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HerMoney Podcast Episode 264: The Financial Checkup You Need Now

Kathryn Tuggle  |  May 5, 2021

It’s time. We’ve got all the steps you need to take to get your financial life back on track and to finally give yourself the financial checkup you need.

This week’s episode is for the moms! We want to wish a big Happy Mother’s Day to all our listeners who have chosen a motherly role, whether that’s as a mom or foster mom, an aunt or a mom-to-be — we see the work and love and hours you put in, and we’re so proud of you. This year has been rough for everyone, but it’s safe to say that no one has had a year quite like mothers… According to data from Fidelity Investments, 60% of women said they’ve felt much more stressed during the pandemic, with 80% of women citing the emotional and mental well-being of their children as their greatest stressor.

But of course that statistic comes as no surprise to moms, because when you’re a mother, you put your children first. Our families are a big reason why so many women stepped out of the workforce during COVID — to provide care and education to our children when they needed us most. Nearly 1 million more women lost jobs during the pandemic than men — 5.4 million women exited the workforce this last year, compared to 4.4 million men, according to the Center For American Progress.

And these figures are a big reason why we decided to focus this week’s show on getting back on track and finally getting to that financial checkup. It’s time to focus on our own goals — specifically, our own financial goals — after putting others first for over a year now. Thankfully, 70% of women plan to take action with their money in the next six months, according to data from Fidelity, and 60% of women now find themselves talking more about financial topics with family and friends, an increase from 34% since the start of the pandemic.

And while all of us at HerMoney are SO happy that you’re taking action and taking more, after the year that moms have had, it’s time you sat down for something more official — a real financial checkup. The kind of step-by-step checkup that will help you get your entire financial house in order like nothing else can. To help walk us through the most important steps we need to take is Sangeeta Moorjani, Executive Leader for Workplace Investing at Fidelity Investments, based in Boston, Massachusetts.

Listen in as Jean and Sangeeta talk about some of the biggest reasons why mothers stepped out of the workforce this last year or put their financial goals on hold. Then, we break down where to start with your financial checkup, whether you’re looking to get “back on track” with your money, or you’ve never developed a plan.

Sangeeta breaks down the main building blocks to a solid financial plan: your budget, your emergency fund, your retirement savings, and insurance. For all facets of the plan, we review the best ways to get started and how to tackle it if you’re short on time and feeling overwhelmed.
We also discuss good money habits — both growing and building them. Sangeeta shares her favorite money habits, and we also talk about some of the most important ones for moms (and the ones that will most need to evolve post-COVID.)

In Mailbag, we tackle listener questions on saving for children who are 12 and 14 years old, and where teacher retirement and pensions come into play when you’re examining your entire financial future. In Thrive, how to rebuild your savings post-pandemic.

This podcast is proudly supported by Fidelity Investments. Life is full of big moments—both the planned and the unexpected. Fidelity can help you navigate both with confidence. Learn more at Fidelity.com/HerMoney. Fidelity Brokerage Services LLC Member NYSE, SIPC.

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

Transcript

Sangeeta Moorjani: (00:00)
As you start the financial checkup, the first place you want to start is to start to outline and update your goals. And I know sometimes it’s really hard to envision what I’m going to do 20 or 30 years out, especially in the current climate, right? Who knows what I’m going to do five months, let alone 20 years out? But ask yourself some simple questions about your future life. What does future life look like? Would you like to travel more? Would you want to make more time to hang out with friends and family? Do you want to start a new business? Do you want to do something different in your career?

Jean Chatzky: (00:39)
HerMoney is brought to you by Fidelity Investments. Moms, is your money working hard enough for you? Join us for a candid Women Talk Money conversation with moms, and access resources to help you create a roadmap for your family’s financial future. Visit Fidelity.com/HerMoney to learn more.

