Joe Saul-Sehy: What Is Your Growing Season?

Listen Now: Listen and subscribe to Morningstar's The Long View from your mobile device: Apple Podcasts | Spotify | Google Play | Stitcher

Our guest on the podcast today is Joe Saul-Sehy, the co-host of the popular Stacking Benjamins podcast. He is also the co-author of a new book called Stacked: Your Super-Serious Guide to Modern Money Management, which he co-wrote with Emily Guy Birken. Saul-Sehy was a financial advisor and represented American Express and Ameriprise in the media before embarking on his current career as a financial educator. He received his bachelor's degree in English from Michigan State University.

Background

Stacked: Your Super-Serious Guide to Modern Money Management, by Joe Saul-Sehy and Emily Guy Birken

Basic Principles and Investing

"Finding the Right Financial Advisor With Joe Saul Sehy," Micro Empires podcast, micro-empires.com, Oct. 20, 2020.

"Timeline Your Goals: Stacked With Joe Saul-Sehy," Choose FI podcast, choosefi.com, March 28, 2022.

"6 Financial Steps to Take Before You Retire," by Joe Saul-Sehy, stackingbenjamins.com, May 17, 2021.

"5 Simple and Effective Ways to Practice Financial Self-Care," by Joe Saul-Sehy, stackingbenjamins.com, June 24, 2022.

"Why Your Target-Date Funds Suck," Stacking Benjamins podcast, stackingbenjamins.com, June 5, 2017.

Money Scripts

"What's Your Money Script?" Clarity Wealth Development.

"Who Is Dave Ramsey?" Investopedia.

Stacking Benjamins Podcast

"Conquer Your 'Mount Everest'," with Colin O'Brady, Aug. 1, 2022.

"Lessons From Cirque du Soleil's Daniel Lamarre on Your Work and Career," Jan. 17, 2022.

"Learn to Steal Like an Artist (With Austin Kleon)," April 27, 2022.

"Creativity, Collaboration and Innovation—Don Hahn, Lion King Producer," April 9, 2014.

Other

"The Secret Financial Lives of Americans," Study by Nonfiction Research, nonfiction.co.

The Retirement Answer Man podcast

Kitchen Confidential, by Anthony Bourdain

Transcript

Christine Benz: Hi, and welcome to The Long View. I'm Christine Benz, director of personal finance and retirement planning for Morningstar.

Jeff Ptak: And I'm Jeff Ptak, chief ratings officer for Morningstar Research Services.

Benz: Our guest on the podcast today is Joe Saul-Sehy. Joe is the co-host of the popular Stacking Benjamins podcast, and he is also the co-author of a new book called Stacked: Your Super-Serious Guide to Modern Money Management, which he co-wrote with Emily Guy Birken. Joe was a financial advisor for 16 years before embarking on his current career as a financial educator. He received his BA in English from Michigan State University.

Joe, welcome to The Long View.

Joe Saul-Sehy: Thank you for having me. I think it's probably time for me to retire because I made The Long View and you go out on top, right?

Benz: Well, thank you for saying that. And I've been a guest on your podcast on a few occasions. So, Joe, we wanted to start with some stage-setting. We wanted to talk about your own journey to being a financial podcaster and author. You were a financial advisor for many years. What made you want to pivot from that position to your current job as, I guess I would call it, a money educator?

Saul-Sehy: After 16 years working with families and having not a huge practice, but not a tiny one either, I managed about $65 million for other people and then did fee-based financial planning as well. I one day received a letter from a guy who was a mentor of mine, who counseled a lot of different advisors and he said he was leaving the firm that I was with. And let's be clear, Christine, the type of firm that I was with, that was much more Jerry Maguire, where you leave at midnight. People who haven't seen this movie—Jerry Maguire is a sports agent. You leave at midnight with the client files and then everybody calling them at 6:00 a.m. to see which way the client goes. And it was much more of that type of an atmosphere. So, the fact that he wrote like a two weeks' notice letter, a month's notice in this case, was very strange, but the letter itself was even stranger where this gentleman, Chris is his name, Chris said, "I've been lucky that I've saved and I built a great foundation myself, and I really don't know what I want to do. Financial planning is something that I love. But I wonder if there's other things that I love more, and the problem is, I spent so much time doing this that I've never really given myself time to see what other mountains there are to climb, and I think I have other mountains I want to climb."

And when he said this, I thought it was a metaphor. Most of my friends thought this was a metaphor, other mountains. And no, it turned out not to be a metaphor. He actually left and went and climbed most of the high peaks. He climbed Mount Everest twice. He went and did all this stuff and now he runs an adventure travel company in Boulder. And that not just for me, but I think for a lot of people was a wake-up call. Financial planning, as you guys know, is much more about balance and being able to have fuel for these things that you truly want to do. And at 39 years old, I'm getting ready to have this milestone birthday at the time, I looked at my own life and I said, “Wow, I like this, I don't love it, and I'm wondering if I have other mountains to climb.” And so, mine was I always wanted to be a high school English teacher and a track coach.

