Season 1, Episode 2: Why is it easier to talk about sex than money?

From financial shame to investing-curious

Talking about money can be awkward, fill us with shame, regret and even panic.

So why do it?

In this episode Sara and Caitlin talk about what it means to leave that baggage behind and focus on the future, no matter where you're at now. Also, Caitlin reveals the depths of her investing ignorance and Sara explains some basic terms and tells us how to survive a stock market storm at sea. (A metaphor that makes sense when you hear it. Maybe.)

And again, get ready for the one thing Women on the Verge of a Financial Breakthrough can do TODAY to take the first, or next, step towards building a strong financial future.

Ask us your dumb investing and finance questions on our contact page!

This episode was edited by Kim Shelton and Kelly West. Music by Bad Bad Hats and Devmo.

Transcripts for Episode 2: Why is it easier to talk about sex than money?

Music intro by Bad Bad Hats

Caitlin [00:00:06] Welcome to women on the verge of a financial breakthrough, the podcast where we're going to figure out finance one dumb question at a time. I'm Caitlin Meredith. I'm a mediator and a coach based in the Bay Area, and

Sara [00:00:20] I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup.

Caitlin [00:00:30] Yes, and a group where we get together with a bunch of women to talk about these very questions. And this is my opportunity to pepper Sara with a bunch of dumb questions for everyone else's enjoyment as well.

Music transition by Bad Bad Hats

Caitlin Sara. Yeah. Before we get to my super dumb questions, there's a bigger, I guess more basic question that I have that I wanted to talk to you about. First, before we get into the more like vocab questions, talking about money is so hard.

Sara [00:01:13] I know it really is. It's hard for almost everyone. Why is that?

Caitlin [00:01:18] Yeah, I'm going to ask you. I feel like you're the bartender of the investing world that people come to you because they finally made that move because they need help. They finally figured out they can't do it on their own, and they made the phone call. So when you find out why it took them long or why they feel so overwhelmed by it, what do people tell you?

Sara [00:01:41] Oh, that's a good question. I think that people often say that they're ashamed of where they are or where they are relative to where they think they should be. Or relative to where their neighbors are. So shame is the big reason that I think it's hard to talk about money. I think the general language barrier is part of it too, and not knowing how to talk about money without either feeling stupid or feeling like you're rude. So that's a big part of it. And I do think there are some set of people who maybe aren't interested in and don't value it, but I think that's actually a smaller subset of people.

Caitlin [00:02:22] Yeah. If someone wanted to talk to me about something like jazz, I know nothing about it. And if I feel like I'm supposed to. It's an impossible situation because if you like finances like that, you get to be a certain age and you feel like everyone else knows, right? And so you feel just like you're saying you feel so dumb, like it's too late to ask What is a stock? Yes, it's too late to ask the very most basic questions because everybody assumes, you know, and it's just embarrassing. Which obviously ties to that shame. So it's not even, you know, you start out with the shame about not knowing that much about it. And then this whole other level of shame that you should have not only known all about it, but done a better job of managing that part of your life.

Sara [00:03:14] Yeah, I think that's true. I mean, one of the things I get all the time that I think a lot of people have, the sentiment is why didn't they teach us this in school? Like, why haven't I learned that before? But that kind of comes back to this idea that if I didn't learn it when I was young, now I'm too old to learn about it. Right? It's too late for me that I've made all these mistakes and I can't overcome them. Because if this was so important, why didn't they teach us in school when we were young, which I totally understand that sentiment, but I think that's kind of part of it too. You think like, OK, I'm 42 and I don't know how much money I have. I don't know if I'm on track. I don't know if I would be able to send my kids to college. I feel like I don't know anything in this very important realm of life, right? Why didn't they teach me to value this when I was back in school?

Caitlin [00:04:05] Right. And it's hard to figure out how much has to do with just not having natural curiosity about it. How much is a gendered thing? You know, we don't know because it was assumed we'd never need to know. And I think that plays into especially women, you know, grown up women feeling that they are as smart as everyone else, but they don't know that much about this one area. And as for me, I always had this force field around it, and the easiest thing to do is just to avoid that force field instead of March right in the center of it and say, I don't know anything and I think I need to know. Yeah. So when people come in who feel all that shame, you have the opportunity to actually look at what their situation is. Is there any relationship to the amount of shame someone feels and how much they've delayed this to what their chances are of making a financial recovery of actually having a stable, healthy financial future?

