(Part 1) Set up Automatic Savings – Your Future Self will Thank You

00:00 Matt: Welcome to the increasingly poorly named real financial planning on WKXL, available wherever get your podcasts. I'm Matt Robison joined as always by Mike Morton of Morton Financial Advice and the host of financial planning for entrepreneurs. Why do we say that this segment on WK XL, radio podcast is so poorly named because it doesn't actually describe what you're going to get in this show. Mike and I do talk about financial planning after all he is a financial planner, but it really is within a broader of all kinds of topics about how you manage your day to day. It's interesting, as we get feedback and listener questions and talk to our listeners and clients, what they say is, hey, I like the financial planning parts this, but I like the context too, because we're all just trying to live our lives, make everything work, it together. And. We're kind of covering all of that, so let's just call this the TBD. Remember under arrested development when they couldn't figure out what fake charity they wanted to raise money for. So they said they were going to raise money for TBD. They never took that off banner. And then it turned out that people thought that was some dread disease. So they're like, yeah, I'm happy to give money TBD welcome to TBD, Mike.

01:14 Mike: Thanks. Thanks for having me, Matt TBD on WK XL. That's awesome. The name of of company is sticking to financial advice. So I got one thing going me.

01:23 Matt: Why don't you change your name?

01:25 Mike: I was just my name. Let's go.

[00:01:28] Matt: All right. Look we do have a topic today that actually fits smack dab into that intersection between how you live your life and making that a little bit more, stress-free manageable, easier. And the financial planning part you wanted to talk about. This is going to dull. I feel like I've built this up and it's yeah, but you want to talk about automatic savings. And I think the punchline on this is this really is that can make the management of your day to day a lot easier and it's better financially. So why do you want to talk about it?

[00:02:00] Mike: Yeah, is right. So I framed this as future spending because we love to spend money. And so let's get away from the savings and just say oh, I'm looking forward to spending money in the. All right, which is the savings and why automate this? It's really important because I want to take that stress out of your life. I want to set ourselves up to confident about your financial future. And so obviously savings is a big part of that. Now, many people listening have automatic savings already in terms of their 401k's 403 B's out of your paycheck. Remember when you joined your company and you signed up those retirement plans, you're automatically saving for that. So that's great. I'm just encouraging rather than budgets. We don't want to say the B word and a budget and, have to watch our dollars. If you save off the top with automatic savings, then you can spend whatever's over whatever's in your checking account. So that's another reason I really like these automatic savings. So let me tell you a story, Matt, about one of my clients had recently jobs. She was in the public sector, maybe making 100k year, was doing that for a decade. Really?

[00:03:17] Matt: That's not bad for the public sector

[00:03:19] Mike: That's right.

[00:03:20] Matt: Hey, congratulations.

[00:03:22] Mike: That's right. Public policy. She was doing really well. She's single middle of her career and

[00:03:28] Matt: the the single guys suddenly like, wait, tell me more.

[00:03:31] Mike: Yeah, we'll wait till I tell you this. So now she has switched to the private sector, working for a large tech company making over $200,000 a year. So suddenly her income has really really jumped. And of course we're the smart things with the benefits and the 401k, I But obviously her take-home pay you know has increased significantly. And so rather than I can already see where it's going, oh, it's to start building up she might spend a a little bit more here and there, but going to start building up and then you have more decisions to make, oh, my checking account now has quote unquote too much cash. Good problem to have. You want to automate those types of things. So you don't have keep coming back and thinking, oh yeah, I really should do something. What should I do? It's or four steps and then kick it, kick the can down the road. So right away, I wanted with her to set up automatic transferring $3,000 a a month from her checking account into a long-term brokerage account to set herself up for future success.

[00:04:29] Matt: So much. I want to talk about here, first of all, thank you for coming up with the future name of this show. It's to be the Tinder dating hour with Mike Morton and his stable of clients of highly eligible, single women who are earning a lot of money guys out there you can email Mike Morton and learn more about okay. All Right. I'm joking about that. That was on the verge creepy. First of all, I wanted to comment on what you were saying right at the top, which is, it's so interesting to think about saving not as saving, but as future spending my roommate right after college, was an econ major. You were an econ major. He was an econ major. One of these kids is not like the other. He actually went on to work for the federal reserve bank and actually be a consultant use economics. The rest of us kind of, he used to this was something he would explain to me because I wasn't as smart as he was, which is, there really is no such thing in economics as savings. There's current spending and future spending. And when think about it that way, what you're really doing, no one likes to think about savings. Cause it's dull it's right. It's like...