So, I sold my practice to another advisor. I helped them transition to other advisors. So, I stayed on for a while. But during that time, I was taking all the tests to go back into post-BA education at a university, applying to schools. And when I got to these schools, I learned what my teacher clients told me was true, which was, they said, "Joe, you'd be a great teacher. But the state of teaching today is much more about teaching to test." And God bless teachers. Because man, what I learned was it was going to be a rough ride. It was going to be very, very difficult to do what I wanted to do. And at the same time, because of my PR background, I had done public relations for American Express and Ameriprise, I was doing part-time work, writing blog posts, and newsletters, and television scripts for my friends, and I'm in shorts and a T-shirt and I kind of do the math on what a first-year teacher makes, and I've realized I'm making much more per hour and I'm in shorts and a T-shirt, home when my kids are home. That became a money blog. The blog became a podcast 10 years ago. And as we're recording this, we're getting ready to release Episode 1,235 of the Stacking Benjamins show now.

Ptak: That's amazing. I wanted to continue along in that journey you're describing. I think a key thesis of yours is that making mistakes is an essential part of the journey to financial well-being. What are some of the key mistakes you made along the way and what did you learn from them?

Saul-Sehy: I did not have enough respect for money and for a dollar and also for credit. I knew none of this stuff and my parents were and still are fantastic people. I'm lucky that they're both still alive. But growing up, like most families I think in America, we didn't talk about money. And any time that we did, my parents would have a money discussion, my brother and sister and I were told we had to leave the room. So, I go to college and I'm at the Citadel, the Military College of South Carolina, which is only important because of the fact that, A) I'm in South Carolina, and B) I'm in a military school. And I walk into Mark Clark Hall, the student union, and I realize there's this huge line. And I don't even remember if they're giving away a stadium blanket or Frisbee, or what it was, but I hop in this line to get an American Express card, which it should seem a little ironic to people that I end up representing the company later because of what I did after that. I get to the front of the line. They have this application. It says, "How much money do you earn?" I'm in a military college. I can't even have a part-time job. So, it's zero. I have no hope of earning any money. I'm a full-time student. I march for a living when I'm between classes. And, of course, you guys know what happened—about four to six weeks later I get this cool green card in the mail, and the first time we get leave, we go out to a mall in North Charleston, and we go to this high-end restaurant. I don't know if you guys have heard of this restaurant. It's called Ruby Tuesdays. Very exclusive, very, very. They had a salad bar and everything. And I'm with six of my friends and the bill comes at the end of lunch, and I immediately take the card out and not knowing anything about anything, I said "I've got it," because I just wanted to make new friends. I've only been in school for a couple of months and of course, I was everybody's best friend then because I was going to pick up lunch.

By the way, no thought ever about how I was going to actually pay the bill. Like even the fact that I would have a bill was weird. But what's even weirder is, after I buy them lunch, we go down the mall and I stop at Nordstrom—of course, the most expensive store in the mall—and I see this sweater, and it's 1987, because I'm an older guy and it's Duran Duran awesome. It's this ugly purple color with like a paisley print right around the V-neck and I buy this super-expensive sweater. I'm in a military college in Charleston, like both cold days in Charleston are horrible every year. And I'm never going to be able to wear this thing. And by the way, I still have it to remind myself of what a moron I was. So, about a month later, the bill shows up, and in fact, that wasn't even the full story. The full story is, back in those days, you got excited about getting mail. And I stopped in at my mailbox and there's this clear glass on the front and it has this letter. I open it up. I'm excited—oh, my friends from American Express just sent me mail. This is incredible. I open it up. I wonder what these guys want. They wanted money. And it had never occurred to me that they would want money. And, of course, I did what any smart person would do. I immediately called my mom and I said, "Mom, we have a problem." And mom said, "No, you have a problem, and you're going to need to figure this out." And of course, that meant because I couldn't have a job that my credit was ruined immediately in college, and I spent the next summer working with a collection agency to pay off this card that had been taken away.

But that was the first of many. And I guess, to your point, so I made that mistake; I've made mistakes in my diversification; I've made mistakes thinking that I could be a stock trader instead of an investor; I've made mistakes with insurances. And you know what I found out? I found out that those mistakes usually are valuable. They're incredibly valuable because of the fact that you went out and tried and you went out and actually did something. And I found as a financial planner, I would often meet people that were people that I would refer to as “broke professors.” They knew everything. They knew everything about everything. And they were doing nothing with any of this vast array of knowledge they had. It was never about what you knew. It was about getting out there and doing things and doing things means making mistakes and then being OK with it and learning from it and falling forward.

Benz: Joe, you mentioned your mom, and I wanted to ask about that, because that's kind of a recurrent theme in your book and also on the podcast, this joke about living in your mom's basement. So, can you talk about your mom? Is she kind of a financial sage? Or what's her influence on you?

Saul-Sehy: So, my mom does loom large. But the funny thing about my mom is that my mom really had nothing to do with any of this. What's funny is, is it's a series of jokes because we believe very strongly that if we lowered the temperature on finance and on financial planning in the Stacking Benjamins world, I believe that if we make this much more playful, we're going to bring more people along for the ride. There was a study done recently called The Secret Financial lives of Americans. And it dives into—the group is called Nonfiction Research—it dives into all these secrets that we don't share with other people, and some of the secrets are really disturbing. There's these people that steal lunches out of the cafeteria back when we were working in offices and not from home during COVID. The person stealing lunches, sadly, isn't doing it because they're a jerk. They're doing it because they messed up their money so bad that they're completely broke or the number of people that have admitted that they've eaten out of a dumpster. But really disturbing to me is, out of 330 million plus people in America nearly half of us say we've cried about our money.

