Learn how to finally get your finances under control with a month-by-month strategy developed by author John Schwartz
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If you’re ready to finally get your financial life in order, New York Times science writer and book author John Schwartz can help.
In his new book, “This is the Year I Put My Financial Life in Order,” Schwartz documents the month-by-month strategy he and his wife used to finally get their finances under control.
From drawing up a will, to maxing out his 401(k) to paying off credit card debt – Schwartz went through what most of us dread doing: Figuring out our financial situation. With humor and keen insight, Schwartz shares his strategy from the perspective of a reluctant man, nearing retirement, who knows it’s now or never when it comes to managing his money.
After 12 months, he had a weight off his shoulders, and he wants the same for you.
JennyHoff: John, thank you so much for joining me today.
JohnSchwartz: Oh, happy to be with you.
Hoff: So, let’s start with your background. You’re a science writer for The New York Times, but you wrote a book on finance. How did that happen?
Schwartz: Well, it’s not that I’ve only had one beat in my whole life. I’ve done a lot of beats; I’ve shown up in pretty much every section of the paper. And while I’ve been a science writer I also continued to write a humor column for the business section in its mutual funds and EFT quarterly. So, I’ve been running a humor column for them for quite sometime, but I’ve also been a business writer both at The Washington Post, News Week, and here at various times. And a lot of the stories that I do even on climate change have a business side. I’ve never really moved out of the business realm, it’s just that there’s a lot of science in there as well.
Hoff: Right. And this book though has to do with your own experience of getting your financial life in order. And I think that’s probably a statement many of us make at the beginning of the year. We say, “This is the year when I get my financial life in order.” And you finally made that statement to yourself. How did that come about? What was leading up to that?
Schwartz: Well, we were in a good spot – that is my wife had convinced me that we needed to sell the house we’ve been in for 15 years. And that wiped out a fair amount of debt, it got us out of our credit card debt, it got us free of the college debt for our first two children, for our older two children. And we had a little breathing room. And at the same time, I was in my mid-50s and I thought, “My God, retirement, whatever that is, is kind of in sight now.” And so, the worries about what’s going to happen were growing, and at the same I realized that we were close enough for it to be a big worry. Far enough away still so if we needed a course correction we could do that. And so basically fear overcame sloth.
Hoff: So, you woke up and was it selling your house that finally made you take a look at your financials kind of, having to go through paperwork? Or did you wake up one day and say, “Hey, I’m 55, I need to get my financial life in order.” What was it that kind of triggered it?
Schwartz: I would say the real trigger was that I knew I was late, but I saw the opportunity to turn it into an assignment. Now this sounds silly unless you’ve been a working journalist, in which case you understand. But I don’t really learn much about something unless somebody is putting a deadline in front of me and telling me to do it. And so what I realized was we had a supplement coming up, a special section in the paper in which I would be able to write a piece about assessing our retirement, and looking to see whether there are three legs of the stool with retirement – pension, Social Security and 401(k) savings that are going to be able to support us adequately in retirement whenever retirement would happen.
And so, the trigger along with this sort of existential dread was the idea that if I got somebody to give me an assignment to do it I would work through it, and if I had an editor waiting for a copy I would do it. And so that’s what I did, I wrangled the assignment, I did the story, and it showed up in The New York Times.
Hoff: And so, for people who don’t write for The New York Times it’s mainly mentally giving yourself that assignment, saying by this time I need to have a folder put together that shows everything, where my assets are, where my investments are, what my insurance plans are, and everything like that.
Schwartz: That’s exactly right. I mean, we all have our magic feathers, right? If you remember Dumbo, with the magic feather that will help us fly. My magic feather is I need an assignment. But other people might just be able to say, “This is it. This is time.” Or set themselves a deadline, or simply hit that panic point that I did and say, “It is really time to do something.”
Hoff: And talk a little bit about what your financial life had been up to that point. Were you contributing regularly to a 401(k) kind of, not really paying total attention to it, but you had some taken out? Were you investing actively? Were you buying insurance plans? What was your financial life kind of leading up to that point?
Schwartz: Well, I was one of those people that didn’t like to think about money at all, a little money phobic. At the same time in my 20s I had realized that a 401(k) is a really good deal, because my employer was going to do a match and if I was buying into a stock fund the stock market tends to rise, and so at the moment in my 20s when I got a nice raise, I had more than 10 percent raise I was able to just automatically put 10 percent away and tell the system to just keep taking that 10 percent out every year.
