Opening Credits

Charged Up! podcast: How to write a financial plan


In her book ‘If You Love Your Family, Save Like It,’ Nicole Peterkin talks creating a financial plan that protects your family.

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Charged Up! with Jenny Hoff




Nicole Peterkin is a financial planner and author of the book “If You Love Your Family, Save Like It.” In her book, Nicole argues that we all have a financial plan already – if we are making money and spending it, we are following some sort of an agenda, even if we haven’t written it down and we’re not aware of the choices we’re making. In this episode, she helps us make those plans more concrete in a way that facilitates our goals and protects our families.

Whether you make $50,000 or $500,000, knowing where your money is going, what goals you are trying to reach and how to prepare for the unexpected will not only make your own life richer but protect your friends and family no matter what life throws at you.

Let’s get Charged Up! about reaching our financial goals!

Transcript: [00:30:14]

Jenny Hoff: Nicole, thanks so much for joining me today.

Nicole Peterkin: Thanks for having me.

Hoff:  So first, tell me a little bit about your own story and how you came to understanding finance and its impact on our family lives.  You talked about your dad’s premature death in your book.  Was that something that sparked your interest?

Peterkin:  Yeah.  I wouldn’t say that I was immediately interested in finances when my dad passed away.  But it was curious to me that my whole childhood, I thought that we were financially okay.  My parents both had multiple six figure incomes.  My dad was a chemical engineer; my mom was a computer programmer.  We had the two cars in the driveway.  We had a big house in a nice neighborhood, and my parents were always the people who siblings, friends, colleagues would go to for money advice.  So when by dad passed away, I just assumed that everything was okay.  It appeared that he had everything together while he was alive so he passed away, I thought that all we had to worry about was grieving and that wasn’t the case.  So the biggest lesson that I learned and the biggest thing that sparked me when my dad passed away was just that a strong income and professional success isn’t an indicator of financial savvy.  Seeing that my dad could have done so much better than what we did looking at the actual numbers and looking at the planning that he’d done kind of frustrated me and gave me a desire to look deeper.

Hoff: Now, you start off your book with “The vast majority of Americans don’t love their family.” It definitely grabs our attention but what do you mean by that?

Peterkin: So that sentence is definitely for shock value but what I mean is everyone has a friend, right, who’s in a questionable relationship, a questionable dating relationship, marriage, et cetera, where the husband or boyfriend or whoever says that they love them but then they cheat on them or then they abuse them or then they x, y, and z, right.  Template story.  And it’s the same thing with money. I know people love their families.  The vast majority of people do love their families, I would say.  But the way that they’re spending their money, after looking at the personal finances of literally hundreds and hundreds of people, the way that people are operating when it comes to money, their actions are in my opinion speaking louder than words in  that yeah, you say that you love your family, you’re taking your kids to Disney. But, they’re going to have to take out $200,000 worth of student loans and live in a basement apartment until they’re 35 because you’re not setting things up for the future.

And so to some degree whether or not you paid for your child’s college education is a personal decision but I’d argue that most parents want to help their kids to some degree and not everyone can.  And part of the reason is because of these different lifestyle decisions and this sometimes unwillingness to look at their finances and get in control of them.

Hoff: Absolutely.  And you stressed in the book the need to have a financial plan or to work with a financial adviser who will get you on one.  Now, I feel like a lot of middle income families though feel like that’s something only the wealthy can really afford or should bother to do since they have money to spare, yet as we’ve discussed already, you would argue that they’re wrong.

Peterkin: So, what is a financial plan? When people think about financial planning, they are thinking in terms of investment. I’ve had so many people at networking events, my taxi driver, whoever just saying, “I don’t have any money to invest that’s why I don’t need a financial planner, that’s why I don’t need a financial plan” or “When I have more money to invest, then I’ll need a financial plan.” And the fact of the matter is, is that if you’re earning income, you have a financial plan.  It’s just is it a good one or not? The money is coming in, you chose to take on a mortgage or chose to live where you’re living and pay rent.  You chose to take on the car payment or to charge up the credit card or pay down the credit card debts.  So you’re making money decisions and you have money behaviors that you’re operating off of if you\u2018re earning income.  So having a financial plan is just having a plan in which case you know what your income is actually moving you toward.