So, the whole idea of my mom came from when we started the podcast, I did not want to be two guys, a former financial planner and a current CFP who are industry insiders to some degree and know what we're talking about, we wanted to lower the temperature, make it inviting. And also, at the time, 10 years ago, Christine, when we started the show, every podcaster was in their mom's basement. They were trying to pretend they weren't. So, we decided that if we were two dudes at mom's basement it would make it much more fun and approachable for people and then, we could be the voice of reason while still having some humility and having some fun.

In the book what's kind of funny about that is that I had forgotten that we had changed these asides in the book, because like most books they have these cutouts, which are important things, but they really aren't part of the main narrative. So, you put them in a block along the side. And my co-author Emily Guy Birken—who wrote The 5 Years Before You Retire and a few other great books before doing this project with me—she and I decided, you know what, we're going to snark it up a little bit. We're going to have mom write those. So, we rewrote them and put some comedy in and made them mom's asides and not ours. Well, when we went to do the audio book, Penguin Random House, Christine, actually asked me the same question and said, "Is your mom going to read those?" And then, I had to tell them that even the voice of my mom on our podcast is not my mom; it's this woman, this wonderful woman down the road, who is the head of a great nonprofit here in Texarkana, Texas, I'm a part of—Julie-Ray Harrison. And so, mom is a construct of ours that really is meant to make this a little more fun, a little more approachable for people. That said, my mom truly is a badass, though, Christine. She is awesome.

Ptak: Your podcast isn't exclusively focused on the financial independence, retire early movement, but it seems pretty aligned, and a lot of your guests are FIRE folks. What's the connection?

Saul-Sehy: I think the connection is that the FIRE movement, financial independence, retire early, is something that I think was around before the FIRE movement. I remember when I was a financial planner, which was largely before the big explosion of the FIRE movement, that if you talk to people they go, "How can I retire earlier? How can I do more? How can I spend money on things I value and stop trading time for hours?" So, I feel like our show has always been a FIRE show. However, I think just lately our show seems to attract more FIRE listeners as our show talks a lot about current events a lot, about what's happening now and how that fuels that FIRE thought process.

Benz: Are you happy with the way that we've seen the FIRE movement evolve, especially over the past few years. It's my sense that the financial independence piece is really taking precedence over the retire early piece, or maybe retire early is being considered just one expression of financial independence, of which there might be many. Are you happy with way things are playing out there?

Saul-Sehy: I would love to hear you guys' opinions on that, because on one hand, I'm incredibly happy because initially the FIRE movement got some pushback and I think rightly so that it was very attractive to people that had very high incomes and could easily cut expenses. And it was very easy for those. And when I say very easy, it's not easy for anybody. So, I should give people a little more credit that no matter who you are, you still have to put in the work. But the work is certainly easier for somebody making $150,000 a year and single or dual income, no kids, than it is for a family of five trying to live on $75,000 a year or even $100,000. Or even that same $150,000 a year.

So, the broadening out that there's different ways to reach this finish line, whatever the finish line is for you, I found that to be incredibly exciting. And the idea, by the way, and I really feel like the FIRE movement is tied a lot to this idea of “great resignation,” that no, I do have some power here. I can change my expenses. I can change my income streams. I can change my job. I can take control of my life. I think that stuff is really cool. By the same token, I don't like the fact that I feel like it's faded into the bigger narrative. I really like the fire of the FIRE movement, how fiery and different and wow that was and how it woke people up. I feel like personally I'm looking for that next voice, that next person, that next idea, that reawakens this giant that we had a few years ago. Because man I love that spark. I just think that's great. How do you guys feel about it?

Benz: I have been happy to see the evolution. I fundamentally believe that work is incredibly valuable. Not necessarily paid work, just staying busy with some effort that matters to something, matters to you. And so, I think that that's been my main response to FIRE is, for people who are just slogging away in a job, my thought is, well, try to find something that occupies you, that keeps you productive and gives you purpose that you like better than that thing that feels like a slog.

Ptak: I had a similar reaction for what it's worth. We've interviewed a number of FIRE adherents on the podcast, and I've been struck by how thoughtful and circumspect they are and also, I think, the ability to relate to those who aren't FIRE adherents, who choose a different path. I think it's comforting that it's not this myopic focus on a form of financial survivalism. It's about making the choices that work for them, recognizing that it doesn't work for everybody, and then imparting the lessons that they've learned along the way that could be applicable to those that are going down that different path. And so, that's the approach that we've taken, but both of us have been really impressed. I did want to ask you about your book, if I may, and something you mention in it, which is that when you were a financial advisor, people would often come to you with some completely irrelevant questions. Can you give some examples of common but irrelevant questions in the financial advice realm that you might have gotten?

Saul-Sehy: These are wonderful, and I'm glad you brought that up because I think it's so important not to get caught in some of these traps. The biggest one is comparing yourself to other people. I can't tell you the number of people, Jeffrey, that walked into my office, and during the course of even our first meeting would say, "I'm just curious, how do I compare to other people?" And the big answer is, it doesn't matter. It truly does not matter. You're running a race against you and your goals. There are people out there who are doing significantly worse on the income side than you may be doing—this fictional person I'm making up as I'm talking. In terms of what they choose to do for a living doesn't bring in as much money, so maybe you're excited on that way that you're "winning" against this person there, but they're doing better on their budget than you are. Or maybe you are saving a lot of money into your 401(k), but you are one of these FIRE adherents and you want to retire really early. So, you're still not saving enough, and I feel like the emphasis and the feeling that we are in this competition against somebody or something other than our goals, I've always found frustrating.