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Jean Chatzky: (00:59)
Hey everybody. I’m Jean Chatzky. Thank you so much for joining us today on HerMoney. A big Happy Mother’s Day to all of our listeners who have chosen to go down the motherly road, whether that’s as a mom or a foster mom or an aunt or a mom to be. We see the work and the love and the hours that you put in. And even though you can’t see us right now, we are giving you a little standing O in our studio because this has been a year. It has been rough for everyone, but I think it’s pretty safe to say that no one has had it quite like moms. According to data from our sponsor Fidelity, 60% of women said they have felt much more stressed during the pandemic, with 80% of women citing the emotional and mental wellbeing of their kids as the greatest stressor. And you know what? I am sure that that statistic comes as absolutely no surprise to all the moms listening out there right now. Because when you are one, you put your children first. That’s just what we do. Our families are a big reason why so many women stepped out of the workplace during COVID, to provide care and education to our kids when they needed us most. Nearly 1 million more women lost jobs during the pandemic than men. 5.4 million women exited the workforce last year, compared to 4.4 million men, according to the Center for American Progress. And these figures, they are a really big reason why we are doing today’s show because it is just time to get back on track. It is time to focus on our own goals, specifically our own financial goals, after putting others first for well over a year now. To that end, although this is officially our Mother’s Day show, we have also crafted it so the advice applies to all of you. And on that front, I’ve got some really great news. 70% of women plan to take action with their money in the next six months. This again is according to data from Fidelity. And 60% now find themselves talking more about financial topics with friends and family, an increase from 34% since the start of the pandemic. I think that is amazing. At HerMoney, we are going to take just a little bit of the credit for that. And while all of us here are so happy that you’re taking action and talking more after the year that moms had, it’s just time that you sat down for something a little more, well, official. A real financial checkup. The kind of step-by-step checkup that will help you get your entire financial house in order. To walk us through the most important steps we need to take, I’m here with Sangeeta Moorjani, who is Executive Leader for Workplace Investing at Fidelity. She is based in Boston. Sangeeta, welcome and Happy Mother’s Day.

Sangeeta Moorjani: (04:09)
Thank you, Jean. It is such a pleasure to be here with you and I too want to start off by wishing all the moms, aunts, grandmoms out there a very happy Mother’s Day. Personally, I feel so blessed that my mom is around with me. So I’ll be spending mother’s day with my mom and with my daughter. So that’s going to be pretty special. And for the first time ever in my life, I’m going to be a mom to a pet, which is super-exciting for me and my family. At Fidelity, I have the privilege of working with teams who are focused on helping employers put together successful benefits programs for their employees. Thank you for having me.

Jean Chatzky: (04:54)
Oh, well, thanks for being here. I have to ask you two follow-up questions there. First of all, what kind of a pet?

Sangeeta Moorjani: (05:02)
I’m getting a cavapoo.

Jean Chatzky: (05:06)
Oh my gosh.

Sangeeta Moorjani: (05:06)
Yeah, so excited. So we get to meet him soon and we’re super-excited.

Jean Chatzky: (05:12)
Congratulations, Sangeeta. I’m excited for you.

Sangeeta Moorjani: (05:16)
I am thrilled too. You know, this is my first time and our home is already filling up with all sorts of goodies for our new little member at home.

Jean Chatzky: (05:25)
That’s amazing. The other follow-up I wanted to ask you was just about your day-to-day role in working with all of these workplace plans. I mean, I know that many of our listeners have work-based accounts with Fidelity. They have a 401k or a 403B. Just tell me a little bit about what you do every day and the job of managing these big workplace plans?

Sangeeta Moorjani: (05:55)
Absolutely Jean. And you know, it starts very much like you said, with a 401k or a 403B, but what the vast majority of employers that we work with for their benefits programs, they are thinking much more holistically about how they can help their employees. So the retirement plan is one aspect of it. But then how do we help people pay off debt? A lot of companies are adding services like student debt. A lot of companies are adding solutions to help people with their emergency savings. So there is a wealth of different benefits that companies are trying to bring to life for their employees. Focus on health and wellness. On mental wellness. I mean, we’ve all been through a good level of anxiety. I mean, I certainly have, through the pandemic. And so financial wellness is a very big focus and my team and I work hard to make sure that we have the right solutions for people to help them.

Jean Chatzky: (06:58)
So every day I know you hear from women about their big questions with their regard to their money. I mean, what are you hearing about the main reasons moms stepped out of the workforce last year or put their financial goals on hold? What were people struggling with?

