Are Your Good Money Habits Holding You Back? (Part 1)

This episode might be a bit counterintuitive. We’re going to question the real impact of common financial habits. Are the strategies you consider beneficial actually working in your favor? We explore the pros and cons of practices like ignoring account statements and strict budgeting. Join us for a practical discussion, as we uncover the unexpected effects of everyday money decisions. Are your good money habits holding you back?

 

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Transcript: 

Marc Killian  00:00

This episode might be a bit counterintuitive, but we're going to question the real impact of common financial habits. Are your good money habits holding you back this week here on plan with the tax man? Look up in the sky. It's a bird.

 

Tony Mauro  00:14

It's a plane.

 

Announcer 2  00:16

No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for a plan with the tax man.

 

Marc Killian  00:29

Hey, everybody, welcome to the podcast mark here with Tony once again to talk investing finance in retirement. And actually we're gonna do this over a two part episode. This week's and our next episode we're going to do are those good money habits you have holding you back and basically I've got some good money habits that if we're doing good things, hey, there's nothing wrong with that. But could there be a disadvantage? Or could we be maybe going a little too far in one direction and we want to make sure we have some balance in there so that's gonna be the topic of the conversation this week with Tony here on plant with the tax man, my friend what is going on? Welcome to the new year. This is we're taping this here in early January. So I know we've all gone through the New Year stuff but Happy New Year, my friend. Same to you.

 

Tony Mauro  01:09

It's good to be back tax season will be here before we know it. And as we're taping this, we got a lot of snow coming down. Yeah, that's

 

Marc Killian  01:16

what you're telling me. You're getting Blizzard Blizzard fi so yeah, and we're getting heavy, heavy winds and storms and possible tornadoes later. So it's, it's an interesting day for us to be talking. But that's alright. We'll get in there. We'll get in here. That's how that's how determined we are in to do a good podcast, right?

 

Tony Mauro  01:31

That's right.

 

Marc Killian  01:32

Ray. What are we like the the what is it? The Postal Service? We're rain or snow? Tony and I are doing a podcast? That's right. Or good stuff? Well, Tony, this is our 100th episode, by the way. So not only are we getting hit with storms, you and I in different kinds of storms in different locations, but we're celebrating our 100th episode. So kudos to you, my friend. I feel like we need a drink or something.

 

Tony Mauro  01:56

We need a little celebration. As it seemed like it's been that long.

 

Marc Killian  02:00

I know you guys need some balloons or some scotch and or drinks or something. I'll well we won't do that. We'll keep it straight. But you know, Anyway, congratulations, and thanks, folks, for hanging out with us here for you know, whatever episodes you happen to catch, and how long have you been watching or listening? Excuse me listening to us. We certainly appreciate you. And hopefully you'll enjoy this week's content. Well, let's get into these money habits. So Tony, I want to break this up. I've got 10 of them. Okay, I want to break it up over the next two episodes, we'll do five this week. And I'll kind of give you the good okay, I'll kind of set up the the main piece here and kind of give the good you know, way of thinking about the good habit. And then you kind of maybe give us the counterpoint as to some things to think about it to where we don't drifted into a bad habit. Does that make sense? Okay. Yeah. Okay. Sounds good. All right. So let's start with ignoring our account statements, easy to do, right? We get these statements, we get things all the time. And some folks, they just, you know, open the financial drawer and toss them in there. And I guess the good side of that would be like, it avoids overreacting to short term fluctuations, right? Because you're not looking at it. Right? So you don't have to get all upset every time you go, Oh, man, it's down a little bit. Right. But why might that be a

 

Tony Mauro  03:08

bad idea? Well, it's, you know, it's sometimes a bad idea for a number of reasons. You know, one thing is, you may get into such a good habit, which you never look at them, and you really never know how you're doing. The other thing is, is, if there's some changes that have gone on in the account, maybe something that doesn't look right, you know, I hate to use the word fraud, but it's not, you know, it's possible in today's age, that that can be going on. There's other issues such as well, you know, you're gonna miss an opportunity maybe, to make any types of adjustments to the portfolio. So it's while it's a good idea, and I hear a lot of clients say that I don't like to look at my statement, especially if after I've watched the news, but I think you'd probably need to keep it on the good side, you need to review it at least once a quarter, you know, and not just throw them in and never review them at all, because I think you're doing yourself a disservice by doing that. And hopefully your advisor won't let you do that either. Or asking you for for a meeting every every so often. And worst case, they're going over it with you so you can at least understand what's happening.