The second thing that I've always found frustrating is this idea—what is the shortcut rule of thumb I should use? Like the 4% rule as an example. These things, people asking me questions about the shortcuts—what percentage of my income should I spend on X versus this other thing? Or what percentage of my income should be in bonds? And what was always frustrating to me about this, wasn't just the fact that I don't think we should be using rules of thumb because they won't fit your financial plan and the more financial plans I did, the more I saw where a rule of thumb can lead you astray. There were two bigger problems that I had with that, Jeffrey.

And problem number one was doing the financial plan was so much easier than I think people think it is. It was so much easier. And the rule of thumb really shortchanged us where I can have something that has texture and has life that is mine and know that there is a higher degree of probability that it's right if I just do the little bit of extra work, and the extra time you invest, it does something else, and that is, it makes your plan stickier. Because the big problem I have with rules of thumb are the fact that when the market goes crazy, goes in a direction differently than we want it to, as has happened this year, when the market changes, we are likely to jettison our plan if we're just using rules of thumb with that plan. If we have a textured financial plan that is tailored for us, I'm much more likely to stick to it. So, I really like the idea of doing that additional work to plan your own goals and how you're going to reach those goals, A) because you're smart enough to do it; B) because it's not that hard; and three, because it's going to make it more sticky.

Benz: I wanted to ask, is it your sense that people place a disproportionate amount of emphasis on investing as a means of addressing their financial problems? And, more broadly, do you think there is confusion in the population about what is financial planning and what is investment planning, and which one do I need?

Saul-Sehy: Absolutely. You've heard these things before, Christine, where somebody will say, "My financial advisor got me X percent." If you've a financial advisor and you're talking about the percentage return that your advisor "got you," I think number one, you're using your advisor wrong, and B) you're mixing up two different things, which is, just investing and doing a really comprehensive financial plan. Because often, a comprehensive financial plan means saving you money. As an example—and this is a big part of what I loved about being a financial planner—was taking this idea that the insurance industry loves of talking about do I need insurance or not, and making that a bigger conversation, which encompasses insurance, certainly, but it is wider and that's, what risks am I taking and how do I mitigate those risks? And maybe that involves insurance and maybe it doesn't.

Well, a good financial planner will help you look at your risk management situation. I'll give you an example. The best risk management that you can have is having an emergency fund. Because if you have an emergency fund, the threat of you having a short-term disability, you can handle that with your emergency fund. You don't have to buy short-term disability coverage. If you are willing to take these risks, you can raise the deductible on your homeowner's insurance, you can raise your deductible on your car insurance because you are now self-insuring. Maybe this helps solve some of the long-term disability issues and also means you buy less life insurance as you build assets. So, a good advisor often saves you money in places—or not even an advisor, frankly. It doesn't have to be an advisor; it’s just a good financial plan. A good financial plan will often save you money, and instead of just looking at investments, I think if we look much more holistically, I think we'll do a good job.

And even, Christine, when we look at investing, I don't think we tether investing to goals enough, which is another reason why our investments often aren't sticky. They don't stick, and we make bad decisions with investments because we're so busy with the fear of missing out on X investment that we will change them out versus stick with the ones we have. So, an analogy that I like being a farm boy from West Michigan is that every investment has a growing season. And if you go into the investment knowing that this investment, or this mix of investments, meets your season, then you're more likely to plant at the right time and you're much more likely to pull it out at the right time to harvest that investment at the right time.

As an example, over a short term, you're not going to use stocks because the stock-growing season is, generally speaking, over 10 years. Real estate also great over a 10-year period of time. But certainly, with a one-year time frame, using stocks you might as well go down to the casino based on the short-term numbers in the stock market, and in real estate, you have to invest so much on the front end and it's so illiquid that your ability to get out quickly is hampered. Also, if you're in real estate investment trust, you're going to have some volatility as well. So, I totally agree. I think we definitely oversize investing versus this holistic picture and then looking at when am I going to need the money and then investing as a way to do two things: number one, get there, but also number two, to cover those risks I might have.

Ptak: A do-it-yourself mentality infuses the book and your podcast as well. Can everyone do it themselves? Or should some people hire an advisor? And a companion question of that is, how can you tell if you need to hire someone?

Saul-Sehy: I'm glad you asked that because I think, Jeffrey, myself that yes, two things that seem to be incompatible. Yes, you can do it yourself and this is not difficult. It isn't difficult. However, I do like advisors. I love advisors. But let's be clear about what I'm talking about, because when I say that I know there's people out there going, "If you're smart enough to do it yourself, why would I waste money on an advisor?" We all have blind spots, and I have blind spots. And I'm not talking about abdicating; I'm talking about having advisors that make me smarter. So, what I disliked very much when I was a financial planner was it drove me crazy when people would come into my office and go, "Here. I'd like you to know everything about my financial situation. I prefer to know nothing about it. And six months from now or three months from now, I'm going to come back and I'm going to judge you on how 'we did.'" And you can't run a business that way. You shouldn't run a family that way.