Sangeeta Moorjani: (07:16)
You know, the past year has definitely created so many challenges and especially for moms and caregivers. Because it could be a mom, but you could be a caregiver for your own parent or another loved one. And, you know, Jean, what our data shows is that 45% of women we surveyed said that, during the pandemic, they took on a larger share of their household work compared to their spouse or their partner. And that required them to really think about how do drastically change things in their life. You know, moms became sort of the chief strategy officers at home, which is everything from I’m a teacher to I’m a school lunch worker to I’m an after-school supervisor, which is really very different from the role that they played during the pre pandemic. And, you know, that’s what required them to step away and give more time at home and reevaluate the needs of their family.

Jean Chatzky: (08:18)
I want to get into the meat of this financial checkup, but before we do that, I just want to point out the high cost of stepping out of the workforce. The folks at Fidelity have a calculator that they’ve launched about the cost of leaving the workforce. And the way that it works, you put in your age and how long you think you’re going to be out of the workforce, and when you plan on taking this break. And then it gives you a number. You put in your salary as well. And it gives you a number for the cost of taking this time out. And I think it’s such an important thing to look at because it doesn’t even include what you miss out on when it comes to social security or contributions to a retirement account or contributions to a health savings account.

Sangeeta Moorjani: (09:10)
Yeah. It’s staggering, Jean. And I like to start by the fact that anyone who is in a position to take a career break by choice, that’s a privilege and you should do it if you can. However, I tell friends and family, never think of it just as a paycheck that you are giving up, right? Number one, many people think they’ll take a break for a year or a few months. It’s always ends up being longer than you think. Number two, it’s important to think about what that means. The first thing you want to take into account is the financial aspect, right? The moment you decide to take a break from the workforce, you’re losing your salary. Your paycheck is impacted, but there may be bonuses. There may be promotions. You may be on the career trajectory to get a raise. Well, all of that is put on hold for a bit. Next, you’ve got to think about your retirement. If you were saving for your 401k or 403B, well guess what? Your employer is no longer contributing to your 401k. You are no longer contributing to your 401k. Many employers match to a certain amount, so that free money is no longer going towards your savings. And then the third factor is the compounding effect. When you save and you invest money, there’s a compounding effect. So let me give you an example of a 35 year old mom who’s let’s say making a hundred thousand and decides to take a one-year break. Well, assuming that she may have to go back at a slightly lower salary, assuming that there’s an annual growth rate that’s impacted. By the time she’s reached from 35 to 67 years of age, the amount of impact that one ear has is about $212,000.

Jean Chatzky: (11:07)
Yeah.

Sangeeta Moorjani: (11:07)
For taking one year of break. And you know, if you can do it, kudos to you. I just like to make sure people make informed decisions.

Jean Chatzky: (11:16)
We so appreciate that. I just have never seen a calculator like this. So to me, it was eye opening to be able to run the numbers in this way. Let’s dig into this fresh start financial checkup and let’s do it step by step. When we get into the building blocks, what do you think the main building blocks are to this solid financial plan that we’re trying to wrap our arms around?

Sangeeta Moorjani: (11:42)
You know, Jean, first off, you said 70% of women are ready to take action. So while there’s so much uncertainty out there, it’s also acted as a catalyst for women to start planning for the future. And so first thing is give yourself a hug and give yourself some love for making time for yourself. Because once you do the financial check-in, you’re giving yourself some peace of mind. But as you start the financial checkup, the first place you want to start is to start to outline and update your goals. And I know sometimes it’s really hard to envision what I’m going to do 20 or 30 years out, especially in the current climate, right? Who knows what I’m going to do five months, let alone 20 years out? But ask yourself some simple questions about your future life. What does future life look like? Would you like to travel more? Would you want to make more time to hang out with friends and family? Do you want to start a new business? Do you want to do something different in your career? And so even if you’re starting to have this fuzzy picture, that fuzzy picture starts to become more like, what are your goals? Once you have a picture of your goals, that’s where you can now start to say, okay, now, what am I saving for? What is it important? And why is it important that I make progress towards those goals? So set your goals, start saving towards the goals. And I tell people, you don’t have to start saving hundreds or thousands of dollars. Even if you can start with $10, a hundred dollars. Every step towards that future life, and establishing a plan towards that future life, is how we want to start people off.