If you are spending every single penny that you’re making, you have a financial plan.  It’s that you’re not building wealth.  If you have a clear-cut plan, it’s just saying that you have a strategy to be able to more efficiently achieve your goals regardless of what those are.  Your goal can be to buy a Porsche, that still should be incorporated into a financial plan.

Hoff: So what would you say to people that are like “Well, I never thought of myself as having a financial plan before but you say that I do because I’m making money and I’m spending money.  How do I get this under control? How do I actually make a financial plan that is something that works for me and helps me build wealth?”

Peterkin: So the place to start is to figure out exactly what your goals are.  And I know that that’s like a clich\xe9 statement.  Everyone says you should have goals, write down your goals, et cetera, et cetera.  What are you working toward? Why do you get out of bed every single day and make money? Is it because you want to buy a house? Is it because you want to be comfortable and go to dinner once a week? Is it because you love animals and want to be able to give $5,000 a year to a charity that you love? Whatever your money is going toward now that you love and that you care about is what should be at the forefront of your plan.  So I would say in terms of goals, goals don’t have to be lofty in terms of, I want a bigger house or I want to buy a house or I want to retire at 55 years old with $100,000 a year.  There’s nothing wrong with those goals but they can also be “I want to get out of debt.  I don’t want to have credit card debt anymore or I don’t want to have to look at the prices on a menu when I go out to dinner because I want my money to be working for me.  I work hard.  I want to be able to go to a restaurant and not have to get the cheap glass of wine versus the more expensive ones.”  Those are goals.

So if you can figure it out. It’s not up for discussion, right? Your goals are your goals.  It’s not what your neighbors would think, your friends would think, your family members would think, your colleagues would think.  Whatever you want, whatever is important to you in your life, those should be at the forefront of your plan as goals and then you can work backward from there.

So if I want to be able to spend $200 a week on date night, what do I need to do to get there? Some people just say, “Make more money.  I’m going to drive Uber,” et cetera, et cetera.  But part of having a plan is sitting down, looking at your resources, looking at the money coming in and the money going out and saying even if you only take home $3,000 a month, what am I currently spending that $200 on right now that I’m not using toward that date night? And so it’s really having a plan just involves reversed engineering the lifestyle that you want to some degree.

So sometimes it’s saving goals, sometimes it’s lifestyle goals, charitable, it doesn’t matter what the goal is but it’s making sure that you’re working hard and you’re not working hard to just have the money come in and the money go out but you feel that you have nothing to show for it.  You should have something to show for it.

Hoff: And your book is called \u2018If You Love Your Family, Save Like It.’ What is saving in a responsible way that shows how you love your family? What does that look like? In other words, what decisions do you see people making that are very bad decisions when it comes to the overall financial health of their family?

Peterkin: The worst decisions at a basic level are the people who haven’t done foundational planning.  To me, foundational planning is making sure that you have some kind of emergency fund so that if something happens, you can fix your car or you can take the day off work to spend with your kids if they’re sick and you don’t have to be making day to day decisions at a basic level because you don’t have money or you don’t have credit or you don’t have access to some kind of cushion.  So one part of it is the emergency savings.  People who don’t have any access to emergency savings, that’s a dangerous place to be and I feel like that is showing that you don’t love your family.

The other side of it not being properly insured.  My dad, thank God, had life insurance.  So when he passed away, we had no idea what to use the life insurance for because it wasn’t a ton of money but at least we had something to show for it.  There are so many people in this country who they haven’t protected their income with life insurance, they haven’t protected their paycheck with disability insurance.  Nobody expects anybody else to die, nobody expects themselves to pass away or to get injured.  But if your family depends on your paycheck for a mortgage, to put food on the table, to pay for after school activities and the clothes on your kids’ backs and you don’t have life insurance, I feel like that’s a huge, huge mistake.  Yeah.  And the disability thing too.