Mary Barra at General Motors, I think has done a great job of keeping this company relevant. And being a Detroit guy, I love talking about GM. And certainly, that's not the car company everybody is talking about. Everybody is talking about Tesla or Rivian. They're talking about these other companies. But Mary has taken this company that my dad worked for and retired from and has kept them in the conversation, which is to me super exciting to watch over the years as she has done that. Well, Mary doesn't show up at work once every three months and says, “Hey, vice presidents, how are we doing? What's going on with this car thing that we're building?” No, she goes to all the meetings. She knows all there is to know about a car, but she still has these people around her that protect her blind side and also are probably smarter than her in these different areas of the car. So, the person who knows the suspension, the person who knows the interior, the person that knows the engine, these different professionals they make her go faster.

And that's the way I look at a good advisory relationship is, I want to build the plan, I want it to be my plan, it's stickier if it's my plan, not if it's some advisor's plan, and then I want to surround myself with people who make me smarter. And if I do that, I think that is the first question we should ask. In my book, I get into things like make sure they're a fiduciary, and I walk through who good advisors are and what they look like. You definitely want those things. But even before that, just foundationally, the idea that you are not smart enough to do it yourself so you hire a financial planner, I think, is a false statement, and I also think a dichotomy between doing it yourself and hiring advisor also is not a correct statement. I think you do it yourself, but you do it in a really smart way with people that know what they're doing.

Benz: One thing I liked in the book is that you noted that every business model for financial advice has some sort of flaw or bugs you in one way or another. Can you discuss your issues with some of the key ways that advisors charge clients? And at the end of the day, which option you think is the least bad for consumers?

Saul-Sehy: There's three basic types of advisors. There are commission-based advisors, which are the dying breed. There is no fee for service, they are marketing products, and you buy a product from them, and they receive a commission. The second type is a fee-only advisor. They will take a fee from you for service, and that's become a little bit of a hybrid there too, where sometimes they also use an assets-under-management model where they will take a set fee like a 1% fee from you for money that they help you manage, where they will also call that fee-only. That to me is closer to the hybrid of the two, which is a fee-based advisor where they may charge a fee for service, but they will also receive commissions or also receive a percentage.

My problem, just to start with the commission-based advisor, is the same that everybody has. If I need product X and this commission-based advisor doesn't have that to reach your goal, you're going to be using a suboptimal thing. You're going to get whatever it is that they have. I remember talking to people over the years that will say, “I walked into my bank, and I asked him for X, and they said they didn't have it, but they had this other thing, and it was really cool.” That is a commission-based advisor who is changing the product mix on you based on just what they have versus what might be best for your situation.

On the fee-only side—just to get to the two ends of the spectrum—on the fee-only side, you have advisors that are not about the product. And the cool thing is, is that as a fiduciary, meaning contractually in writing they say that they have your best interest at heart, and they have to. They are certainly going to do the thing that they think is right. In the middle, you have this middling muddle of I'm not sure where the commissions are, I'm not sure where the fees are, I might know where the fees are. The commissions, sometimes they're going to be selling stuff that they get a commission for, sometimes I don't know what that is. By the way, the fee-only advisor is that the fee-only advisor—and study after study this has been done—the implementation rate from fee-only advisors is the lowest of all advisors. The commission-based advisor has obviously the highest implementation rate.

So, the question that you ask yourself is, is it better to be going 90% toward the goal and be doing something versus being 100% right and you don't implement? Because the key is implementation. It's not about what you know. Like we said earlier, it's about what you do. So, the advisor, Christine, to answer your question directly, that is the best for me is definitely the fiduciary advisor where I'm paying them a set fee and I know that they're doing what is clearly what they believe is best for me. But I go into this relationship knowing that I have to implement. I have to know that statistic that the chance of me not implementing and the advisor pushing me to implement. The advisor doesn't care if… They do care because they're a human being and they want to help you be successful. But once they've delivered the product, they've already been paid. And so, if you don't implement, well, that doesn't mean that the family is not going to eat. The commission-based advisor, it may only be 85%, 90% right, but they're going to make sure that you do it, because otherwise they don't eat. I'll go with the fee-only advisor first, knowing that I'm going to have to be a self-starter, and I'm going to have to put myself on a timeline to get this stuff done.

Ptak: You note that a lot of basic personal finance books tell people to start by outlining their goals. You prefer a different spin on that exercise, which you call timelining. Can you walk us through what that entails and what the advantages are?

Saul-Sehy: I'm glad you asked that, because frankly, I've read a lot of personal finance books and most of them start with goal-setting. Most advisors will tell you that you should start with your goals. I like a mutual friend of ours, I'm sure, Roger Whitney, the Retirement Answer Man, says that if an advisor leads with product and not process, you should run. So, starting with processing, goal-setting makes sense. But when you look at the efficacy of goal-setting and the amount of times that we don't end up implementing anything or moving toward our goals, it's incredibly frustrating.

The way that I found for this to be sticky, which is the key, getting back to behavior is realizing why goal-setting doesn't work. And the reason why most of us, as they listen to this, probably aren't working on their New Year's resolutions anymore—which is a form of goal-setting if you think about it at the beginning of the year—is because of the fact that these goals exist in a vacuum. And when real life shows up a week, two weeks, a month later, the goals go bye-bye, and I'll get back to these New Year's resolutions as soon as I deal with real life. So, the key is to integrate these into real life. And I love it when goals fight against each other in real life, meaning that the things that are important to us are what we're really going toward. If it's not important to us, then truly is it really, really a goal? So, I also like if we're going to get this done, what a lot of brain experts have told me about how the brain works, which is, visualization is a great key to success. You look at the success people have when they do vision boards, when they put it in front of them. If I want to do something, I put it on my screen saver. I do that all the time with my goals. I will make sure I see it all the time, and man, does it work.