Jean Chatzky: (13:26)
And I think the most important thing about these goals is to recognize that, as you go through life, they’re going to change. You’re going to change and they’re going to change. And that’s okay. But what I’ve learned from behavioral finance is that we have to have something that we’re shooting for. Otherwise we don’t have enough reason, there’s just not enough motivation, to actually save the money, invest the money, put it away. So even if you’re not a hundred percent clear, I think that that’s a really good place to start. Once we know what our goals are, then we have to start freeing up some money to save for those goals. That means taking a look at our budget. What do you do if your expenses have gotten a little bit out of control this year and you’re looking to get back on track,

Sangeeta Moorjani: (14:19)
I’ll tell you a number that we use at Fidelity. We have something call the 50, 15 and 5 guideline for budgeting. And what the 50, 15 and 5 is, as you think about your paycheck, think about 50% of your take home pay being accounted for essential expenses. And that’s everything from food, clothing, transportation, and essential expenses also change over time. Like during the pandemic, getting food delivered may have been an essential expense because you were taking care of someone at home and you just didn’t want to risk stepping out. But think about your mortgage, your car payment, your food, your clothing is essential expenses. The next 15% of your income should be towards your retirement goal. How do I make sure that I save towards my future self? The next 5% is for short-term goals. And this could be anything like saving for any emergency, you know, a car breaking down, or a gift for a loved one. And you’ll ask me, well, 50, 15, and five, Sangeeta, doesn’t add up to a hundred. And yes, it doesn’t. Because what that 50, 15 and five do is it still gives you 30% for flexibility, because you may have to adjust in life. Sometimes you may need some guilt-free spending. Sometimes there’s a goal that shows up that you didn’t have in the past or a debt that you may have to take on. So look at the 50, 15, 5 rule, and then give yourself that little cushion or buffer for 30%.

Jean Chatzky: (15:55)
Okay. All right. That makes total sense. You raised the issue of 5% that could go for the short term, for emergencies. During the pandemic, the idea of not having an emergency fund, I think, filled a lot of people with dread. And it became very, very clear just how important this is. Are there new guidelines for how much we need to have for emergencies?

Sangeeta Moorjani: (16:21)
You know, basic guidelines that we think of at Fidelity is, make sure you have enough to cover three to six months of essential expenses. But essential expenses depends on your situation. So the way one should think about this is really, what’s your sleep at night number? I’m dating myself. But when I started using credit cards first, I would still have like a $20 or $50 bill in my pocket to say, what if I need cash? Because that made me sleep better at night or made me comfortable. So think of your emergency saving number also as a sleep at night number. For some people that may be four months of expenses. For somr it maybe three. But it’s important to, again, write down what are those essential expenses you have and then you can have the right number. The other thing that’s really important here, and a good practice is to have that emergency saving in a different account because then that account is where you don’t let temptation get in the way.

Jean Chatzky: (17:22)
Yeah. If you don’t see it, you don’t touch it. You don’t spend it. That’s one of my money rules. I’ve been hearing from people though, who are worried that they’ve used their emergency savings this year. And my response to that has just been, hello, this is an emergency. If a pandemic is not an emergency, I do not know what is an emergency, and that’s fine. How do you rebuild it if you’ve gotten off track, if you’ve used some of that money. And how do you rebuild it while you continue to put your money to places where you’re going to get a better reward, like into that 401k, where you’re going to get those matching dollars?

Sangeeta Moorjani: (18:01)
Yeah. I would say a couple of things here, right? Number one, every small amount matters. $10, $50, a hundred dollars. You’d be surprised how quickly it adds up. The second thing is the importance of replenishing that emergency fund is so important. Just like we did. Thank God people who had an emergency could go back to it. But it’s important to automate that savings. So if you have a paycheck, get a direct deposit to the emergency saving account, so you don’t have to remind yourself. Just set it and forget it. The other thing is, look at some of those expenses that may have creeped up like a subscription. And what can you trim back?

Jean Chatzky: (18:43)
We talk a lot on this show about saving for retirement and about, in particular, the Fidelity benchmarks. That you’ll know you’re on track if you’re putting aside a good 15% of your income for the long term. And that should get you to the point where you have about one times your income at 30 and three times at 40 and six times at 50 and eight times at 60 and 10 times by the time that you retire. But we started this show talking about women who take breaks and how that can derail you when you’re out of the workforce for a couple of years. What’s the solution there? Is there a way to keep yourself on track if you decide that you are going to take a couple of years out of the workforce?