[00:05:45] Mike: It means you don't get to spend, I don't get to spend this $10. That's terrible.

[00:05:49] Matt: And so if reframe this, as would you like to, I mean there are two better ways of saying savings, right? One is instead of, would you like to save a million dollars. about, would you like to be able spend whatever you want in the future? That sounds pretty attractive. Or how about this one, Would you like to not really worry about money in the future and not spend any time on it? Yeah, that was the other thing that my roommate used say, which is that the only really truly limited resource in the universe is time, it's the only thing that you can't replenish. And so part of what you're doing here, what I hear you saying with this automatic savings thing is. First of all, it's about future spending. Second of all, it's about de-stressing process. And third of all, it's about saving you time and having manage all this. I have much more to say about but that's what I take away from...

[00:06:41] Mike: Yeah, that's right. Time is of the most limited resources maybe the only that's until get to live forever. Matt, is a future podcast episode, which I can more about.

[00:06:51] Matt: We should actually do that show. We should actually, I want to do, this is something you've said to me off the air, which is we're approaching like great singularity point where the number of years of life that we're adding in terms of life expectation is beginning to line up with a number of years of life that we're living, which means that. Anyway. I know... that's that, but there's, there is an interesting, there's so many implications of that. Yes.

[00:07:17] Mike: I will in fact, I'll write, I'll put a pin in that because I was having a discussion this week on that topic and there's financial implications of course, if we're living forever, there's implications, but even living a longer life I had some thoughts so put a pin in

[00:07:30] Matt: Let's put a pin in

[00:07:31] Mike: hundreds or beyond. So yeah, being. About your future, man. is the number one thing, especially today. I find that everybody I talked to, Hey, Matt, your day. Oh, there's so going on kids this, career that, really busy, like everybody's busy right so trying to reduce that, just 5, 10, 15%. It makes a difference. So by making a decision once and not having to revisit the decision over and over again makes a difference

[00:08:06] Matt: Can I I jump in on that for a Because when I worked on Capitol hill, the one best piece of, I took a management there's actually a, there's a, not-for-profit called the congressional management foundation that teaches staffers to manage congressional offices better, it's like a mini business school for the public sector, really good. They do a great job on time management. And honestly, the most useful thing I ever did was spend an hour in that training. And the thing that I retained the most from it was you do make sure only crosses your desk once. And so if you have incoming emails, don't let that drive your attention. Don't respond things as they come in, batch things set aside time, I am going to now answer emails, and then you look at it you process once you don't come back to it over and over again, set things aside onto the to-do list I'm going to engage with this once because otherwise what happens is. All that incoming stuff across our transoms. It drives us our attention goes in many different directions at once, no one research has proved this, no one effectively multitasks when you multitask, it just means you're doing many things badly. The key is, this is a piece from the actor, Mike Myers. He said that his dad's advice to him was one job at a time, every job of success. And that's really this boils down to. The financial piece of this that is so compelling here is just by that 10% reduction of decisions you have to make steps you need to take and just processing the savings once the fire it and forget it is it's so distressing, it's so much more efficient and it's so much better. You're the job once and you're making it a success.

[00:10:04] Mike: this is now a time management podcast, but on that topic, you know of the other ones that we're going to record today is on attention, that'll be coming out in a a of weeks as well and it's exactly this topic that are bombarded, our attention is now bombarded. This isn't a problem we had 20 years ago, but it's a problem today and think it's definitely worth discussing in context of productivity and money management and all those other things, reminds me of a quote, from one of our professors, Barry Schwartz, who spends time thinking about a lot of these decisions and the paradox of choice. And his quote is things that used to require no thought or effort now require a lot of planning in the COVID world so much is uncertain we haven't had practice making decisions under these circumstances. And that's just highlighting what you're saying. there's so many decisions that are, with just email load, right taking that, and people really can relate to that. Your inbox is full stuff is coming in all time. Your attention is being bombarded, and we need spend a a little time on that. So on this again, getting back to this episode, the automatic savings, Hey, I switched jobs. I now have a greater income, that's fantastic. So rather than having to kick can down the road and say oh, I'll spending some more and then the account's going to grow and what should I do with it? And how should I invest it? Let's get ahead of that game and look, I think I can save an extra thousand dollars a a month. So go ahead and automatically transfer that a longer term brokerage savings or brokerage account. You don't even have to get it invested right away. Just set automatic transfer all these banks now do that, right? You go in, Hey, I want to transfer you up once a month from this account over to this other account, get it out of your everyday checking account, where you and pay all the bills and off your credit card and do all that stuff and get it into an account that you don't check.