Sara [00:05:06] No, that's really funny. So I am a little bit worried that the people that I see in my office, who are a group of people who have self-selected to come and talk to someone about their financial situations are almost always people who don't have as much to worry about. Right. So a lot of the stories I hear in my office are from people who either end up being on track or being able to make changes that will get them back on track every once in a while. The numbers are really tough, right? And I think maybe in the of women's investing group and in being out in the world, I know for most of those people, the numbers are tough. And by that, I mean, what if you're not on track and not on track in a big way? What does that look like? I think in my practice, I don't see as many people like that, but I know that there's a lot of people out there in the world where it either feels that way or it actually is that way when you put the numbers down.

Caitlin [00:06:06] Yeah. And we're not encouraged to have the conversations, either. You know, you can talk about a lot of things with your friends or in social groups or with the parents of your kid's friends or whatever. But we don't talk about and share our experiences with many personal parts of our lives. But especially not like What is your retirement account look like, right? You go around having no idea what it's supposed to be, so you can really feel just bad that it's not as big as you think it should be.

Sara [00:06:39] Yeah, I was talking to a woman the other day who unfortunately is widowed, and she was saying that at some point she was so anxious about her new reality that she asked her friends if they thought she was going. OK. And I thought that was really brave of her to ask people in that moment of vulnerability, and I also thought it was brave for her friends to answer her. Right? Her friends looked at, you know what she had and tried to put, you know, her financial situation in context with theirs, right? Like, Oh, you know, you have more than me or we have about the same amount, or I know someone who is fine with that amount, right? But she was brave enough to have that conversation with her friends in a really vulnerable moment.

Caitlin [00:07:24] Yeah, it's like the most naked feeling to show. Right? So the spreadsheet of what you're looking at?

Sara [00:07:30] Right, right. So I thought that was so kind, like such a kindness that you can extend to someone is being the type of person that your friends can talk to about this, right? And of course, I think for most of us, it means, you know, understanding our own financial situation and understanding the journey that goes along with, you know, going from a more vulnerable financial situation to a more stable one. Or maybe you're fortunate enough to always have been in a stable position, but you can understand that other people aren't. But I just I really love this idea of women becoming that resource for the other women in their lives, and that's just like such a kind way to pay it forward, even if you're not a financial expert. Right? I don't think you need to be running people's financial plans or giving them recommendations on how to invest their 401k, right? It's just like, Hey, I have a financial question, you can ask me and I'll at least listen to you and we'll figure it out together, right?

Caitlin [00:08:24] Yes. And feel like we don't know these same things.

Sara [00:08:28] Yes. I mean, for people in relationships, I do find that, you know, by the time they make it into my office, you know, our first meeting is often the first time they've talked about a lot of these basic issues. It's the first time they've gathered all of their financial information together to see how much they have, right? Like what's the value of your assets as of this date? And certainly, I think it's the first time that everyone has been on the same page as far as how much money do we spend? Right? Usually, one person has a much better idea what the budget is than the other person

Caitlin [00:09:02] logging in and looking at the credit card

Sara [00:09:04] bill, right? Like, OK. Because with retirement planning especially, you can't get to the no like, OK, what? How much do we need in order to retire? You can't know that number until you know how much you need to pay the bills in retirement, which is probably very closely related to how you spend money today. Right. Like, I think we all have this like, I don't know, like this base. Wait right? Or like this base level of spending that we do right where you could diet and, you know, get real slim. You could cut back and, you know, have a really skinny diet or you could like totally live it up and overindulge and have a big budget. But most of us have this like, I don't know, like

Caitlin [00:09:46] the general cost of our lifestyle,

Sara [00:09:48] right? Baseline budget. I think that piece is by far the most important piece of information that needs to be shared between spouses because it drives every other piece of the equation. It drives how much money needs to be made, drives how you need to invest and how long people need to work and what everybody's expectations are for the rest of life. So I think that piece everyone needs to be on board with know what are we trying to do here? This much money comes in, this much money goes out. The money left over is what we have to save. Is that enough for what we're trying to do here, right?