So, what I found is much more successful than just goal-setting is take out just a sheet of regular copy paper, put it landscape style, put yourself as a stick figure on the left side, draw a line that represents the rest of your life and plot out those goals on a timeline. And not only now do I have the same goals I had when I had my New Year's resolution, but now they're time-specific, and we talk about how time-specific goals were much more likely to get the smart goal process, but also, I see this goal in relation to other goals. And while language was developed over centuries and centuries, and for us as humans, learning to talk takes us a year or two, and our vocabulary as children takes a number of years for us to get the vocabulary together. Sight is something that if we're born sighted, we have immediately. And so, this idea of spatial recognition is inherent to the vast majority of us. And because of that our unconscious mind very quickly looks at these two things and it compares them. Is that goal more important than that one? How do I get both of those? Oh, I'm trying to retire at the same time that my kids a junior in college. How am I going to do that? It doesn't mean you can't do it. But it certainly means that there's going to be some friction between these goals, and there always will be friction between our goals. So, I like that. We begin having these wonderful value conversations that we don't have with New Year's resolutions or with regular goal-setting about which ones of these are the most important between these goals.

The second thing that we do is we also see that growing season that I mentioned earlier. So, when it comes to your investment philosophy, it's much easier to determine in your head which growing season I need, which type of investment historically meets this goal. And the cool thing about that is it gets rid of the fear of missing out. Like, if there's some investment that my buddy has that is supposedly a fantastic investment, it's OK for it to be a great investment; it just doesn't meet my growing season. It's no longer about good or bad. It's about does it fit.

And then, the third thing is, a lot of us have trouble with budgeting, and if we take all these different goals and we draw a line back to today, we very naturally ask ourselves, “For me to make these a reality, how much do I need to save toward these goals?” And I begin tethering the goals to my saving today, makes saving more exciting, makes it more fun, but also, we can see realistically what we have to do to get those and then we start making again some value decisions about how I'm spending money today. Do I value going out to dinner as much as I am versus having the second home or putting junior through college? And certainly, without judgment toward those things, we can find some middle grounds. Maybe I pay for three quarters of college or half of college, or maybe I retire two years later, whatever it might be. I love this idea, Jeffrey, of goals fighting it out for brain space, and I think that's what timelining your goals does that just simple goal-setting doesn't do.

Ptak: You've referenced this concept of growing season a couple of times, and I've heard you talk about it before, Joe. And I'm hoping you can just expand on that for people who haven't heard you riff on that concept before.

Saul-Sehy: The idea is, is that your investment has a time when it works best. And different investments work great over different timelines. And when I was a financial planner, I would have somebody that said, hey, I got a long time on this. So, I was thinking I'd use some stocks. I've got about three years till I need the money, so that's great. And then, I would have to redefine for them what the growing season is on a good stock portfolio. And growing season, what that means for people that didn't grow up in West Michigan and farm country, it means the amount of time when we're going to have a relative degree of certainty that this investment is going to do what we want it to do. And so, for the stock market or for real estate, large company stocks and real estate, we're looking at 10 years plus, certainly some hybrid model or bonds, depending on the type of bond—might be in the five year, five, six, seven-year time frame; cash for those shorter needs. And then I begin with more certainty, building a foundation toward getting my goals. So, that's what I mean by growing season.

Ptak: Wanted to ask, I suppose, it's a somewhat topical question, which is on inflation. Inflation, is another hot button issue this year. What's the best way, in your opinion, for investors to protect their portfolios against inflation?

Saul-Sehy: Jeffrey, inflation is a thing? I didn't see that. When it comes to inflation, I think the key is to is to pull back and ask myself what is inflation caused by? Inflation is quite literally prices going up and the cost of things going up. While the companies that are inflating their prices are protecting themselves by inflating their prices to make sure that their profit margins stay where their investors and their owners hope for them to be, which means that if I am worried about inflation, I certainly, with my long-term investments, have to realize the least-risky place to be is in those types of investments that are causing inflation, which are ownership of stocks, ownership of these companies. So, the stock market is a great place to be, even though we look at the stock market this year over the short run and we go, "Oh man, I don't know if I want to be there." But I think when I start thinking in terms of 10 years plus, like we were just talking about a second ago, and we start thinking about the mechanisms that are creating this, man, if I'm protecting my portfolio against inflation, I think the best thing to be are in these companies that are raising their prices to make sure that they protect their shareholders. So, if I'm a shareholder, I'm actually protected as long as I have a long-term view by having my money in equities.

Benz: So, you're not a fan of target-date funds. You wrote about that in the book. Can you summarize your key objections?

Saul-Sehy: Christine, have you read a Tony Bourdain's Kitchen Confidential?

Benz: Yes. A long time ago, but yes.