And I chose some funds a little better than dart board choice, but not really very intelligently but at least I had some funds going. And then I did my best to forget about it. I did not actively invest, I was not choosing individual stocks, I was not trying to play market timing. When things went down I wasn’t going into the Vanguard site and moving my assets around, because I had pretty much learned over time that I’m never going to be a market maven. And if I try to do timing I’m not that good, I mean, there are people who are that good, and God, I love them, I mean, go out there and make a billion bucks. But I always had the sense that if I tried to play the market the market would play me.
Hoff: That’s advice that I hear from a lot of financial experts – just put your money in and leave it there and forget about it and you’re going to see that grow exponentially over time. So, you did the exact right thing. Were you doing anything else to kind of control your finances or was that basically kind of your financial plan – I’m going to stick this in a 401(k) and then go about my life?
Schwartz: That was the good thing I did. I also tried to buy real estate, I tried to have a home and make money off a home. And the first time we did that it ended in disaster. We bought an apartment in New York, we thought we were doing everything right. It turned out that we didn’t really understand the market and we were buying close to the top of a rising market, and then when the water went out I got an opportunity to work in Washington, D.C., and we were stuck with an apartment that was for all practical purposes unsellable.
Hoff: Oh, wow.
Schwartz: Banks wouldn’t loan on the building. These are all rules that sound arcane today, they were arcane then. But if you’re going to plank down your life savings and then put a chunk of your income into something, you better know something about that. And I didn’t, because I thought you can’t go wrong in real estate. Oh, OK, after 2008 we know you can. And in 1993, 94, 95 was a little easier proposition and I had the confidence of youth and I messed up, and we ended up losing that apartment.
Hoff: Yeah, and I think that’s a very good point because a lot of people I know had that same mentality – you can’t go wrong in real estate. They know people who have made a lot of money that way, and I live in a hot market like Austin and people think you can’t go wrong, just buy places, it’s going to go up in value. But like you lived in New York, right? I mean, it just shows that, yeah, unless you kind of know what you’re getting into and all the expenses involved and the rules and everything like that you can end up losing a lot of money. How did you dig yourself out of that?
Schwartz: Well, part of the reason we lost the apartment was not just that we were stuck paying the mortgage and the maintenance on that apartment, and we were paying our rent in Washington, D.C., where I’d moved. But we also had a tenant who was there to help us to pay the cost of the place and he stopped paying, and he refused to leave. And that’s what really killed us on that.
Once we were out of that apartment before we ended up having to give up the apartment we were able to buy a house in the Washington, D.C. area, we found a very inexpensive house. It was a mess, but again, we were able to get it fixed up somehow and found a great handyman who basically lived with us for quite some time and did great things in his own way. And bit by bit we got the house not just livable but really nice. And when we sold that house six years later when we left Washington to come back to New York for my job at The New York Times we doubled our money on it.
Schwartz: So that was the beginning. Until we did that we were really struggling. Our savings were gone, we were dealing with the kinds of problems that everybody has, right? Two children who needed schooling, a boiler that went out in this 1927 house that was, I mean, these things are great but this thing was the size of a car and it came with the house. And when it went out it was time to buy a new one, that’s thousands of dollars, you can’t just shiver in the dark.
So, each of these things though some of it we did with credit cards, some of it we did in other ways, but we were living paycheck to paycheck, and things were very, very tight. Our children were in public schools, but we made sure that we sent them to summer camp in the summer, which many people might say, “That’s a stupid way to go.” But we knew we weren’t going to take an expensive vacation, we knew we weren’t going to take the family somewhere great. We didn’t want the children to miss out.
And so I was eating like french fries and gravy in my company cafeteria for two bucks, but we made sure that we were able to send the children to their summer camps so they got to do things and have fun. Because I’ll tell you during that time we weren’t much fun to be around.
Schwartz: Yeah, and then we did the things, in the book I quote the singer/songwriter Robert Earl Keen who’s got a great song called Dreadful Selfish Crime. And he talks about finding things to do that we could do for free. And we did a lot of that. And in Washington, D.C. in the 1990s there were a lot of things to do that you could do for free.
Hoff: So you are creative?
Schwartz: Including the best museums in the country, right? Some of the best museums in the country, so we had the time, it’s just that there just wasn’t extra money. And things were very tight. That eased up a little bit when we were able to sell that house.