Caitlin [00:10:24] Right. And the person who knows how much groceries costs and gas costs often knows a lot better about why money is going out and where it's going. I feel like when I have to estimate my budget and like per month, how much I spend on groceries, I don't know. Like $100, $600. What's normal? Like what was the target here taking pandemic out of that equation? OK, are you ready for some dumb questions?

Sara [00:10:53] Yes, I love it. I'm ready.

Caitlin [00:10:55] OK. This one sadly asking for a friend? Not really. How do you know if you're investing already?

Sara [00:11:04] Oh, how do you know if you're investing already? So investing is putting your money at risk with an expectation that you are going to end up with more money in the future. So I think, you know, you're investing if you have some money that is not just sitting in cash, so I wouldn't include the money you have in your checking account, the money you have in your savings account. Not really investing. That's just money hanging out there with no expectation of growth in this specific interest rate environment. If you have a 401K.

Caitlin [00:11:45] OK, so retirement account, a

Sara [00:11:46] retirement account, you are probably investing, but you might want to take the extra step to confirm that I see accounts that have a balance. Let's say there's a $30000 balance in a rollover IRA that $30000 is invested in cash or money market fund. So people will say like, Oh, I have an IRA. I'm investing, but you have to take one more step. You have the IRA and then you have the investments inside the IRA. Those are the most important things. So if you see something there that says Stock Fund or Equities Fund or Bond Fund or real estate fund, then you are investing. If you can't find anything that has any of those words on it, then you might just be kind of stockpiling cash instead of turning that cash into an asset that's expected to increase in value over time.

Caitlin [00:12:50] What are other examples of ways people could be investing and not know? I'm trying to think of like an inheritance? Is there something you could inherit and not realize that it was an investment?

Sara [00:13:03] You might if you inherit any kind of financial account that's not a savings account or a checking account. So if you inherit an IRA from someone, most likely that person was investing. And when you inherit an account like that, they just split up the investments among the beneficiaries and send you your portion. So in that case, you might be investing. You didn't really know you end up with an inherited IRA or an inherited brokerage account that already has investments in it that you didn't choose. You just ended up with them. So that could certainly be the case where you wouldn't know that you're investing. You're basically inheriting the investments that the person that predeceased you made.

Caitlin [00:13:50] I was so surprised when I first took your class investing for beginners, thinking This is about culture. I will never partake. And then when you started talking about retirement accounts, realizing, Well, I have a retirement account, how is that possible that I didn't know that that was the same thing, not for tax purposes, but as having some of my own brokerage account open where I was investing in the stock market.

Sara [00:14:18] I don't know what in your mind when you think back then, like, what did you think that account was and what it was for and what you were doing with it?

Caitlin [00:14:28] Well, what I was doing with it was ignoring, there's no question about that. I knew that it was from old jobs that I had worked at nonprofits, and I think I thought of it as something like a pension account or something where the money went into some underground system, not underground illegal, but just went through some mechanism where it saved me money and would give me that money back when I was older that it wouldn't necessarily been in the stock market. I mean, maybe I just never gave it a second, but that 403 b that I had or a 401k. Those seemed like a different entity than when I heard about the stock market being discussed. So maybe this is just really me. That retirement account seemed to have a life of its own, like there's a savings account, a checking account, a retirement account and then investing accounts, and that it didn't cross over.

Sara [00:15:27] I don't think that's just you. I think part of the confusion is that when we talk about retirement accounts, we often talk about the tax benefits you get from a retirement account. So sometimes if you're talking so much about like the tax benefits from this retirement account and you're not talking about the investing that is supposed to be done in the account, then I can see how it's like, Oh, I just put money aside pretax and saves on taxes today, and then something magical happens. And then I come back, give it back at retirement because that's a retirement account and someone gives me some money. Yeah, I can totally see how that would be like, Oh, it's a tax shelter. It's just taxes.

Caitlin [00:16:06] And when you get the brochure, you're just giving it full of all these words that don't say, like, welcome to investing in the stock market. You can have us choose this. Selection of stocks that we think are a good investment, or you can do it yourself, I don't even remember what the choices are, but it was very much like Choose your health care policy, choose your retirement account. Just one of many things where you had to check these boxes and that I didn't make that one to one connection that I am now going to be investing in the stock market.

