sure all of your planning pieces are coordinated the way you think they are, we're happy to confirm as well.
Study shows financial literacy is lacking in the US. That's shocking.
What do you think? What's your take on that, Jeff?
[00:39:54] Speaker B: Yeah, I just think we're just, you know, there's so many things that you can spend your time doing, and, you know, if you're not in this industry, you're busy doing whatever it is you're doing. Right? Most of us are Puritan. You know, I'm dropping the kids off in baseball practice, soccer practice. My son plays the piano. My daughter plays the flute.
We have a million things that are always fighting for our attention, fighting for our time. And, you know, financial literacy doesn't seem like it's very high on anyone's list, especially with, with some of the reports that we're seeing, but it needs to be. It's one of those things that it doesn't matter if you're an engineer, if you're a nurse, if you're a stay at home mom. Like, it's just one of those things where you just can't afford to be illiterate in this area. And shockingly, people think that things are just going to sort themselves out. And maybe you don't say it that way, but that's actually what you're hoping for. You're kind of burying your head in the sand and you're not doing some things that are very practical and easy to implement. But for a lot of people, I think it just seems so overwhelming when you look at the student loan debt that most people are carrying when they get out of college, the job market, there have been times when it's been very favorable and other times where it hasn't been, then Covid happened.
It might just seem overwhelming. Where do you start if you're your forties and fifties? Unfortunately, people sometimes at that stage in season of life, they feel like, hey, like, how do I make up for all the lost time? How do I redeem all of that right for the last 2030 years, I've been barely making it. I've been making sure my kids are able to go off to college and taking care of all the weddings and all the things. And now all of a sudden, you're in your fifties and sixties. And we mentioned this in the last podcast, but maybe you're caring for an adult parent, an older parent, or maybe an adult child, and there's other demands that are being placed on you. And sometimes I can give you all the textbook definitions and all the things that you should be doing, but it just seems so difficult and so impossible to prioritize those things when you consider and factor in all of the other demands that life is putting on you. And I think that that's where it really, really makes sense to have somebody who's giving you good, objective advice that isn't necessarily involved emotionally, but just somebody who can give you good advice, who can critique what you're doing and help you implement solutions that'll set you up to be successful in retirement, throughout retirement, and help making sure that you're not just missing some of the low hanging fruit, some of the things that you know. Of course, it's not all low hanging fruit, it's not all easy, but there is a lot of things that people just simply aren't doing because they lack that financial literacy, right?
[00:42:33] Speaker A: Well, it's the same thing. You know, whether it's, you know, car repairs, home repairs, you know, if you're in those industries, sure, of course you know what to do, you know what the maintenance is that's required, all those items. But, but if you're not, how, how do you learn those things? How do you know those things? Or otherwise? And you, if you either have the option to learn it on your own, or you have the option to partner for somebody that knows exactly what they're doing. The other day, I ran into a couple of, um, moms in, in my wife and I, circle of friends and all that. And they're, they've got kids our age and everything. And I was just chatting with them at the coffee shop for a moment, and what are your plans for the summer? And I said, oh, well, we got the two younger kids into soccer and this and that, and they immediately started peppering me with questions. What program was it? Was it this program? Was it that program? And I kind of looked at them and I said, look, I can tell you what I've got scheduled at work this week. I can tell you how many appointments I have. I can tell you all these things. I couldn't begin to tell you what program for soccer my kids are at. I know where I need to drop them off tomorrow morning, but that's about it. Right. But that just goes to support that. Yeah, everybody has a ton going on and it's totally valid that you're going to focus on certain areas, especially in a relationship. Right. My wife focuses on things more than I do in certain areas and vice versa. I focus on things, sort of things in more areas that she does. But I share that to say that that's the value in partnering with somebody outside of just relying on yourself. Right. The value and saying, okay, maybe this is an area where I do need to dive in a little bit more, or maybe this is an area where I need to rely on somebody else. I'm relying on my wife to figure out what soccer program to put the kids in. Right. So, you know, looking at it and mapping things out, saying, do I