 

Marc Killian  04:10

Exactly right. I mean, it's they can get confusing, I get it, but we shouldn't just always throw that stuff in the junk drawer, the financial junk drawer and not look at it. Okay, keeping a strict budget. Okay, now, this sounds like a good habit to have, right? Certainly, it helps you ensured some discipline on your spending and your saving helps you achieve your financial goals. But strict budget Oh, be careful, right. So what's some bad things to think about here? But

 

Tony Mauro  04:34

I think sometimes people that really love budgets, and frankly, you think an account like B would love budgets, I really don't. I don't I don't follow one I kind of do and I do in my own personal life, but I don't let it get to be too restrictive because obviously, you know, if it's too restrictive, it gets too stressful. Sure. You feel like you can't have any fun in life. And you know, I think you miss out on Some things so I'd say set a budget. Don't go overboard and feel like, you know, if you miss on some things, you really beat yourself up because it's, you know, it has to be a flexible.

 

Marc Killian  05:10

Yeah, exactly. The flexible diets Exactly. Yeah, exactly. Here, we're in a new year, or you're probably on some sort of diet, maybe people are right, so five people, you know, and I think that's the key to like, we get emails all the time from people, they're like, you know, I just got to retirement. And I'm really like, or the fear of like, I've been saving and been really good about saving, now I have to pull money back out, and it stresses me out, right. So they're on a budget, and they kind of maybe, then they get a little too tight. But to your point, you've saved all this money to enjoy it. And retirement, having a strategy and a plan is going to help you especially laid out in black and white, it's going to help you feel good about actually pulling that money out and using it for things that you want to so Exactly, yeah. Okay. Number three, investing in familiar stocks, again, sounds like good and practice, right? So invest in what you know, has always been sage advice over the years. And it's certainly easier to understand, you know, things when you have a familiar arity to them. But you know, I mean, all you could just, I could just throw out the word Enron as a reason why it could be bad, right? So, you know, just don't want to go overboard. And in any one thing.

 

Tony Mauro  06:14

Yeah. And with with your example, with Enron, for example, I mean, you what you really lack if you stick to just a few things, you know, then you lack diversification. And if any one of those particular securities in that case, you know, you mentioned Enron go bad, which went bad in a real bad way, big way, I should say. And, you know, that's really going to hurt your overall portfolio. So, you know, while you want to stick with, you don't want to get too into exotic investments and do that kind of thing. You want to work with your advisor, on diversifying your portfolio, not only for the number of types of securities, but also based on your risk, and also based on tax efficiency. So yeah, definitely. I think that that that particular one could go bad in a hurry, you

 

Marc Killian  07:02

know, yeah, exactly. You know, and it's like, and sometimes Well, again, I'll use some examples where we get emails and Tony to the show into to your website, where people are, like, you know, hey, I was left some, you know, an inheritance when I was left some money from or less some stock from mom or dad, you know, and dad had, you know, stock X for 40 years. And you know, he really loved that, I really love them, I don't want to sell them. And yet, you're looking at it thinking this is probably not a good thing for you to hang on to, right. And that's why I'm not gonna pick any particular company. But again, you've got like this attachment to it. And it may not be the best thing for your financial situation.

 

Tony Mauro  07:34

It really is. I just had a big accounting client that we do their monthly accounting for. And he's very reluctant. He's a young guy to get a 401k going for his business. And his biggest fear is that he watched his mom and dad, they worked for a company here locally, for almost all their lives. And they all of their investment, or their retirement savings was in that stock inside the 401. And it went under. Yeah, so he's very skittish of the market because of that. Yeah.

 

Marc Killian  08:03

I mean, I understand that, but but he's the owner of this company. Right. So he's, he's a control versus his parents who work there and didn't have control. So didn't have control. But I mean, yeah, I

 

Tony Mauro  08:13

mean, but the important thing is, I keep trying to tell him, as I tell most clients is, like you, we're going to, we're going to diversify, we're not just going to end up in one type of security here. Because that's recipe for potential disaster. Indeed, yeah. So I mean, again, you know, the

 

Marc Killian  08:26

idea here, you know, there's, there's good habits, right, investing in familiar stocks can sound like a good habit, but you gotta be careful to not let it cloud you or restrict you, again, maybe a little too much. Number four, embracing automation. So you know, we're all probably AI to death. At this point. We're tired of hearing about AI at this point. It's everywhere, and everything and every marketing thing is seems like but automation does have some good points. And certainly investing and saving simple saving stuff, right? I mean, just you know, having your money come out of your check, go right to if you're still working as a pre retiree, going right into accounts, hey, that makes things easy ensures that timely bill payment, right? You don't to worry about extra fees, because you didn't pay the light bill on time, you know, or whatever. So there's certainly some good things to automation. But I would imagine the downside, it would be maybe disengagement told me where you're again, you're no longer paying attention, like you should be.