Sara [00:16:40] I can totally see that I can. I can totally understand that.

Caitlin [00:16:43] The good news is it just sat there. I mean, who knows what they had chosen, but it was still there, even though I didn't know what it was. So I was investing without knowing that I was investing, and it made me feel excited that like, Oh, I had already had a start. So, you know, I would be just adding to that, that I already had that account there. Tell me this, though. So you figure out your invested and one of the things, as I say, I always hear you want a diversified portfolio, the portfolio. I'm going to go ahead and assume is just all the money you have.

Sara [00:17:21] Yeah, that's exactly right. OK. I love that your portfolio is everything that you own period, right? It's just everything you own and think of it like everything that's under this big umbrella that falls in the realm of things that I own. I mean, maybe I wouldn't put like your furniture or your cars or things like that. Then I'm talking about like accounts your house. You know, you would put your savings account in your checking account in there. They're part of your portfolio. Any digital assets or cryptocurrencies, you have all the retirement accounts. Put them all in there, and that's your portfolio.

Caitlin [00:17:54] OK.

Sara [00:17:55] And so the idea of a diversified portfolio is not having all of your eggs in one basket because if one thing goes really wrong, you don't want all of your money tied up in the one investment that just falls off a cliff and just goes very, very wrong. And so, you know, a lot of people end up in a relatively diversified portfolio without even knowing it because cash is a diversifier the equity in your house as a diversifier if you own your home in the financial investments world, we talk about stocks being diversified by bonds, so stocks and bonds kind of offset each other a little bit. So the idea is like when you look at your whole financial picture, do you have things in different investment types? We call them asset classes. Do you have things in different asset classes? Because sometimes real estate does really well, but then sometimes it kind of struggles or goes flat, and sometimes stocks do really well, but sometimes they struggle or go down. And so you kind of want to have a little bit of everything so that something is doing well at almost all points in time.

Caitlin [00:19:04] OK, but not all eggs in one basket thing. I understand that analogy, and I also wonder if this diversified portfolio. Is it something where you get a pie chart printed out for you? Like this is your ideal financial life? And it would say how much should be in each one, or just if there's four different slices per person in your pie? That's good enough.

Sara [00:19:31] I think that each person has like a investment diversification plan that's right for them. I tend to start with a mix of high risk, high return investments like stocks and then low risk, low return investments like cash or bonds. And just finding out from people, OK, like which of these things sounds more appealing to you? Perfect stability or maximum growth, right? Like because it's trade offs. If stability is the most important thing to you, you need to be in stable and therefore low growth asset classes. So your pie chart is going to look really different from someone who's like, I don't care about risk, I just want maximum growth. I just want this money to grow as fast as it possibly can. If I take some losses, it doesn't bother me at all. I'm just way out there, right? That person's pie chart is going to look really different. But having some idea of actually call it the risk return spectrum of each type of investment ends up being important so that you know what to expect when you invest in something, right?

Caitlin [00:20:44] OK, so Sara, you just said a term that I understand the each word separately, but when you put them together, I feel like someone is talking to me in a pinstripe suit and telling me I have to put on pantyhose. OK? I get all anxious. You said asset class very casually. And so I know what an asset is. And you know, I know what a class is. But just can you say what an asset class is?

Sara [00:21:12] Yes, totally. So an asset class is a group that we put assets into. If all the assets have, generally speaking, the same characteristics, so all stocks go into that stocks asset class because every stock represents ownership of a company. Bonds are their own asset class, so all bonds, generally speaking, are loans that someone has made to a company that the company needs to pay back with interest. Things like commodities, which are raw materials, things that you grow or take out of the ground and they get used up right, they get used to make other things. So gold. Gold, you know, that's a really that's a really tough one because gold sometimes gets put in a different asset class of precious metals. But sometimes people put gold into the commodities asset class. But I'm thinking like I'm an Austin oil and gas.

Caitlin [00:22:15] OK. Those are commodities, right?

Sara [00:22:18] So if it's a very broad category of assets and you just think like, OK, stocks, whether it's Apple or ownership at a small business, both of those things, if you own stock in Apple or stock in a small business, it is generally the same in that it's ownership of that company. So they would be in the same asset class.