[00:12:01] Matt: Can I just bridge over to another discussion that we had a few months ago when we did an episode on budgeting if you did not catch that not catch that episode, go to financial planning for entrepreneurs, Mike's podcast or you can go To the capital closeup podcast feed it's also but you did this episode on did this very quickly alluded to this alluded to this just a moment what you recommend what you recommend to your clients isn't to come up with a budget makes me feel when I heard that the when I heard that you're a terrible you're a terrible Why do you have a Why career have And then I realized no realized no no no, I'm wrong. I'm wrong. I have that backwards. It's brilliant. Because what you're really you're saying take care of the take care of the savings take take care of the automatic savings. And then if you've taken care of that you know that whatever is what you're able to spend. Yes to spend first of all first of all, that's but we were saying at the top of the show, that's also just also just stress management, time management, just making your life better because what you're doing is that Barry is that Barry Schwartz paradox of is his, the finding that he's finding that he's most psychologist is there's of an optimum of an optimum number of we can have in front that we can you know three or four different choices feels like We have some feel like we have some agency in our lives, a dozen. choices 15 choices 15 choices, 20 choices. It's overwhelming. feel actually feel worse off and we feel And that's what that's what happens when you is that you're is that you're constantly making choices and trade-offs, should I spend on a, should I guns or butter? I don't know. Maybe it's both. Maybe I'm not sure, but the point is that's a that's an economics joke

[00:13:52] Mike: and butter

[00:13:53] Matt: That's the classic trade-off in economics. Go to any Go to any Econ 101 and they always and they always guns and butter.

[00:13:59] Mike: No, it's not guns and butter. pizza and beer. pizza

[00:14:03] Matt: that's a No That's false the answer is both answer, on guns and butter should someone who as someone who actually has gone to a blistering hot day, 90 that I got so sweaty that I actually dropped story. Luckily I had already discharged 'm telling you do not mix point is what you're saying what you're saying here with automatic savings is exactly you were advising. budgeting And the budgeting episode, just make one decision on the decision on the saving. And that reduces the number of the number of choices you have to make on the spending.

[00:14:43] Mike: Yeah, that's exactly right. And trust me, it feels great. I have another story for you. I was actually talking, you reminded me, I was talking to clients yesterday about the, very similar situation where we had gone through their income and expenses. And at it and realized you love this one, another good problem to have they had an extra sort of $80,000 a year that was unaccounted in terms of look, we, went through your expenses, you're spending about this much your mortgage and other things, and you're making this much and there's 8,000 left and it resonated because their checking account was quite large as well. Your checking account had or a hundred thousand dollars. That had just grown over time, to the point. And so it's great, is good opportunity, but let's save that, let's not find, oh, it's getting spent or the account balloons a little bit. And then you're like, oh, We got some money. Let's ahead and do these things you might want. Have that flexibility the future, how those opportunities for future spending. And so go ahead and save that automatically each month get ahead of that game so that don't have to keep revisiting it or, miss out

[00:15:52] Matt: it well It reminds me of the line from Hamilton where Aaron Burr is basically advising I can't believe I'm I can't believe I'm taking his advice he's basically you know he's basically advising Don't pick a side, keep your options open. And then the the line from the musical is you double your and it is kind of not thing. Now I'm not advising people here. I'm not Don't take my financial advice. Take Mike's my

[00:16:20] Mike: not advice.

[00:16:20] Matt: but I mean I'm not telling people, never. Because, you know that that is like a prescription Scrooge, dumb of like you know I don't want that I don't want that extra bread waiter, but what you do what you do is some in your life. I will tell you will tell you that my wife and I about a year ago, a purchase I'd call it like a I'd call it like It was a multi was a multi thousand purchase. And we weren't sure we were on the fence when this happened. And, this happens you know we were like know we were like, ah, save it, spend it. This is something that would do good in our lives but upshot is we decided not to do it. And one of that really that really pushed me over to that side of the decision option value. It's something in financial analysis that there is a value you get from open. And I thought you know what thought, you know what? If we don't invest in this now, if we don't make this purchase, there's nothing stopping us this year. Let's see what this few thousand dollars does. then it turned then it turned out that we made another even bigger financial decision and we had our options open and we were much happier. That's not always going to but again, just outsourcing this piece of your brain to the automatic savings It's just a simple way, a simple way of taking that off the table. Also realizing more of that more of that option could save it could save you could save it in a way save it in a way that it remains And actually, I want to And actually I want to Oh that's where I Oh that's that's where I want to go with you could defer could defer decisions like that, where you might have Let me ask you that exact that exact thing When you say automate automate savings, you are you suggesting. Locking available that can be in long-term investments that are hard to pull out of without pull out or without tax consequences where where should the, this Are there kind of multiple options there? Some of which are more Some of which are more liquid than others.

