Taking Care of Your Future Self with Money

You’re listening to the Mastering Money in Midlife podcast with Debbie Sassen, episode 14.

Welcome to Mastering Money in Midlife, a podcast for midlife women in business to overcome financial anxiety and make more money without burning out or sacrificing their families. Join certified life and money coach Debbie Sassen as she shares practical business strategies and mindset shifts that help you dissolve the money blocks that keep you stuck in a cycle of underearning and under-saving, sabotage the growth of your business, and prevent you from building the wealth that you desire.

Hello, my friends, and welcome to the podcast. Today we’re going to be talking about taking care of your future self with money. I thought that this would be a great topic to discuss during the week when the 2022 Olympics are taking place. I thought about this because when the Olympic athletes are involved in their sport and preparing for their sport. Over time, you know, they might start out as amateur athletes, and then they grow, and they become professional.

They become very, very skilled in their specific area. It takes consistent work, showing up daily, day after day, doing the hard work, the tedious work, the mindset, going to the gym and lifting weights, making sure that they’re eating on their food plans so that their muscles are strong, doing the coordination. I mean, imagine if you’re a skier or an ice dancer or you’re snowboarding or whatever it is, it just requires a tremendous amount of coordination and focus and eye on the prize, and it’s just a long term process, and thinking about your future self is a long term process.

We have a tendency to live in the moment. We all have that instant gratification. We want to eat the thing now, we want to buy the thing now, we want to do something right now, and the future is so far off that we have a hard time really putting our mind over there and planning to take care of our future self. It’s also a special time for me personally, always the winter, well, always, the last eight years the winter Olympics have been a special time for me because eight years ago, I was in Arizona with my mom.

We were watching the Winter Olympics together, and we watched the ice dancing, and that was when Merely Davis and Charlie White of the United States team took the gold medal. And my mom and I were together, and we were cheering for this couple doing their ice dancing routine. It was if you had watched it eight years ago, right, you might remember that there was a very, very close contest between the American contenders and the Canadian contenders, and of course, the US won, like I mentioned already.

And at the end of the Olympics, I joked with my mom. I said, okay, I’ll see you in four years from now, mom and we’ll watch the winter Olympics together, and we’ll see what happens. And then, unfortunately, two months after that, in April, my mom passed away. So, it just has a very warm place in my heart, the winter Olympics and spending time with my mom. So, now that we’re in the Olympic season again, it’s on my mind.

Let’s talk about you taking care of your future self financially. It’s something that we don’t always think about where we kind of push it to the future because it seems so far away. It involves consistent, dedicated actions in taking steps toward your future self, and a lot of people don’t even understand how much money it’s going to take to take care of themselves during their golden years. During the retirement years.

I mean, I’ve had people, entrepreneurs jokingly say to me, oh, I’m just going to work to 100. Which sounds lovely if you really love what you’re doing that much, and you really are going to be that healthy. It’s a lovely plan. You might want to take off some time to vacation, travel, play with your grandchildren, not work 24/7 10 hours a day in your business when you’re 100 years old, right?

You actually might want to take it a little bit easier, or you might not have the physical capacity to work all the time in your business. So, we have to be a little bit more rational and reasonable and really think on purpose about taking care of our future self. And in today’s episode, I might get a little geeky, a little nerdy, and talk numbers.

If you want to press pause, go get yourself a pen and pencil and a piece of paper. You can do that also because I’m going to bring in some numbers, and numbers aren’t scary. If you can count to ten and you can use a calculator, I’ve got you. Right? It’s just numbers. That’s all it is.

The fact that we connect the numbers with the money sometimes gets people like a little bit uncomfortable, but I got you. You can also go to my website download the show notes. There’s always a transcript on the website, and you can have the numbers in front of you. But what I would like to invite you to do is think on purpose about your future self and how much money he or she might need in order to take care of ourself during the retirement years.

So, let’s start out with an assumption, right, each one of us is in a different place. So, I’m going to put some numbers out there, and you can speak with your financial advisor or your financial planner of not giving any specific advice. I’m opening up your eyes and maybe lighting a fire under your backside that it’s time for you to start taking care of your future self. Okay?

Let’s make an assumption that you are 40 years old, you could be older, you could be younger, but you’ll see how the numbers fall out as I go through my example. Let’s also assume that today at the age of 40, you need $10,000 a month to cover the expenses for you and your family now as you grow and as you age and as your family changes, right? Today you could be buying food and clothes and education for your children, but one day God willing, they’re going to grow up.