Saul-Sehy: He has got a chapter in there that I'm going to use as an analogy. And for people that haven't, Tony Bourdain, the chef, Kitchen Confidential talks about his life as a chef. But he's got a great chapter called "Eat Before You Read This," and he goes over all the gross stuff that happens in kitchens and restaurants. And a gross thing that happens in the financial-services industry is that a lot of target-date funds are the equivalent of the salads that restaurants will put out on the Sunday buffet. And the reason, Tony explained, that the Sunday buffet was created was because companies will often get new food in on Mondays or Tuesdays for their freezer. So, they're working at the back of the freezer and all week long the chefs have gone past some of the ugliness. And so, they turn it into a salad. They hide the blemishes and they put it into a Sunday buffet and market it for an amount of money that people will come flocking to. And he said that we really often shouldn't be fooled by that. I think in a lot of the mutual fund industry, and you'll actually see a lot of this by exploring Morningstar, you'll see that a lot of financial companies hide their ugliness inside of the target-date fund. That's not my prime problem with target-date finds though, however, even though that's true.

And certainly, there are good target-date funds that don't do that. I have people that use Vanguard target-date funds, fine, they are fantastic. Fidelity has nice target-date funds just to mention a couple—T. Rowe Price. But overall, I think this about target-date funds. Number one is, you are—to use a whole different analogy—you're landing the plane with a target-date fund. And when you land the plane, what I mean by that is, the target-date fund takes a date, let's say, it's 2050 and it is getting more conservative as you get toward that goal. Well, a lot of people in my history as a financial planner are coming in hot when it comes to their long-range goals, and we need every doubling we can get of our money. We need to make sure that our money is going to last as long as we are, and we can milk as much of it as we can. And so, I find that with a target-date fund, we get way too conservative with our money right at the time when we would have that last double. And certainly, there's an argument to be made that we need to be conservative with some of our money on that day. But if I'm using a target-date fund, I'm getting overly conservative. I can see why the investment industry does this. It's because of the fact that, A) they've made you a promise. They said this money is going to be available by or near this date. And so, they're upholding their half of the bargain. I think the problem is much more in the planning that do I truly need all this money to be there at this one time?

The second piece though— actually, if I'm counting, it's my third piece—the salad as number one, number two then being the fact they get too conservative. But number three is this. I don't like some of the terms that we use: asset allocation, efficient frontier. What I found is that these concepts are not as hard as the words make them sound, and building your own asset allocation using tools, frankly, like Morningstar, like I did when I was a planner, not only less onerous than I thought it was, much easier than I thought it was, much more fulfilling than I thought it was. It is not hard to build your own target-date fund, to build your own portfolio. So, why I'm going to do that when it's going to be stickier, it's going to be more fun, it's going to be more interesting, it's built for me, and I certainly am smart enough to do it. Why I would outsource something like that to a financial company? Isn't something I would do. I just wouldn't do it. So, those are three reasons I don't like it. And if anything, Christine, that I talk about I found this is the one I get the most pushback on. A lot of people, like, “No, beginners need target-date funds.” I'm like, “No, I think we should teach beginners.” They're smart enough. And it's OK if we mess it up a little bit at the beginning. We're going to be OK.

Ptak: An argument that we've often put forth is that there's value in the way target-date funds mechanize the process. It's very hands-off. The investor doesn't have to intervene in the ways they otherwise would have to if they were selecting investments for themselves and then maintaining them over time. Do you feel like from that standpoint there's a case to be made for target-date funds? Or do you feel like, notwithstanding that, you're still better off to go out and try to optimize in the way that you described?

Saul-Sehy: I think it's less optimization than it is efficacy, and that is that the efficacy of twice a year looking at my investments and then keeping my asset allocation where it should be to meet my goal, to rebalance myself is a process that maybe takes an hour, and again, I think it makes it stickier. It makes you stick with your plan more. When I outsource that, which certainly to your point, I can do for a very small fee. I mentioned Vanguard's approach and one that I like, a target-date fund that I like. They can easily do that for you for a minuscule fee. But I just think that it's so much stickier. So, the efficacy, what it teaches us about investing and what it teaches us about keeping our own asset allocation and the fact that when the market does things that we maybe either didn't expect or don't like, we're more likely to hang on to it. If we built the plan ourselves, I think are all reasons why I still wouldn't do it, even though there's good target-date funds out there. So, I guess, my answer Jeffrey is, I can see the argument, I just think to myself what is the cost? What's the cost of not doing it myself? And I go back to, I would rather do it myself.

Benz: I wanted to ask, Joe, about this money scripts idea. First, can you talk about what that means, what a money script is, and also, how can people short-circuit some of these money scripts that are perhaps negatively affecting their financial lives?

Saul-Sehy: This is a part of the book that was super exciting to both Emily and I because everybody has a starting point, and our money scripts are these things we tell ourselves in our head that we are. So, you meet people that are frugal from the very beginning, you meet people that are running scripts where the second they get a dollar, they spend it. But certainly, knowing the history of who you are and realizing that's why you make the decisions that you make that that can lead you to more success and also, get rid of some pitfalls. I think a big problem that I've met along the way with investors is that we don't pay enough attention to our upbringing and the scripts that are in our head. And I'll give you an example.