I can’t tell you how many stories I’ve heard about people being unable to work.  You know, you get in a car accident, you got a cancer diagnosis, something happens where your employer is not going to continue paying you and then guess what, you’re moving back in with your parents.  That’s not showing love to your parents.  Family isn’t just \u2018I have kids and I’m taking care of my kids.’  Family is \u2018I’m taking care of my own financial situation and making sure that things are taken care of so that if something happens to me I’m not forcing other family members be it parents, siblings, friends, people who love me to step in and sabotage their financial security to try to step in and help me.’  Why would you want to put them in that position?

Hoff: Absolutely.  And you discussed though how we also put money in the wrong places sometimes, so maybe it’s overpaying for certain insurance plans that we don’t need.  You gave one example of putting more toward a house mortgage when you really should be paying down high-interest credit card debt.  Can you talk a little bit about that? Even though our intentions might be good and we’re paying down certain things or we’re paying for certain insurance plans, it’s really about making the smart choices and looking at the numbers before making those decisions.

Peterkin: Money is emotional, right? Money isn’t logical.  So whether you have a plan, whether you’re working with an adviser, whether you’re working by yourself, there’s always an emotional aspect to money.  So there are triggers in society and things that we’ve learned from our parents or from the talking heads or from whoever that things are good and bad, right? Everything has a charge.  Credit card debt is bad.  You know, student loan debt is good.  Or now, student loan debt is becoming bad because people aren’t getting jobs.  But it’s always this \u2018is this bad, is this good? Is this right? Is this wrong?’

And so I think when it comes to debt, there is no straightforward right and wrong, in my opinion.  I think that sometimes people go on autopilot when it comes to their finances, and it makes sense because when it comes to daily life we go on autopilot, right? Like, you wake up, you make your bed or you don’t make your bed.  You brush your teeth or you don’t brush your teeth.  You take a shower.  You do all of these different things according to your routine.  And I think with money we get into this routine so you might say, “Okay.  I really want to pay off my mortgage faster.” So you start funneling all this money toward your mortgage – meanwhile something happened.  Your roof leaks so you needed to replace your roof.  You didn’t have an emergency fund.  You charge on your credit card so now you have this credit card with 20% interest or 29% interest.  The credit card itself isn’t bad.  The fact that it’s costing you a lot of money is bad.  So you’re paying off your mortgage at 4% when you have a credit card at 29% and it’s not really hurting anyone except for yourself, right? You’re paying the bank more money, the banks that you have your credit card with more money when you could be keeping that money in your pocket.  So I think it’s more — the way that I think about that, that isn’t necessarily good or bad.  That is a tool.  So that is a tool to create leverage.

In my opinion, if you need a certification to be able to get a better job and you charge that on a credit card, that could be an investment.  I don’t care if the credit card interest is at 29%, you are doing something that will make you more money in the future and continue paying dividends in the future because you chose to make that investment even if it’s with a high interest investment.  To me that’s not that bad, regardless of the vehicle.

So when it comes to figuring out what debt to pay off and what debt not to pay off, obviously the first debt that you should pay off is high interest debt but also don’t be so focused on paying off high interest debt that you don’t build up savings and that you aren’t putting away a little bit of money long term for retirement.  Because I think sometimes the single focus on “I have to get rid of all this debt before I start building a foundation or before I start saving for retirement” can make it so that you’re missing out in the retirement scenario compound interest and pros.  And in the savings scenario, you’re potentially setting yourself up to accumulate more debt.

Hoff: You would suggest almost automating it.  So saying, okay, this much a month is going from my bank account straight to this retirement account.  This much amount is going from my bank account straight into the savings account.  Here’s what I have to pay down debt and almost in a way where it becomes a habit so you’re always building a retirement account, getting compound interest, you’re building a little emergency fund but you’re also taking care of that debt and you’re taking care of all of them at once.