Hoff: And so then you moved to New York and fast-forward to you deciding to get your financial life in order, where did you start? Where did you say – OK, this is what I’m going to tackle first because I think it’s the most important? And did you decide to call a financial adviser? In the book you mentioned how you’re a little wary of financial advisers because you weren’t sure if they were going to try to push products on you that maybe weren’t in your best interest but rather in their best interest. So how did you kind of navigate that to get started?
Schwartz: Well, just to get started all my assets because of the three publications I’ve worked for all totally in Vanguard funds, I went to the Vanguard site and they had an assessment tool for retirement. And I had to move some things around to make it all show up, right? Because the stuff that I had from The Washington Post company weren’t showing up in my New York Times account, but you do a little roll over, you mess with the effectiveness of that.
But once all of the funds were in one place I was able to work through their work sheet and see that, “OK, if I stayed working until at age 70 here’s how it’d be. If our funds continue to grow the way that they appear to be going, here’s how it’d be. If nothing horrifying happens, here’s it’d be. Then we will be able to survive living with less money than I make now but probably an acceptable amount.” Which is sort of what you look in retirement, right? You’re not looking to travel the whole world and go to casinos. You’re looking to be comfortable.
Schwartz: I mean, unless you’re a financial genius, again, go out and do that thing. But if you can make 70, 80 percent of your income off the three legs of the stool then you’re doing great, and conceivably you’re not having those expenses that you’re having before, you’re not paying for stuff while your children are away.
Hoff: So, you did your assessment and you found that you were in a good place? You were prepared for retirement? What did you find?
Schwartz: We found that we are in a reasonably good place. That is we didn’t hit the lotto but we are going to be able to survive. Or as Jean put it, “Yay, we’re not eating cat food.” Which is great, that’s sort of where you want to be, along having done that I realized that that was really only the first step in getting our financial life in order. The retirement is a big thing but it’s not the only thing. And that’s when I came up with another assignment.
The idea was, “Well, if I treated this as a yearlong project, and if I went through the steps doing all the things like finally getting it real and making sure my health insurance was right and making sure there our life insurance is in order and just learning the sort of things that I hadn’t put the brain work in to learn before that I could structure a book in a way that if somebody else read that might do the same thing, might be able to follow me and what I did and do it for himself, do it for herself, so that it’s not just a memoir, it’s not just what I did, but it’s what I did and how you can do it too.”
In the hopes that people who are like, a little moneyphobic would say, “Well, this isn’t impossible. It looks like a pain, but that moron did it. I guess I can.”
Hoff: And you gave yourself a year to do it, so it wasn’t like, “OK, this weekend I’m going to get my financial life in order,” it was, “This year I’m going to get my financial life in order.” And so, you took your time, you got a full-time job, you have a family, you have things going on. But little by little you started organizing it which I think is an easier chunk to chew on than trying to just get everything done in a couple of days and giving up because it’s kind of confusing.
What did you find? OK, first talk about drawing up your own will, because I find that hard to stomach. It is money is tough to talk about, I think wills might even be tougher.
Schwartz: Oh, you don’t like thinking about death? You don’t like thinking about dying? Oh, gee, why is that?
Hoff: And you almost feel like say if you get superstitious about it – what if I write my will and then that’s it. Somebody up there thinks, “OK, she’s good to go. Her children are taken care of.” So, it is one of those things that I think you play tricks on your mind with it, and logically you know you better do it, why would you want your assets being held up in court or not going to where you want it to go? But I think it’s even tougher to do. So how did you get started on that? How did you stomach that and then get started on that?
Schwartz: Well, look, when you do the financial assessment of retirement, the first question on a lot of these forms is when do you plan to retire? And that’s like, “Oh, my God. I never thought of that. I don’t want to think of that.” When you think about retirement then you’re thinking about that stuff that comes after retirement. And then write down the will from there is another question that says, “How long do you expect to live?” Which is, “Oh, my God.” And let me check my calendar, right? Except that you can sort of know what your parents, your parents’ life span, you know what your family is like, you know what your vulnerability is like. You can sort of guesstimate how long you might live.
All of those exercises that I did in the very first step, which took you know weeks by the way because I was gathering all the information from my pensions and everything else. It took a couple of weeks to get all those numbers together, all of that over the hump.