I'm a spender. I'm a total spender. My parents were always spenders throughout their entire life. Knowing that money script, that the second that I get a dollar, I'm going to blow it, I end up being the exact opposite of what Dave Ramsey talks about. Dave says that you should only spend cash because of the fact that you're more likely to put more money on a credit card if you just carry plastic instead of cash. You know what? For most people, that is true. He's not wrong. For me, I am the exact opposite, and I know that because I know the script growing up. If I have $10 in my wallet, I am going to blow it. That money is not accountable. It doesn't go into my budget. I built all these automated systems now through Tiller Money. I've been experimenting lately with a budgeting app called Qube. I have used Marcus Insights a lot in the past. Certainly, like many people, I've used Mint. And Sheryl, my spouse, and I have a weekly meeting. All these systems I've set up, if I have a $10 bill in my wallet, not accountable at all. If I have to put it on a credit card. I know we're going to look at it next week. I know we're going to talk about it, and I know that it's not in my financial plan to maybe do what I would do with the $10 cash that I'm going to spend. So, knowing that money script helps me do way better with my money. Or I could do what a lot of people do and just keep making the same mistake over and over and over.

Ptak: You note that a scarcity mindset is a recurrent theme that can create negative money behaviors. What are some constructive ways to override a scarcity mindset?

Saul-Sehy: I'm thinking about an analogy about a client that I had back when I was a financial planner who just totally enveloped this and I'm wondering how best to tell this story. But they thought that money was so scarce that they always had to work every hour of overtime, that they had to work on weekends. His name was Mike, and his spouse Donna and I would always question that. And Mike would always say, "Listen, growing up, we never had any money. I'm certain." And we would talk all the time about the fact that he had enough money to do what he wanted to do. Mike, by the way, was diagnosed with a pretty rare disease. And he found out that although he felt pretty healthy, he was probably going to die in about 12 months. And immediately, Mike's scarcity mindset went away, and they were going to Alaska, they were doing all of the things that they so wanted to do. And it was exciting on one hand to see that they were finally going to spend some money. They were going to do these things. On the other hand, it was sad that he waited for that diagnosis to actually do it. Well, he got a second opinion. And when he got a second opinion, he found out—and it's a longer story—but very luckily that he wasn't going to die, and it was a misdiagnosis. It was easy to see how the doctor had said that, but that it was this other thing, and he was going to be OK. You know what happened the second that he was going to be OK? He went back to working weekends. He went back to all the stuff. Put the trip to Alaska back on hold.

He's the opposite person as most people I worked with. The best way I found to fight the scarcity mindset is to give yourself a plan that looks at how much money am I going to need for the rest of my life. For most people, Jeffrey, I think math is the cure for that disease, which is, let's take your budget, let's give you reasonable inflation risk, let's make you live for a good long time, and let's see if your money runs out. If your money doesn't run out, well, then, a lot of people would still get worried because they'd say, “What if, what if, what if?” Because the scarcity mindset comes with, well, these bad things are going to come up, and I'm going to need this money later. So, we then inflate that number. I'd inflate that number by 15%, 20%. I'd inflate that number by a ton to show people that even if bad things happen, that we have those covered. And once we covered those things, I would see the scarcity mindset then begin to abate. So, I think you have to recognize it. I think you have to do the math. And I think, then, it makes it easier for you to go forward knowing that even if bad things happen, you've got that support system in place.

Benz: Wanted to close with a question about your podcast, Joe. You've been doing it for how many years now? I don't know. But you said you've done 1,200 episodes altogether.

Saul-Sehy: Yeah, we're in the 11th year.

Benz: Eleven years? As you reflect on the experience, what are some of your most memorable episodes?

Saul-Sehy: I like the episodes that challenge us. I just had a great episode with a guy named Colin O'Brady, who is an adventurer, and he at the time that he did it, he did this world record where he climbed the highest peak on every continent faster than anybody else. So, they hit go when you start the first one and then you go from the first one to the second one, third one, fourth one. You go as quick as you can, and the record has been broken. But he did that, and he challenges people to get out of their comfort zone and ask more like what is your Everest? And it's funny he said that on our podcast and that's the same question that my buddy Chris asked me in his resignation letter from way back at the beginning of this discussion. What is your Everest? What is it that you're trying to do?

I love episodes about creativity. I know that the financial planner is listening. I think building creativity in your financial plan makes them stickier. So, having people, that people don't think about when they think about money like Daniel Lamarre from Cirque du Soleil earlier in this year was a fantastic discussion. Austin Kleon, "Steal Like an Artist" where you see what other people are doing that you love. And we're not comparing ourselves to them. Like I talked about earlier, I think that's dangerous. But we go, man, that's something I'd love to try myself, but I want to make it my own. I really want to make that me. Austin Kleon was a great person. Don Hahn, who is a Disney producer, produced Beauty and the Beast, and talked about constraints and about how constraints can often make you more resourceful. Certainly, I find when somebody has a tight budget, they all of a sudden think of these great ways to solve problems versus just throwing money at it, which are super exciting. So, I think it's when we challenge ourselves to be a little more creative, or we challenge this fixed mindset that many of us have, those have always been my favorite.

My favorite one is always the next one, by the way, Christine, to directly answer you. And I'm sure it's the same for you guys. Like, my goal is, I'm kind of embarrassed even by the episodes we made a year ago, and I hope like heck I'm going to be embarrassed by the episodes I'm making today, a year from now. So, if I'm constantly pushing myself to make more creative episodes, I think I'm on the right path.

Benz: Well, Joe, this has been such an illuminating conversation. Thank you so much for taking time out of your schedule to be with us.

Saul-Sehy: Well, thank you to both of you. This was a great time. Thank you so much.

Ptak: Thank you.

Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Christine_Benz.

Ptak: And @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)