Peterkin: Absolutely, yeah.  And on regular debt, on debt that’s investment debt, I would focus on paying the minimums.  Not on your credit card but on your mortgage, on your car payment, on those kinds of things.  Pay the minimum and then look at what you have left over and figure out, okay, do I have an emergency fund or not? If no, yeah, put some of that extra money toward there.  Am I saving for retirement or not? If your employer offers a match, okay, put some money in your employer account; get some free money.  And then if you still have money left over from paying off your debt, paying off your fixed expenses, putting a little money for emergency and putting money into retirement or college plan or whatever is important to you, then pay extra off of your debt.  I mean credit cards are a little bit different depending on how much credit card debt that you have but I would argue that even somebody who has substantial credit card debt could benefit from putting $25 a month away for retirement still or still putting $25 or $50 away for emergency fund and then funneling the rest of their money toward paying down that high interest debt.

Hoff: You do talk a lot in the book about also how taking general investment advice can really hurt you in some ways because obviously every family, every person is individual and has different needs and wants and costs and debts and so it’s really important about finding a personalized financial plan that works for you.

Peterkin: Yeah, definitely.  I had a potential client recently request a meeting.  And during our meeting, she was telling me about what her and her wife had done and were currently doing when it came to their finances.  And she told me that she was putting 12% away into her 401(k) because her parents — this woman is in her forties — because her parents told her that every single year you should try to increase the percentage that you’re putting to your 401(k) or to your work retirement because that’s the only way you’ll be able to retire since there’s no pensions anymore.

She started at 4% and every single year she ratcheted it up, ratcheted up, ratcheted it up, and so now she’s putting 12% of her income into her retirement, her wife is putting 12% of her income into her retirement. They have a bunch of debt and they’re not saving at all it’s because four years ago, they decided that they wanted to get pregnant.  They’re a lesbian couple. They had to do fertility treatments. They had expenses associated with having a baby that other heterosexual couples don’t have.  And so they made that decision which is totally fine, that’s great that now they have this little child but they didn’t adjust the retirement contribution.  So they are literally suffocating: garaging, couponing for groceries and making sure to take the bus instead of driving and they’re doing all of these things, sacrificing lifestyle to be able to put away 12% for retirement.

And when we actually talked about what their employers give for retirement, they’re way overfunding their retirement.  They could definitely cut back on retirement and still be okay.  And so that was part of the conversation.  It’s just like, “Hey, look, you don’t need to hire me right now but lower your retirement contribution.  I’m proud of you for getting there but you don’t need to kill yourself.  You don’t need to do that.”  You can’t take the advice of people who don’t have a vested interest in the outcome is my rule of thumb.

Hoff: Absolutely.  I love that.  In every facet of your life, I think that is the number one rule of thumb – don’t take advice from anyone who is not invested in the outcome of that advice.  And you talk about saving the wrong way in the book.  So how can you save smarter and not harder?

Peterkin:  The number one way to save smarter and not harder is to make sure your money is working for you.  And it sounds like common sense but you’d be surprised at how many people I’ve sat down with are talking about what money they have in cash and they’ve actually done a great job in building an emergency fund but when we look at where their savings are, they are making 0.03 of a percent when there are banks out there offering 1%.

My bank just reached out by email last week and said, “Oh, we just pumped up our 1% interest to 1.05%.” So if you have money in a retirement account, I had clients who are in their sixties who came to me for retirement planning, they had all of their money sitting in their Roth IRA and it was in cash.  That’s saving harder, not smarter.  You’re working so hard to come up with this money to put away for retirement or put into savings.  Not all money can be invested in the stock market but if you’re going to have money sitting in cash, put it in a CD if it’s a little longer term, put it in a higher interest savings account.  There’s no harm in that.  There’s no additional risk taken.  But it’s the difference between having cents credited into your account and having dollars, and that’s money that longer term can really work hard for you.

The other way is just to make sure that you’re saving in line with what your goals are.  If your goal is that you’re saving for retirement, it’s likely that you should be saving in a retirement account and not just putting money in your bank account or in a regular investment brokerage account because retirement account have benefits that help it grow faster because of tax deferral.

So same thing with college planning.  I got those clients who say, “Yeah, we have all this money in this investment account for our kid for college.” And they absolutely know that their child is not going to be getting financial aid because the parents make $300,000 a year.  Still, instead of putting it in a college plan, they’re putting it in a savings account or in a shorter term investment account.  So things like that don’t make sense.  Even beyond talking about what investments are good or bad or are the best for you or worst for you in terms of your personal situation, having money in cash not growing at a higher interest rate when the higher interest rate is out there in the market doesn’t make sense.