Once I was over that hump, once I had in my half assed way answered the question how long I expect to live, then I could move on to what happens when I die. And just like you were saying before a chunk, the first chunk was just considering death at all. From there the next chunk was, “OK, what do we do about that?” And knowing that it was time and knowing that we have a house that’s going to be worth some money that we have these 401(k) funds that will be distributed, we want our children not have to deal with probate and all that mess while grieving.
So once again what gets you over the hump while considering your needs of others really helps and having taken that first step really helps. And I looked at a few of the will programs, the sort of do-it-yourself things and I thought, “Maybe our stuff is a little more complicated than that.” But even more than that it sort of went right up against my money phobia, all my phobias, and so I started asking friends who are lawyers, who did you will?
And one of the friends had a guy that he just thought was terrific and was very helpful. And then I called the guy and he was charming and funny, but also is very much about his business. And after having talked to Jean, my wife about it, we said, “Why don’t we go with him?”
I had earlier sort of looked around using the internet to find lawyers who did wills-only and who are in like upscale areas and down scale areas. And she said, “Why are you doing this when you just need to ask your friends who they like?” And she was, as always, my wife was smarter than me.
Hoff: And she was right.
Schwartz: And so, I called this guy, and she was right, and the guy was terrific. He brought us into his office, he told us what it might cost, what it would probably cost, he walked us through things, he told us what would make it cost more. Are you going to come back? You can come back every week and change this, it’s going to cost you. But he was very honest about where this was going to take us.
And we had one wrinkle of hoping to get a trust in place for one of our children. And he said, “Yeah, understand that.” And we talked about that, and he said he would set that up. In a few weeks later we had both a will for me, a will for Jean, medical directives, medical power of attorney, all the things that help you determine your end of life care if bad things happen, which you really should do while you’re doing your will, why not? And all of it with a summary that was actually in English for each of us, and we were able to go in and sign
And look, Jean hated this process. She said, “I just don’t wonder people don’t want to do this. Death, death, death.” I mean, it was unpleasant, but we were strapped in, we rode the ride, and at the end we had two wills that are good.
Hoff: Yeah, absolutely. It needs to be done. I mean, every single financial adviser I talked to they say, “You just need to do it. You don’t want to give that money away to lawyers or to the state or anything like that. Just get it done.” Especially when you have children or people who love you who are going to have to handle that for you.
Schwartz: Well, exactly. And we held on to one with the lawyer, the lawyer’s holding onto one, we’ve got some at home, we’ve told the children where to find it. You don’t want to spend all that time and have everything not be findable.
Hoff: Right, you got to get it organized. OK, so you did that. What would you say were the four like topics, the biggest financial subjects that you had to deal with? Was it your 401(k), getting a will in order? What other big things do people need to tackle to really get their financial lives in order?
Schwartz: I think it’s a really good idea to assess where you are in terms of – yes, your retirement stuff, yes, your will. But also, you’ve really got to take hard to look at your life insurance. Where do you stand, and do you have enough? In fact, by the time you’re in your late 50s, early 60s maybe you need less than you thought, but you should be looking at that. Take a look at your health insurance – do you have enough insurance to cover you? Insurance is expensive, it’s irritating, but having a medical emergency that you can’t pay for is catastrophic.
Schwartz: So, you’ve got to look at that closely. You’ve got to sort of do the numbers as a consumer in the same way that you would look at the financing. You got to say, “OK, here’s a high deductible but lower payments. Or here’s higher payments and a lower deductible. What’s likelier to happen to me? OK, get hit by the bus, all bets are off. But if I did relatively healthy I might be dedicating a little bit and getting the higher deductible and paying that and just using all this to forestall catastrophe.”
Schwartz: But the point of the book is to give people the introductory ideas that they need to then move forward to find someone to help them with advice, to help to find an investment adviser too if that’s what you want, you know the kind of questions you need to ask to make sure that somebody’s working in your best interest. Because if you need advice you don’t want that person to cost you money, you want that person to help you make money.
Hoff: What were the three biggest lessons you learned during this experience?
Schwartz: Well, the first lesson and the most important lesson is you’ve got to start early. The thing that made everything work for us is that in my 20s when I had a job that had a 401(k) plan I got it, and then forgot about it, and as I move from job to job just kept that 10 percent going. Starting early is absolutely essential. But starting whenever is essential, so the first step, the first big lesson is to start.