have a map? Am I partnering with someone on this map as well? Is highly valuable as we kind of close here. Just a quick five steps to master your cash flow and create a budget. And we wont spend a lot of time on these. I think we pretty well covered the majority of the topics here. But step one, assess your financial landscape. And you really just have to take inventory here, whats coming in, whats going out, and you have to take into consideration all forms of income and all form of expenditure, not just your fixed expenses. And I think we probably talk about the difference in fixed expenses versus living expenses. And almost all twelve episodes so far is my guess. I know its a frequent conversation, but, but it is because it's an important one. All the time we see people think that they're only spending five grand a month or seven grand a month, and it's at least 20% more than that. Very frequently. Uh, step two, set clear financial goals. Goals can be a big topic. And whether that's having a set number of retirement funds or just having a set plan for retirement, um, or if you're a younger listener out there, maybe it's not even retirement. Maybe your financial goal is more. So I want to make sure that I save a certain amount, right. You're backing into the equation saying, hey, I know I want to have x amount of dollars in retirement. What does that look like? I got online, used a couple of basic calculators for compounding interest, etcetera, and now all of a sudden I can back into a goal to say, here's what I need to be saving on a monthly basis. Track and categorize your expenses, whether you're the 50, 30, 20, or whether you have a spreadsheet for every single penny. I kind of laugh a little bit. One of my good friends is the. It's not you. I will say you're more reasonable in this area. One of my good friends is a track every penny budgeter. And I kind of tease them a little bit. And I say, like, what good is it knowing everything that you already did.
[00:46:14] Speaker B: But really push back on that. But for the sake of time, I'm going to let that one go.
[00:46:20] Speaker A: No, I know it's a lot of fun, but I was hoping you'd push back a little bit more. But you're right. For the sake of time, we'll let it go. Allocate your income, so just know where it's heading. As we wrap up again, just want to encourage you to map things out. If any of these things were, your ears were burning as we're talking about it a little bit, reach out. We're happy to go through a plan. We're happy to coordinate all the pieces to your retirement plan. Now, it's important to partner with somebody that is an expert in these areas. And yells, they reference it. This is what we do on a daily basis. Every day, we're meeting with people looking at retirement plans, talking about how to fight inflation, coming up with a time tested plan that will last for your retirement. And we'd be happy to go through those things with you. Complimentary consultation. Phone number is 612-286-0580 yellow. Say anything else as we close?
[00:47:16] Speaker B: Yeah, I think my final word would be, you know, don't be afraid to have someone challenge what you're doing.
Don't be afraid. Of course, correct the environment as that changes. We've had to shift and make some adjustments on behalf of our clients and as we identify new ways to make sure that we can help them retire successfully. Like, it's, it's, it's just a part of the conversation, and you can't be afraid to have these types of conversations. You know, it's a lot easier to not to, as I said, bury your head in the sand and not do anything, just to kind of hope for the best. But it's a little bit more difficult to do some of the heavy lifting, to think through things. And, you know, one thing I'll say, the last thing I'll say is, you know, retirement, it's, it could be, it could be challenging or it could be very rewarding. And, you know, when it comes to retiring, well, we want to make sure that we're doing everything we can to help the people that come through our doors, to make sure that we're giving them good advice, that sometimes we're challenging what they're doing. And, you know, surprises are never fun at any stage of life, let alone in retirements. We want to make sure that we minimize those surprises, and we give people good, holistic advice that helps them to plan well for the most important, one of the best seasons of life that they could have. And that's. That's what we're here for.
[00:48:31] Speaker A: Yeah, absolutely. Make today that. Make today the day that you get things in order. Make today that the day that you partner with somebody and make today the day that you ensure that you can retire once and retire well.
[00:48:45] Speaker B: That deserves, like an amen after that or something.
[00:48:47] Speaker A: Amen. Come on.
[00:48:50] Speaker B: All right.
[00:48:51] Speaker A: All right. Thanks.
[00:48:51] Speaker B: Have a great week. Thank you.
[00:48:53] Speaker A: Thanks for listening to all things financial. You deserve to work with retirement planning specialists who care about your money and take a unique approach to your financial and retirement needs.
[00:49:05] Speaker B: Visit allthingsfinancial.com and set an appointment today.