They’re going to move out of the house, and they’re going to take care of themselves. Hopefully, they will also be financially independent and financially sustainable. You won’t be supporting your adult children in your later years, and that’s actually a question mark. I have worked with people, spoken with people who are in their 50s, 60s, 70s, and they’re still supporting their adult children.

I say that because it’s important to realize that if you’re taking care of your adult children or helping them, I don’t know they need to do renovations in their house. They want to expand it, and they want to buy a car. We as parents want to love and give and support our children, and you’re doing that, but not taking care of you and your future self, you might be making a mistake. Because your kids are younger than you are, that’s usually how it works, right?

Our kids are younger than we are, and they have more time to make more money and invest more money to take care of their future selves. But you don’t have time on your side. So, you want to think logically and clearly about the money that you are gifting to your children rather than gifting to you and your future self, back to our example, a 40-year-old adult who needs $10,000 a month to take care of her financial needs.

That means over the course of a year; you need $120,000. Okay? This is just an example with numbers that are easy to wrap our heads around. You might need $7,000. You might need $15,000 whatever you need; it’s all great. Okay, $10,000 today is not going to cover all of your expenses when you’re 70 years old. I’m using 70 as retirement age; 65, 66, is sort of the average retirement age according to many different countries in the world.

But the average retirement age is pushing towards 70, and with healthcare being what it is, we might even see in the next 30 years that it gets pushed to 75, but for the moment, I’m working on a 30-year time gap between where you are now and when you might retire at 70 years old. And as we know, prices rise over time, right? If you’re buying bread and milk and eggs and chicken and you’re putting gas into your car, and you have electricity, water, clothing, vacations, all of your expenses will rise over time.

That’s called inflation, and I’m going to assume again, making a lot of assumptions here, inflation is going to average 3% per year between today and your retirement in 30 years from now. So, the $10,000 that you need to cover your expenses today is actually going to be like a little bit more than $24,000 in 30 years from now.

Now, like I said before, you might not be paying for education for your children, but you might be paying more for healthcare for yourself, right? People do need more healthcare usually as they age, and it could be also your eye care, your dental care, things that happen to our bodies, right? Unfortunately, our bodies don’t last forever, and they do kind of fall apart, and atrophy takes everybody. Maybe you will be spending money on a personal trainer and other sorts of things.

Anyway, I’m going to round that number up to 25 again because it makes my head and my numbers easier. Alright, so if you need $25,000 a month to cover your expenses in the future, that’s $300,000 a year. Three hundred thousand dollars a year might be a number that makes your eyes sort of like pop out of your head because you’re like perhaps today you don’t even have $300,000 in any investment accounts or any retirement plans.

Like, you could look at your future self today and say, I don’t even have money to cover one year of expenses for her. How am I going to make the numbers work, okay? That’s why I’m bringing this to your attention now because you still have time to change things. You can all of a sudden wake up and say, wow, I think I’m going to need some money in the future. I better get to work.

Now, we don’t want hustly work, and grabby and graspy, and going to like extreme measures. We’re bringing awareness to the situation so that you can create change starting now. Now, when you’re 70 years old, and you retire, I mean you might continue working part-time in your business or whatever you decide to do, but you’re going to then need money from the age of 70 to 100. So, we have to ask ourselves how exactly am I going to calculate how much money I’m going to need to take you from 70 to 100?

I’m going to share with you a practical rule of thumb, and the jury in the financial industry is out on whether this rule of thumb which was created in the 1970s whether it, still is or is not applicable today, but it’s a simple rule that we can bring for purposes of illustration only again, please speak with your financial advisor, with your financial planner, in order to figure out what the right numbers are for you. The rule is the 4% rule. Okay.

This rule of thumb says that retirees can withdraw 4% of their nest egg in retirement, and as long as the rest of that nest egg, let’s say, for example, you have $100,000 in your nest egg, you withdraw 4% which is $4,000. Which means $96,000 is still in your nest egg, right? And that could be your retirement account, your IRA’s, your 401K’s, any retirement plans, pensions you have, whatever could be other investments that you have, right?

That $96,000 stays in investments so that next year when you’re 71, you can also withdraw 4%, and there will be growth in the account. Your investments will be invested in financial assets like stocks, bonds, real estate, various financial assets, and then at 72, you’ll be able to withdraw another 4%. Seventy-three another 4% and the idea is is that if you’re withdrawing 4% per year from your nest egg and your nest egg continues to grow because it’s being invested in the financial markets.