[00:18:40] Mike: Yeah. Good question. Let me also, just while we're on that topic of the optionality of future spending, like you were just saying I think next week's episode exactly on that waiting a week before Matt. So you need to tune in, I'm talking with Megan Russell. Who's fantastic? And it's all about waiting a week before spending your money. So exactly to your point eh, we always do. Next week or next month or next year. And then you see how it feels. And if you still really want that thing, then you go for it. It's man, I really want this. So tune into next week's now on this. So what do you do with this? So you set up automatic savings. It's 500 a month. So you got 6,000 a year, you decide? Yep. We sweep that away. I don't need to do that. I will spend that in the future. My recommendation is start small, always like starting habits, small. Just it up into a longer-term either brokerage or a separate savings account you don't check very often and just do that. So that's it, 500 a month automatically on the third day of each month, it'll get transferred from my everyday checking account where my direct deposit is from my paycheck into. Either a brokerage account where you could invest it or just to another savings account, that's step one. And the reason I always recommend that is to start small, start your habits and then let that go for a few months, make sure, yep. I really can save that. I didn't even notice it wasn't there. That's perfect. That's what I really want to see. And then at that point in three months or six months, some money has built up there. It's still all in cash. So to your point, Matt, if you need it, it's still right there. But at that point you can say, wow, yeah, I didn't need that money. I can invest it for the longer term. And you make a strategic decision How much to put into, longer-term investments locking up in the stock market, which go up or down or leaving it in cash be ready for a down payment in the future, some optionality you might want next year to be spending So that's when you make those strategic decisions and start small, easy, start with a habit, and then go from there in terms of your overall portfolio and investing and

[00:20:42] Matt: You know That's a really you know that's a really interesting point, which there's an upfront time setting up the Mecca. automatic automatic for a lot of these a lot of these put these but that's a large large part of it. What I found is that I do these automatic, like for example, for the five to nine accounts for college as an automatic as an automatic and it's fantastic. great. And recently I had to adjust and I had to adjust and I had to downward I, know for many know for many reasons. I will tell you that setting it up in the first place took me maybe 30 adjusting. It took me maybe And so one of the things that comes out of this is out of this is you know just take that first step you get so much get so much value out of then with it later with it later. Move it up, move it down it up move it down, whatever also I mean you can pair it let's say you're a regular a regular heard our recent our recent episode on I and you're like I want to get into I want to get into You know one of the You know One of the do with this do with could have an available. have an available Savings pool very easily easily convertible to something that's an opportunity. Like I , or you can you can there there are places there, there are places you can put maybe you're only know maybe you're only a six month window or window that are somewhat liquid. right there. Right of midpoint liquid. that let me let me do something. I want something. I want to let you know we are coming up to WK Excel and a Excel and kind of a natural I feel like we've got I feel like we've got a bunch more to talk about on this topic. to hang around and to hang around do another another quick show on this. All right. So here's what we're going to do. Might you go ahead and comment for 30 like 30 seconds we'll take a then we'll we'll take a quick break on.

[00:22:48] Mike: Good. Yeah. I was going to say on those there's other places to automatically save as well. Hey, I'm not currently saving in my individual retirement accounts. I know I can do 6,000 a year. That's 500 a month. You can automatically put that in. If you did know that this is for long-term savings, you can automatically do that 500 in a brokerage account, which is automatically invested in fund in the stock market. So it goes directly into the stock market 500 a month. So there are different ways, depending again, what sense for you and your situation that can set up the automatic savings, but to your point, Matt. Exactly. Right Just the 20 minutes today to set up the automatic So you know it might have create a a new account, the transfers, whatever.

Just

[00:23:30] Matt: we're going to pick up. on that up on that exact could be in your podcast in your podcast or it could be shown, or it could be on WK Excel in just a minute.

[00:23:39] Mike: Thanks for joining us on financial planning for entrepreneurs. If you like, what you heard, please subscribe to and rate the podcast on Apple iTunes, Google play Spotify, or wherever you get your podcasts. You can connect with me on linkedin or mortonfinancialadvice.com. I'd love to get your feedback. If you have a comment or question, please email me at . Until next time thanks for tuning in