Hoff: So do you suggest people who feel better having some money is a savings account rather than putting it all into let’s say an investment account, do you suggest they shop around in different banks to see what’s the best possible interest rate they can get?

Peterkin: Yeah, definitely.  There’s Google.  This isn’t like 30 years ago or 40 years ago.  It would take somebody five minutes to log into their bank account, pull up their statement, and see how much interest they’re currently getting.  I’m telling you right now if anybody’s listening to this and you are getting less than 1% interest in your bank account, you can be getting 1%.  There are at least four banks locally — I live in the Boston area. There are at least four banks locally who lends all over the country, who lends nationwide that are giving 1%.  There’s one bank locally that the interest rate is 2.05%.  There are couple hoops to jump through but they are at higher interest out there.  So Google, ask somebody.  Yeah, definitely, there are options.  

Hoff: All right.  Let’s talk about real estate.  A few guests on my show have said that you house is not an investment.  And Robert Kiyosaki in particular who wrote “Rich Dad, Poor Dad” told me that your house can be an investment or a liability depending on how you use it.  Let’s go into the real estate myth that you talk about in your book and how we should be thinking about properties and our own homes.

Peterkin: Yeah.  The myth that your house is an investment really bothers me.  Like you said, it’s been echoed in the market.  There are a lot of people who are now saying your home is not an investment, it’s not necessarily.  An investment is something that you can calculate a tangible return on, right.  You’re making an investment to have a return.  And so buying a home to live in without any regard for what the expected growth in value is or whether or not you can rent this down the line or how much work and additional investment is going to be needed, investment meaning my roof is leaking, I need to replace my roof or I need to add a fence in the backyard because we decided to get a pool.  There are significant costs associated with owning.  It’s not free.  It’s not just pay your mortgage and you’re done.  There is maintenance, there’s insurance, there’s property taxes.  And if you’re just buying a home to live in and that’s the only consideration, can it be an investment? Can you make money off of that home long term? Yes.  But these days it’s much harder because you have this societal feeling that you should get into whatever house you can hoping that it will appreciate and then in three to five years or seven years selling and upgrading to a bigger house.  Buying a house is expensive.  The costs upfront are expensive.  So if you aren’t buying a house to stay in long term, chances are you might get your money back but the money paid that you could sell it for what you bought it for or you can sell it for a little more than what you bought it for.  But the other expenses that were associated in terms of interest, property taxes and insurance, you likely spend more than what you’re actually seeing.

Hoff: And so you have an interesting setup where you say in your book that you actually live in a multi-family home and you live in one of the units and you rent out the other units.  So you’re generating income on your property.

Peterkin: Yeah.  So when I bought my house in 2012, I had started my business in 2011.  I knew that income wouldn’t be steady.  As an entrepreneur, it’s variable income month-to-month so I wanted to be able to build in some kind of stable passive income and I thought that purchasing an investment property would be the way to do it, purchasing multi-family would be the way to do it.  So what I started to do was to get tenants in there, live there myself, and it worked out.  I mean, the mortgage was covered and I got to live there for free and I got to build my business and it was up to me whether or not I lived by myself in one of the units or whether I have roommates, and I made the decision to have roommates.  So it’s not the right decision for everyone but that’s the difference between looking at it as an investment or looking at it as a convenience or a luxury.  If I cared more about living by myself and having my apartment to myself, well then I’m not getting the return that I’m getting from the sacrifice of living with somebody else but it’s a decision.  Everyone has options.

Hoff: Let’s talk now about being an entrepreneur because that’s one of the chapters in your book, and I think it is an important subject right now because we’re seeing more people than ever who want to be entrepreneurs and starting their own companies and you don’t even need to have a lot of capital upfront because we have online ways to have little businesses and we don’t even have to get a building or rent an area yet you call the entrepreneur trap because there’s this belief where we read so many stories about these entrepreneurs who dropped out of school and made billions of dollars.  We think we can be one of them yet most are not success stories.  So talk a little bit about the entrepreneur trap and if you are thinking about kind of striking out on your own, what you need to be keeping in mind especially in regards to your families’ finances.