Caitlin [00:22:46] So when you talk about diversified portfolio and that's when you mentioned asset classes, would we know what asset like? So I say I have stocks, so that's one asset class that I'm in. I have some bonds. That's another asset class that I'm in. I don't have any oil and gas, but like, are there a fixed number? There are five agreed upon asset classes and you need to have something from each of them or are there infinite number of asset classes? And we just talk about three of them.

Sara [00:23:21] Yeah, you can break them down into smaller and smaller pieces. I don't find that to be super helpful. So I would say if we're thinking about asset classes, I'm going to count these on my fingers. Cash bonds, large U.S. stocks, small U.S. stocks, real estate, commercial and residential real estate commodities, international stocks and maybe something like precious metals, maybe something like digital assets in cryptocurrency. That's an emerging asset class. Not everybody agrees as to whether it's an asset class or not. So that's I stopped counting on my fingers. How many was that like? 10.

Caitlin [00:24:06] You can trust her with your money, but the under 10 fingered count less secure. OK, but we're Sara. I understand why you use the word, the phrase whatever concept asset class, because that's your job. But do normal people talk about asset classes when they're like, well, my retirement account, blah blah blah? Like, if you can't figure out how specialized that is, you probably don't know you don't have any. Yeah, I would say,

Sara [00:24:37] like normal people probably don't use the term asset class, but I think that most people have a general understanding of the idea of diversification. That you want some money in cash, right? Just in case of an emergency, this is like your emergency fund, right? Your cash is going to act differently than your stocks, which are going to be different from your bonds, which are going to be different from the house that you live in. All of those things are assets. You own them and you expect them to increase in value or maintain their value over time. So those are four different asset classes, and I think most people would generally agree that you shouldn't have all of your money in one of those

Caitlin [00:25:23] in one asset basket,

Sara [00:25:25] right? You should have them spread out among the four.

Caitlin [00:25:28] OK, so the overall concept as what we were talking about diversified portfolio and then that's just like the folders within your diversified portfolio would be different asset classes. Yes, we might have our assets in four different classes some five, some two, whatever, but that the folders within that portfolio?

Sara [00:25:49] Yes, exactly. OK.

Caitlin [00:25:51] The other thing that you said that like just rolls off your tongue and because it rolls so smoothly off your tongue, you don't catch myself right away. The risk return the moment you say risk, I think bad. Don't do it. Yeah. You seem to say it in a positive way, like it's going to make me a bunch of money. And so I have these competing instincts to protect risk or that's bad. She's about to tell us how bad. And then you talk about these high returns. And I'm like, Oh, I got it wrong. So I know this is a much bigger conversation risk versus reward risk return. But just in this thumbnail vision of it. For you, making the most money you possibly can means a high degree of risk. Yes.

Sara [00:26:46] Yes, there should be. There's this relationship between risk and return. When you're talking about certain asset classes. Right. So going back to the asset classes, easiest thing to talk about with the risk return profile is stocks. The risk that we're talking about and that generally we're measuring when we're talking about stocks. It's a concept called standard deviation. Moody's standard deviation is how far are the actual results from what you expected them to be? So if I tell you, Caitlin, that over the last 30 years, on average, stocks have returned about 10 percent per year,

Caitlin [00:27:34] and by return you mean they made 10 percent a year. They increased in value by 10 percent every year.

Sara [00:27:42] Correct. Your total return has been about 10 percent per year on average. That would mean that looking forward, I would say, OK, well, I expect a 10 percent annual rate of return in the future, but that relationship only holds over long periods of time in the stock market. What actually happens is from year to year. So one year over another year, the stock market returns are actually something like 10 percent plus 20 or 10 percent minus 20, which is a huge range, right? That's like, oh, maybe they're up 30 percent, maybe they're down 10 percent year to year. Your actual outcome from year to year is going to be somewhere between down 10 and up 30. And that's not. It could be higher or it could be lower. But that is the risk that most people think about with the stock market is, Oh my gosh, I put my money in the stock market, and one year from now, I'm down 10 percent or I'm down 20 percent. Right. That is risky. The risk is that you freak out. You think you did something wrong, you sell at a loss, you lock in your loss and now you just I mean, you legitimately lost money by actually selling. So there's that short term relationship, but if you can get through all those short term fluctuations, meaning

Caitlin [00:29:12] the short term downturns.