The second big lesson is to stick with it. Don’t panic and decide, “Well, the stock market is going down I’m going to stop contributing for a while,” because are you going to remember to contribute again? Keep it going if possible in a consistent way.
And the third is to more than what I did look at where you are, do it every once in a while. You should be looking your will every five years to make sure like if the law changes that you’re still covered. If your family composition changes you’re still covered. You look at that insurance, if your health insurance expires at X year and then you got to do like another term, then you’re going to spend a lot more money if you don’t buy ahead in a larger chunk five year, 10 years if you can. Making those decisions and looking at them with eyes open is the way to go.
Hoff: Absolutely. How did you feel when you finished at the end of that year and you had gotten everything in order that you needed to get in?
Schwartz: Oh, I was relieved. Look, I didn’t feel that I made myself a genius. I’d be frank I don’t think I’d made myself all that smart, but I had learned what I needed to learn to take action. And so instead of sitting there with the fretfulness rising I was doing things, small chunks, one at the time working through this year. At the end of the book, at the end of this I got my financial life in order, I do like a 12-month plan to help people figure out how they want to do it.
And it’s just, once again getting started, a sense of relief that at each one of these steps, having a will, we were done. Ah, finally. Maybe just checking through each one of these things, it doesn’t mean that life is grand; we’re not going to be in great shape in retirement, we’re just not going to be in bad shape in retirement. And I have added to our contribution for the 401(k) using the older age catch up limits, to do a little more of that, which is the important thing about looking back and looking forward.
But that sense of relief comes from finally having actually done something instead of living in that state like you are the middle of the night and we sort of wake up and think, “That thing, I need to do that thing, I need to do that thing.”
Hoff: Yeah, and what did you find made it easier to do it? It was the assignments for you, but if you’re recommending to somebody else would it just be I guess using your checklist, but organizing it into these chunks and say, “OK, this month I’m tackling the 401(k), I’m going to figure that out. Next month I’m going to figure out our will. The month after that I’m going to figure out our health insurance.” How would you recommend that people get organized before they start?
Schwartz: Well, first of all you do have to get organized. You have to figure out what the chunks are you need to go after. But I’ll tell you the thing that you want, the thing that motivates you is the thing that motivated me beyond having an assignment, it was that rush of having actually done one of these things that I’ve been putting off. Procrastination is a very fretful state. You worry about whether you’ve done enough, when I’m going to do this? And it just sort of hangs on you like a weight on your shoulders.
And once you start taking care of the chunks you feel that lift, and it’s a great feeling. I mean, this is when Dave Ramsey throws on multimedia phenomenon on debt reduction, talks about the snow ball method and getting rid of the smallest at first, he says, “When you get rid of that first debt it’s fabulous, and it’s addictive.”
Schwartz: Right, when you start to do it you want to do more of it. And what I’d hope is that if people do the first chunk and really feel good about that they want to take care of the rest of it. I think it’s really easier when you’ve got that all done.
Hoff: Yeah, it’s true. OK, you’re like if all else fails at least if something happens to me nobody else is going to have to deal with this mess that I’ve already dealt with it for them.
Schwartz: That’s right.
Hoff: We have to wrap up now, but I always like to ask my guests the last question, our show is called Charged Up, what gets you charged up about helping people finally get their financial lives in order?
Schwartz: Well, I’ll tell you, the great thing is over the last few months, now the book just came at this month, but when I would tell people I’m writing a book and they would say, “Well, what’s the name?” And I said, “This is the year I get my financial life in order.” So many people said, “Oh, my God, that’s exactly what I need to do.” And knowing that this project was hitting people where they live, knowing that this might be a motivation for people who really don’t want to buy a personal finance book, and sweetening it with our personal story which is at least entertaining in the sort of shopping for it kind of way – the things we did right, the things we did wrong.
If I can get people to really think about these things and pick up a book that they otherwise would avoid, then that’s a fantastic feeling that would get me totally charged up.
Hoff: Absolutely. Well, you have, and your book is entertaining and you’re a great writer obviously. And I think that it’s nice to listen to somebody who isn’t necessarily living and breathing investments day and night, but you are part of it and you went through this process. You know what the process is like, you dealt with the fear of having to deal with money, and you came out the other ausw and you succeeded in it. And so, I definitely recommend people check it out especially if you have a little bit of a fear of dealing with money, you’re not alone. Thank you so much, John, for making time to talk to us today.
Schwartz: Well, thank you. It’s a pleasure.