 

Tony Mauro  09:19

It's that and then, you know, I think to effectively kind of ignoring technology and just refusing to maybe learn or embrace anything new. I mean, especially for retirees, my dad included, you know, he's now in his 80s he's getting like that where he don't and so I can make fun of him a little bit, but he, you know, technology, he refuses to kind of embrace it and learn it. And you know, with an AI, I think AI and all of this stuff is only going to get more and more in depth as we all age, but he's at a point where he feels like well, I don't want to learn anything new. I don't, I don't want to embrace that but then he ends up with things It's like he just had it where he accidentally turned on the. And this has nothing to do with finance. But he accidentally turned on the closed captioning on his TV and can't get it off. And nobody

 

Marc Killian  10:10

might come to like it. I love it. I'm only 52. And I use it all the time.

 

Tony Mauro  10:14

He likes it. So yeah, I mean, so he's mad about that. But again, he, he struggles with technology. But I think it's one thing to you know, especially as you get older, maybe you don't want to get too far into it. But I do think you need to keep up. Yeah. And at least tight, you know, don't ignore it completely. terms, and

 

Marc Killian  10:31

I'm with you there my mom's 82. And she actually has, she actually has a pretty good grasp on some technology. And she does pretty well with it. But then at some other times, I'm like, you know, she'll ask me the same question like for the 30th time, and I'm like, How can you remember all this other stuff? If you can't remember this? I don't know. Yeah, at me alone?

 

Tony Mauro  10:49

Well, right. But like my, my dad, you know, with in most advisory firms, and really, even if you're doing it on your own, you know, you're logging into a portal, you're looking at your account. If you can't do that, you know, yes, you will get a statement. But everything's going to online. And like said, You gotta at least be able to function and do some of that stuff.

 

Marc Killian  11:12

Yeah, definitely. So I mean, again, automation can be really useful. So just make sure you're also not, you know, setting and I think think about like this too, right, Tony, the set it and forget it mentality that we talked about sort of with the statements can also kind of bite you here on the digital side, too. Right? You might set up your target date fund, for example, 15 years ago, or something like that. And you're like, it's gonna take care of it for me, and it kind of does. But could there be better options? Right? Could it be better things for you to be doing? So? Alright, and then also the fifth one here, we'll wrap it up this week, then we'll come back in a couple of weeks and do the other five of good money habits. So patients patients getting into the stock market? Well, no, scratch your head a little bit. Good. The good side? Well, I mean, that means I'm not making a mistake, I'm thinking things through, right. I mean, I'm not being irrational or anything like that, right. But you can also pretty obvious here, you can also just sit with your thumb in your ear forever and not do anything, right. You gotta be careful with your patients levels,

 

Tony Mauro  12:09

as in the first thing that pops into my mind is the whole market timing. Yeah, and people that want to try that and think that they can out smart the market as a whole, it's impossible to do. And, you know, there's, you can just go out and Google things like now and you'll find the studies if you missed the best five days, 10 days in the market, or whatever, timeframe over the elbow, or whatever timeframe you want to use, and you'll see how low your returns are. And so you don't want to be too patient and try to be too picky. The best thing probably, is to dollar cost average and constantly be putting money in good times and bad into whatever you plan, I'd say the market but whatever, right? You are investing in, yep, to avoid that to avoid, you know, getting that emotion into it. And just, you know, make it a habit. A lot of times you can do it through your paychecks, we've talked about it before 401, KS, and that kind of thing. But that's really what you're forcing yourself to do is to not not get stuck in that rut,

 

Marc Killian  13:11

L for sure. Because sometimes people will see these questions too, where it's like, hey, the markets kind of doing bad. I think I'm gonna pull back on my, you know, my contributions to right, you know, and it's like, but I'll pick it back up whenever things, you know, tip the other way. It's like, No, you're looking at that entirely wrong. Right? Yes. Yeah, it's dipping a little bit. And that's not the most pleasant thing, but you're getting it on the cheaper your dollar cost average. And so keep pumping it in. Right?