That should last you under most situations for 30 years and perhaps even more. SO that would take you from 70 to 100. In order to be able to withdraw 4% right of a certain nest egg so that you have $300,000, right? When you’re 70 years old, right. We’re going back to our other numbers, right? The question is, how much money do you need in your retirement account?

And buckle your seatbelt, you might get in for a shock, but if you haven’t already done the numbers yourself, if you want to withdraw $300,000 from a nest egg, and that $300,000 is only 4% of a nest egg, your nest egg needs to be 7.5 million dollars. Let me repeat that for the people in the back, 7.5 million dollars is what your nest egg needs to be to enable you to withdraw $300,000 when you’re 70 years old if your financial life looks like the hypothetical numbers that I’ve given you in this example.

And again, you have to look at your specific financial situation how much money you have already saved up and invested. What your financial needs are, what things might change between now and then, but I wanted this to be a very big ah-ha moment that just like those Olympic athletes show up consistently day after day after day. They’re really focusing on their sport and their strength, and they’re attacking the issue from all different ways, right? I mentioned, you know, they have to be eating properly and sleeping properly and working all the different muscle groups and really knowing their craft well, money is that thing that we all need to know well in order to take care of our future financial selves.

Now, that doesn’t mean that you have to become a financial advisor, but it’s really important that you have some basic understanding of finances so that you can have a sensible conversation with a financial advisor, financial planner, whoever you decide to work with who’s going to help you plan for your future financial self.

So, why do I bring this up now? I bring it up now because, as I said before, you could have adult parents of adult children who are continuing to financially support their kids for whatever reasons. They’re not thinking about the impact that’s going to have on their future financial self. I also bring it up because I see this in particular with women who want to serve and they want to help a lot of people, and they’re very kind-hearted and compassionate and have really a lot of empathy for their clients.

They want to be able to work with a lot of people and just really be givers, and what often happens is they undercharge for their services. They’re so concerned about their clients, and they want to help so much that they don’t charge enough because it means that some people won’t be able to work with them, and so they’re taking care of their clients, but they’re going to leave their future financial self, high and dry.

Your future financial self might not have enough money because you’re taking really, really, good care of other people today. And I don’t want to encourage everybody to abandon the people who are less fortunate, the people who can’t afford to pay for your goods and services, but I also want to bring it to your attention that it’s a choice, and if you had spent 5, 10, 15, 20 years working in your field and you have been very compassionate and helpful to certain sector of the economy.

People that you wanted to help but couldn’t afford your services unless you lowered your prices, it might be time to say okay, I have been very helpful and supportive and charitable, and now it’s time for me to also be helpful and supportive and charitable toward my future self because nobody’s going to come and take care of her. I mean, maybe you’re going to have to get your kids to help you when you’re 70 or 80 or 90 years old, right?

Most people do not want to be a burden to their kids when they’re older. So, I really encourage you to take a step back now and think about where your priorities lie. Because you need to take care of your future self. Most likely, there aren’t going to be too many people who will do that for you. I mean, if you own your house, and a lot of people don’t even own their homes, but, if you own your house, you could sell it, and you could use that as an asset, and then you could rent, and then you could move into government housing if you can’t afford an assisted living facility.

You could move to a less expensive area or neighborhood where your financial costs are lower in the future. Most of us actually want to be closer to, like, the cities, where there’s good medical care when we’re older. But these are all the different factors and variables that you want to bring into your financial equation, so to speak, when you’re thinking about how to take care of your future self.

This is what I invite you to do. Number one, we’re going to draw a line in the sand between today and our future and today in our past. However, you have made your financial decisions until now on my watch. There’s no shame. There’s no blame; there’s no embarrassment, there’s no guilt, there’s no beating yourself up or self-judgment for whatever financial decisions you have made in the past.

I always believed that you had made the best decisions that you could have made. Perhaps if you had had different information or new information, you would have done things differently, and it could be that this is the first time you’re even getting an awareness of how much money you might need to take care of yourself in the future, and that’s a beautiful thing.

So, there’s no blaming and shaming your younger self. Just like we’re going to take care of your future older self, we’re going to take care of your younger earlier self, your past self, because he or she was really, really, doing the best they could. We’re going to love them, and we’re going to thank them, and we’re going to wake up now and say, oh, now is the time, and that’s a beautiful thing.

The second thing is I invite you to be consistent and start by making small tweaks, small changes. If you don’t have a routine of regularly putting aside money for your future self, start where you are. Decide on $100 a month, $150 a month, $200 a month, whatever that number is, and it doesn’t matter that it let’s say $100 a month, how are you going to grow a seven and a half nest egg on $100 a month. You won’t. That’s pretty clear, but you’re creating a new financial identity for yourself.