Sara [00:29:15] Yes, most people don't have problems getting through the upturn. They have problems getting through the downturn.

Caitlin [00:29:19] So many people feel

Sara [00:29:21] So weird, right? So that's really the only volatility that really matters is the downside volatility. And so there's this thing called the equity risk premium that know

Caitlin [00:29:33] my anxiety trigger is bleeding so hard in my ear that I cannot hear you anymore. Sara

Sara [00:29:39] OK, OK

Caitlin I'm not going to let you continue on without explaining what equity risk premium means.

Sara Equity means stocks. It means ownership.

Caitlin [00:29:48] OK.

Sara [00:29:49] Risk is the additional risk you're taking because of the volatility of the prices in the stock market. Yeah. Premium means the return you get above and beyond what you would have gotten by being safe. So the equity risk premium over long periods of time is something like, let's call it like five to six percent per year above super safe investments. OK, Treasury bonds. That's why you invest in stocks. The additional risk you're taking has in the past always led to substantially higher returns over long periods of time. OK. You can't get one without the other.

Caitlin [00:30:40] The way that I break this down is that you're saying with higher risk comes higher reward. But thinking about the

Sara expected

Caitlin Sorry. She's a financial professional, expected. We do not guarantee you will make any money off of any no guarantees. OK. But you're saying OK with risk comes a higher return. But we expect OK. But you can't. There's a very different scenario when you think about what's my risk in a year from now of getting my money back or losing money versus what's my risk in 30 years that this money that I put in won't make me a lot more money? And the risk decreases the longer you're in the market for a huge loss like that and less the day you were planning to take it out with March 12th, 2020, or whatever day the market crashed. Like you said, bad luck.

Sara [00:31:41] Yes, that would be bad luck. That's another type of risk called sequence of return risk, but maybe we'll deal with that in another episode. But yes, like this, when I think about risk and standard deviation, it's the risk that in the short term, you panic and behaviorally can't handle the downside loss on paper, and you can't get yourself to the longer term, which is what you need in order to give yourself a higher and higher and higher probability of capturing the higher returns. Like, this doesn't happen like clockwork. That's what the risk is, right? That's exactly what it is if it was easy and like clockwork. You wouldn't get the higher returns. I mean, what asset class do we know? That's pretty much guaranteed. Like, you know what, your return is going to be over one year, the

Caitlin [00:32:33] cash under my mattress. Totally. Except for inflation, I guess. I mean, I know that I'll have that three hundred dollars. Exactly. But it might buy me a little bit less of an iPhone.

Sara [00:32:44] Yeah. So what is your rate of return in your FDIC insured savings account if you took it out of your mattress and put it in a savings account? What's your rate of return

Caitlin [00:32:53] 0.02 percent, right?

Sara [00:32:56] Like in September 2021, it's .02, not two percent, not point two percent point zero two percent, right? Which is nothing. So that's the trade off if you want to make money. There is no such thing as a low risk, high rate of return investment, especially now in a low interest rate environment. That's just like, that's what like Bernie Madoff promised people. Yeah, Bernie Madoff like, oh, there's no risk and you're going to get 12 percent per year. Like, Yo, like that is a red flag like a big one.

Caitlin [00:33:32] So we have to tackle a lot of this because what I'm hearing is the risk part I think of is like investing in a boat that might not be seaworthy. It might have a hole. It might not, but like, let's risk it in. What you're actually saying is the risk is I'm the risk by reacting emotionally to downturns in the market and doing something stupid and losing my money because of my own reaction. So clearly, we have to talk about this a lot.

Sara [00:34:06] Yeah, it's like the much bigger risk is that you're out in the middle of the ocean and a storm comes and you're afraid that your boat is going to go down and you, like, jump out of the boat into the water with your life jacket on and you put yourself in a much worse position than if you just stayed in the boat.

Caitlin [00:34:22] OK, so many metaphor

Sara [00:34:25] Does that actually work? on the spur of the moment. Kind of.