Peterkin: Yeah.  So the entrepreneur trap is like buying into this belief that becoming an entrepreneur is going to give you so much more money, so much more freedom.  It’s that idea that being the boss of yourself, especially with all of these online businesses and there’s the ability of being able to work from anywhere because of the internet, it’s the thought that you can just be sitting on the beach sipping pina colada while you’re working and then it’s this glamorous lifestyle when in reality, I think people don’t understand that to net $100,000 as an entrepreneur, you need to make significantly more whereas making $100,000 as an employee, you just have to make $100,000.

So the idea is as an entrepreneur, there are all these other expenses, right.  Even if you’re a consultant and it’s your intellectual capital that you’re selling and not necessarily a product, there are costs associated, right.  There is a client relationship management system.  You need to hire an attorney to make sure that you have legal contracts that you can actually enforce with your clients.  There’s marketing expense and dollars and overhead if you need to buy faster internet for your office.  Expenses are different for every entrepreneur and depending on what you’re doing.  But the whole concept is you’re paying self-employment taxes, you’re paying your own health insurance, you don’t have an employer providing pretty much anything for you.  You are the employer. So you need to bring in more revenue than you want to live off of to be able to be able to grow.  And there are a lot of entrepreneurs who — they’re a one-man show.  I’m basically a one-man show.  I have a junior adviser under me and I have different virtual contractors I pay to incorporate into different aspects of a client’s plan but really and truly, if I don’t show up, my business doesn’t keep running.

So there’s this other piece of it where if you haven’t built a business to sell, if you’re not running a big operation; a business where you have a general manager and you have a CEO and you have all these different people who have different roles, then you are your business and that lessens your freedom.  So you’re working in some cases harder for, if you look at it, less pay.  As an entrepreneur, you better be passionate about what you’re doing and probably be willing to roll up your sleeves and take on some additional risks.  I think it’s worth it or else I won’t be doing it but I think that there are a lot of people who decide to quit their jobs and think that they can do it better themselves and then they are unpleasantly surprised when the revenue doesn’t start rolling in and when there are all this different expenses and people knocking at their doors.

So, I think the biggest thing that you can do if you’re thinking about being an entrepreneur is just to make sure that your finances are in order as an employee.  Because if as an employee, you can’t manage to save and cut back on your spending and properly allocate your resources, then without the stability of a paycheck, you’re going to be in trouble.

Hoff: And you can write a lot of stuff off in your taxes but that doesn’t mean you’re going to have a lot more in the bank.

Peterkin: There’s this thing, “Oh, it’s a business expense.  It’s a business expense.” I hear that all the time.  Well, that’s okay because it’s a business expense.  You can just write it off.  And people who are entrepreneurs say that and people who are not entrepreneurs say that.  The bottom line is who cares if it’s a business expense; you still have to write the check.  Yeah, you get some money back on your taxes but you have nothing to show for it.  The additional risk of having, in some cases payroll and some cases other people depending on you to put food on their family’s table but never really knowing where the next client is coming or whether the next product is going to be a success or a failure oftentimes has entrepreneurs more hesitant to actually invest and to actually save and to actually cut away.

Hoff: What are three things that somebody right now could do immediately to start showing their family that they love them financially and really starting to really prep for the future and have a financially sound plan?

Peterkin: The first thing is to look at your expenses.  And I know that nobody wants to do that, everybody hates budgeting.  But look at your expenses, pull up your credit card statement, your debit card statement, and take a pen and literally check off everything that you spend money on that you really love, that you are happy that you are able to afford that.  So coming at the budget or looking at your expenses from a place of what am I glad that I can afford now that I couldn’t afford before or that I wouldn’t be able to afford if I wasn’t in my current position and checking off the things that are really, really valuable to you is a good exercise. Because if you look down your statement and you see that you 50 transactions but you only have 10 checkmarks, now you have a starting point, now you can look at it.