You are the person who consistently puts aside money, and when you start at $100 a month, it could be that in 3 months from now, it’s going to be $150 a month, and it could be that in 6 months from now it will be $200 a month, and then it will be $300, and then it will be $500, and before you know it, you might be putting aside 1000, 2000, or 3000, or $5,000 a month for your future self.

Start where you are and become the person who regularly invests for the future. If investing for your future is something that you’re not familiar with, then please seek out financial help with financial advisors, financial planners, I also invite you to look up my book on Amazon, The 1K Investor, Simple Smart Steps to Start Investing With $1,000 or Less. It’s a very fundamental basic book which walks you through what stocks are, what bonds are, calculations about how you can get to the future, what average returns for the stock markets, and bond markets have been over time.

It discusses risks and why investing in the stock market over a 25-year period of time is not as risky as you might think it is. I open the book with a quote; somebody once told me that she thought that investing in the stock market was like the emperor without clothes. Like, it was just all a mirage. It was all like, so unclear, but really when you’re investing in stocks, you’re just buying little teeny tiny bits of companies that are out there in the world selling their goods and selling their services. You become a part-owner. It’s not an emperor without clothes.

This podcast isn’t the place to go into to, so I invite you to either purchase my book on Amazon or do some searching on Google, but start educating yourself on what investing is. Investing is a long-term engagement between you and your money where you’re letting your money work for you, and you’re letting your money grow. The next step you want to take is really look at the financial model of your business. Are you making enough money to take care of your financial needs today to pay off debt?

Slowly but surely, if you have debt, right, again we’ve spoken about it in a previous episode, in episode 11, that there’s no shame in taking on debt, and most businesses need debt in order to finance their operations so that they can grow for the future. So, you want to be able to take care of your current financial needs, pay off your debt, and take care of your future financial self. If your business model doesn’t allow you to do that, it might need some tweaking.

It might need you to raise your prices or offer different products different services, but look at how you’re making money today, and are you making enough? It does take time for businesses to start to grow. It could be two years or three years or four years before your business is buyable, and I don’t think that’s a problem. But look at where you are today and have in mind what that future is that you want to go toward and make sure that you’re building into your business a way to grow so that you will have enough money to take care of your current and future financial needs.

And between today and your retirement, there will be other financial expenses if you have children they might need an education, you might want to help them get married, you might need to buy a new car in 5 to 8 years from now, and of course, we always want to be able to upgrade our computers, and other electronic gadgets may be renovations in your home. We’re currently doing renovations on our bathrooms.

There are all of these things if you are a homeowner that needs to be upgraded and tweaked in your home. So, there will be financial expenses at certain periods of time in your future, and you also want to be making sure that you have money set aside for those. It could be a refrigerator, something like that, whatever it is, but those are all expenses that you want to build into your financial plan and your financial model that’s going to take care of your future self.

For example, if you need to upgrade your car in 5 or 8 years from now, that’s also your future self. It’s not the future self that’s 30 years out, it’s the future self that’s five or eight years out, and you want to make sure that you’re growing your savings and investments to take care of all of those points along the way.

So, let’s recap taking care of your future financial self is something that you want to do sooner rather than later, and today would be a very good day to start. You’re likely to need millions of dollars, whether that’s two million or five million or ten million dollars in investments and retirement plans, when you get to retirement age to take care of your future self for a period of 30 years, right?

We do want to plan for 95, 100, 105, 120 because with healthcare improving all the time and technology improving all of the time, there is a likelihood that we could live, many of us could live into our 100s, and you don’t want to get to 98 and a half and run out of money, okay? So, start planning now for the future.

That’s going to involve number one, not shaming and blaming your younger self. Number two, putting in place a consistent plan for putting money into investments and retirement, and number three looking at your current business model to see how you can start tweaking and shifting things with the products that you offer and the services that you offer so that you are making more money so that you have money to take care of your present self and your debt repayment if you have that and your future self.

All right. My friends, that’s what I have for you today. I hope that I lit a fire under your backside without scaring you too much. The goal of this podcast is not to have you frozen, really paralyzed, and stuck in your tracks. Go back and listen to the podcast if you didn’t quite get the numbers, read the transcript, whatever it is, but please start making moves now to take care of your future. All right, and I’ll see you in the future in another week from now on the next podcast. Thanks so much for tuning in; bye.

Thanks for listening to Mastering Money in Midlife. If you want more information on Debbie Sassen or the resources from the podcast, visit masteringmoneyinmidlife.com.