 

Tony Mauro  13:34

It is it's funny that we have clients with their employees that do it in their 401 K's that will say that exact thing is, you know what, I'm gonna I'm gonna pull this back. Mark's not doing very well. So in other words, you're trying to time it because you think that because the markets down? Like you said, that's the exact worst time you want to do it. You want to be in there. What, Why, why you're where your money goes a little further. So we try to talk them out of it. Some of them do, some of them don't. And then the bad thing too, is sometimes people will forget to change it back. Exactly. Yeah. Contributing? Yep. Um, so that's a tough one to see. And I don't advise doing that. Yep, for sure. Do that people

 

Marc Killian  14:09

do it? Yep. That's where, and that's where some of these good habits sometimes can, you know, best intentions, right. But they wind up kind of maybe backfiring a little bit too. So you always, you know, life is long. You know, life is designed to stay on the ball. You know, we can we can let things slide a little bit here. My wife and I were just laughing about when I had open heart surgery almost 11 years ago. Now. I had to go on this diet. And we're dieting right now in the new year, to your point a second ago in your tongue, being flexible. And it's like, you know, for you to just this diet we're on right now is actually working pretty well. And it's not too bad. And we're actually kind of doing all right with it's like, why didn't we do this versus that hardcore crashing? I had open heart surgery. So we went to the extreme level with some extreme diet, right? And it didn't stick and here we are 13 or excuse me 11 years later, you know, and starting all over again. And it's like it could have been As if we did just, you know, moderation if we would have gone with a reasonable diet versus some extreme thing. And I think that's what happens sometimes financially, we'd have some big a moment financially that happens to us. And we get a little extreme instead of being a little more prudent or being calculating with our moves. I suppose that makes sense. I think so. Yeah. Cool. Well, good. So that's open that translated?

 

Tony Mauro  15:22

I mean, I think you're exactly right, that whole new year's resolutions and dieting and everything else people try. I mean, we could talk for an hour on just that kind of stuff not even related to

 

15:33

right. But it means thinking about your findings, or look at the market, for example. So in December, we'll wrap it up here with this, Tony, but in December, right, so you know, late in the fourth quarter, the Fed had their their meetings, right. And they talked about various different things. And they're like, Well, we're gonna not we didn't do anything, and then we're gonna see you, and we're gonna hit pause, and we're gonna wait. And then in December, they go, Oh, we're gonna cut rates probably in 2024. Well, the market loves that idea. Right. So the market got very excited as the year went on down, but then January started, and and some of the reasons why they started, I think, maybe, you know, the prognosticators or whatever, sort of looking at some of the reasons why the Fed was thinking about cutting rates. And then they went, Oh, well, maybe it's not that great, after all. So the markets been off to a rough, rocky, rocky start here, this first part of the year, you know, and I just was on a call yesterday, where, you know, basically, it's a market update from basically our advisory firm, you know, and they've been talking about this for a couple of months. But I think this goes back to our points about the, what they're calling The Magnificent Seven stocks of the s&p 500, that actually accounted for almost all of its gains in 2023. And you know, they were playing it well. But yeah, but if those weren't in there, then the gains would have only eroded or the return would only been X. And, you know, I'm sitting there thinking over these months, everybody interprets these numbers a little differently. You can you can slant them any way to make whatever you're talking about

 

Tony Mauro  16:56

look good. And I think that back to our big point of people need to be investing regularly, in good times and bad because if you're trying to, you're trying to handpick, and again, market time and do everything else, you're gonna end up with not a lot of return, and definitely not going to meet your goals. Definitely,

 

Marc Killian  17:15

definitely. So again, so good habits can be, you know, be very helpful, but they can lead us astray sometimes. So be careful with that. That's gonna wrap it up this week here on the podcast, we'll be back with the second half, and just a couple of weeks, so don't forget to subscribe to us here on playing with the tax man at your planning proz.com. That's you're planning proz.com. You can find a lot of tools, tips and resources at Tony's website. And of course, you can check him out on Apple, Google Spotify. I keep saying Google, but it's it's really YouTube now. So Apple, Spotify, and they've converted everything to YouTube. So either way, you can find all the information that you're planning. proz.com Tony, thanks for hanging out, my friend. I'll see you in a couple weeks. All right, we'll see you next time. We'll catch you next time right here on playing with a tax man with Tony Morrow.

 

Walter Storholt  18:03

Securities offered through a van tax investment services SM Member FINRA SIPC investment advisory services offered through advanced tax advisory services insurance services offered through an event tax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.