And step 2 is to look at all of those things that you checked off and to see how do I make it so that I can keep these things in my budget so I can always spend money on these things or potentially spend more money on these things that I love, that I care about, that I’m proud that I was able to spend.  So when you look at the rest of your statements, you’ll be more willing, I think, or like in a different mindset to be able to cross off all the things that you spent money that you don’t care about.

If you have like Dunkin Donuts or Cumberland Farms on your credit card statement 10 more times and you didn’t check off any of those because you don’t really care, you just got coffee and your latte isn’t like self-care, it’s just like I need a caffeine and I didn’t plan well in the morning, then cross all of those out, those don’t bring you joy but they’re draining your paycheck.  Would you work an extra three hours a week to be able to pay for that? Most people would say no, I’m going to leave work and not buy that.

And so looking at where you can cut immediately, you’ll likely find significant money that you didn’t know that you were spending on things that you did not care about that you can then allocate to an emergency fund or a college plan or retirement or to get the disability insurance that you don’t have or to get the life insurance that you don’t have to be able to strategically plan better.  And if you find $500 a month, you don’t have to save all of that money but now you have money to save.  Now you have some money to save that you didn’t have before.

So that exercise is the first two steps that I would recommend.  The next step is just look at all your fixed expenses and question everything.  What I’ve seen is that writers for different financial magazines and different financial experts like to say that the reason why Americans are broke, the reason why they have such high credit card debt, the reason why they don’t have enough in savings or a lot in savings is because people are buying all of these extravagant things.  It’s the Gucci bag, it’s the Mercedes, it’s the X Y and Z luxury items.  That’s the reason why people can’t save.  It’s the $4 Starbucks.  Starbucks is the devil.  I’d like to argue that most of your money is hiding under the veil of necessities.  Your money is going to things that you think you have no control over spending when really you do.  So it’s in your cellphone bill.  Yeah, you need to have a cellphone, you need to communicate but are you on the cheapest plan or the best plan that fits your needs?

I have clients all the time who are calling Comcast, calling Verizon, calling their insurance agents seeing if they can get a discount on their car insurance or on their home insurance.  Those are things that — you’re not going to get rid of cable.  I mean, some people do.  But you’re likely not going to get rid of cable but are you paying for HBO and you never watch it, like when Game of Thrones isn’t on anymore? Get rid of it.

So looking at those kind of things, people can save significant amounts of money on just being more critical about looking at what they have just dismissed as fixed expenses that’s just are what they are.

Hoff: Yeah, and don’t give you any pleasure really.  You’re just paying more for something than you should be paying.

Peterkin: Right.  I had a friend who was paying for ClassPass and she never went.  And I was like, “Why are you paying for ClassPass? How much does that even cost you?” She was like, “It’s $85 but if I ever want to go to yoga or if I ever want to go to a class, ClassPass is cheaper than just paying for a drop-in for the same amount of classes or for less classes.” And I was like, “Yes but you don’t go.” I went and figured out that ClassPass has some kind of different plan and I’m probably butchering this but instead of paying $85 to keep her ClassPass then it was like $19 and she still has the option to go but then she just pays a little bit more when she actually uses it.  A $65 savings? I’ll take $65.  I would have canceled it but she downgraded it and still saved a ton of money.

Hoff: Absolutely.  So three big steps.  Look at what you’re spending.  Check off first the pleasurable part, all the steps that you’re happy that you can spend money on and that gives you a lot of joy.  Cross out the stuff that obviously means nothing to you and start deducting that from your monthly expenses and then look at ways that you can save money on not the extravagant purchases necessarily but saving money on the things that you pay for automatically without thinking about it that you could probably be paying less on.

Finally, our show is called Charged Up.  Nicole, what get you charged up about truly understanding money and how it can work for us?

Peterkin: I just love the idea of being able to have a lifestyle now and have your money be the tool for you to get the lifestyle that you want instead of being the obstacle.  That’s what gets me excited.  I don’t want to save every penny for a later that might never come.  I want to have the lifestyle now and I know that you can do it with proper planning.

Hoff: Nicole, thank you so much for joining me today.

Peterkin: Thank you.  This was awesome.


See related: Charged Up! podcast: Becoming financially literate


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