Caitlin [00:34:29] I'm under a blanket. I jumped off the boat right away. OK. Much to be unpacked there. But this idea of risk, I feel like we just have to keep coming back to because it is in my cells. There are some things all risk and other things that I won't. And money is in my cells to not take big risks because I need it and I will need it. And so it's hard. Not every time you say risky to think of a slot machine, I'm like, Well, I would never do that. So why would I do these other things? So we'll keep circling back to this idea of risk.

Sara [00:35:09] I love that we should do a whole other episode on risk and how to think about it in different types of risk and where you are the risk. Yeah, fester and where

Caitlin [00:35:21] the main aspect of the risk. That's what this podcast was totally called like.

Sara [00:35:25] Yes, blame the victim. That's what we'll call that.

Music transition by Bad Bad Hats

Caitlin [00:35:30] OK, now we can move on to one thing. So Sara, what is one thing a woman on the verge of her own financial breakthrough could do today to kind of the next step on her financial journey? What do you think?

Sara [00:35:55] Well, I'm going to talk about something that I think is a really important idea, but it's something I really dislike doing myself and that is putting together your baseline budget or.

Caitlin [00:36:12] I know. Yeah.

Sara [00:36:13] So I think personally, it can be really simple. You are just trying to get an idea of how much money flows out of your life every month or every year,

Caitlin [00:36:25] OK, every month or every year. So that's different than, like, how much do you spend on groceries every week?

Sara [00:36:31] For me, yes, I do not find it very helpful to put things into very precise categories. But I know there are a lot of people who do find that to be very useful to know where your money goes.

Caitlin [00:36:45] I feel like I have control over my life. If I know that right. 

Sara [00:36:49] A lot of people think if I know where my money goes, then I can be more mindful about my spending, and I would totally agree that that works for some people. But just knowing what the amount is is actually the first step. Do you spend $5000 per month? Do you spend $10000 per month? Do you spend $15000 per month? It's really, really important to know what that actual number is because we're going to use that number to do financial calculations on how much you need to get ready for retirement. And so knowing what the dollar amount is is more important than knowing what each subcategory is. In this particular context?

Caitlin [00:37:37] OK, so what if, though I think, well, right now I'm paying my mortgage, but by the time I retire that puppies paid for. Like, do I still put that in the No.

Sara [00:37:47] I would do a before mortgage and after mortgage number with something big like that, a big expense that you have now that you don't think you'll have in the future. It would be pretty simple to say I have a $12000 a month budget now, but I expect that my mortgage payment, which is $2000, will go away when I'm in retirement and then I will have a $10000 budget. So I think it's good in that case to be able to break out the mortgage payment. But I think a lot of people assume that their future spending is going to be really different from their current spending. Yeah, I don't know if that's the case.

Caitlin [00:38:25] OK, because I sort of feel like it's like asking someone their weight like, is it the weight that I hope I'll be by Christmas or what I weigh today?

Sara [00:38:36] Yes. And so this is where you need to be super honest with yourself, because when we do the calculations, it's important to have the right numbers are otherwise it's garbage in garbage out to these formulas.

Caitlin [00:38:50] OK, thank you for that first step. I'm going to really try on that one.

Music transition by Bad Bad Hats

Sara Hey, do you have any dumb questions about finance or investing? Send them to us at our website. womenontheverge.com.

Caitlin Hey, so many thank yous to Kim Shelton, our audio editor. Kelly West, who not only took the amazing photos for her album art, but helped with website design and music and mental health. Emily Kleinsorge, our stylist that did our hair and makeup for our photos from Lucy's Skyrocket. Lauren Gross and Taylor Gross, who helped us with our graphic design and

Sara our music is by Bad, Bad Hats and Devmo

Caitlin If your partner is making you ask for money, giving you an allowance, taking your money or not letting you know about or have access to family income, this could be economic abuse.

Sara Learn more at thehotline.org or call one 800 799 safe.

Caitlin So Sara Because you're a financial professional, we have to read a disclaimer for this podcast 

Sara I would actually really love it if you could read the disclaimer and your best legal voice. Oh my

Caitlin God, the legal voice. OK, doing it. This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Music outro by Devmo

Devmo The first thing you notice is that I'm covered in gold
The flick of the wrist it could turn a hot bitch cold
To get what you want in life girl you gotta be bold
Now Imma die rich