Sangeeta Moorjani: (19:34)
If you are taking some time out of the workforce, you will not have access to a 401k for that period, but there are absolutely other ways for you to do this. So let’s say, if you’re working independently for some portion of your time. Well, you can actually save in what is called an individual retirement account that is not tied to you having a 401k in a company. So you can definitely do that. And you know, in 2021, you can contribute up to $6,000 if you’re under 50 or an extra thousand dollars above that, if you’re over 50. So you can still save. The other thing is if you’re not working at all, Jean, if you have a partner who’s working, a spouse or a partner, you can still save through a spousal IRA or a spousal individual retirement account. So you can continue to contribute through that. And so I think it’s very important for people to make sure that they’re aware of each of these aspects. And then, when you get back into the workforce, if you can’t get to the 10 or 15% right away, get to the point you can. But make sure that you can increase a 1% interval, maybe every quarter. So you can come back to the saving rate that you need to have a comfortable retirement.

Jean Chatzky: (20:55)
Sangeeta, I want to talk about the other parts of this financial checkup. Specifically, I want to talk about insurance and some good money habits. But before we do that, I just want to remind everybody that HerMoney is brought to you by Fidelity Investments. Moms, you work hard all year long and your money should work just as hard for you. Join us for a special Women Talk Money event. In this candid conversation, we talk about the challenges of this past year and share stories to inspire other families. Also take advantage of access to articles, tools, and resources that can help you create a roadmap for your family’s future. Visit Fidelity.com/HerMoney to learn more. I’m talking with Sangeeta Moorjani, Executive Leader of Workplace Investing at Fidelity. We are taking a deep dive into all the steps that you need to take for a successful financial checkup. Let’s talk about insurance, Sangeeta. How do you know if you have enough? And how often do you have to revisit this analysis?

Sangeeta Moorjani: (22:01)
A good rule of thumb is, you’ve gotta have your annual physical, right? So at a minimum, visit your financial checkup annually. And sometimes, if there are a bunch of changes in your life, you may want to do it more frequently. So let’s talk about insurance here, right? Insurance needs are greatly dependent on your individual situation. So it’s important, as you’re thinking about that, to talk to a financial professional who can help you with your needs. But let’s think of a few things here. Essentially, as a parent, one of the first lines of defenses you want to have is life insurance. And there are several kinds that may be relevant for your situation. What do you want to make sure is that you’ve been able to provide money for a loved one if something happens to you. You also want to be thinking about disability insurance, both short-term and long-term disability. Particularly, if you’re the only parent providing for your children, this is going to be important for you to think about. The other thing to be thinking about is, your insurance needs will change as your children grow up and become less financially dependent on you. So make sure that you’re looking at, again, your insurance needs at least annually. I mean, what a child needs when he or she is two, or when he or she’s 22, is very different. So make sure you’re thinking about that. It’s an important reminder that, if you have a child with special needs, the cost of childcare is going to be significantly different. So, again, take those aspects into consideration. And beyond insurance, Jean, it’s so important that we have some basic documents in place. Number one, you want to make sure that your beneficiaries are updated, whether it’s for your 401k account, any of the other accounts, so that if anything was to happen to you, you want to make sure you’ve got the right beneficiaries for your account. Second, you want to make sure you have your will and legal documents in a safe and accessible place. I know it’s hard to think about life after I’m gone, but I think it’s so essential to think about how do you set your loved ones up for success?

Jean Chatzky: (24:28)
Yeah. No. A hundred percent. And I think this is part of our conversation actually is where considerations about kids factor in more than most. I mean, I didn’t get a will until I had a baby. And then the first time my ex-husband and I signed one was when we were getting on an airplane for the first time without our child. Should we have had one before? A hundred percent we should have. But that’s how these things often roll. And the same is true with life insurance. I didn’t get life insurance until I had somebody depending on my income, meaning a child. And for all the special needs parents, I think the calculus is just different because, while many people know that term insurance is often going to be the right choice for them because they will be able to drop it once their kids are grown and flown, if you know that you’ve got a lifetime responsibility for the financial needs of a dependent because you have a special needs child, that’s when we have to start looking into permanent insurance, because term insurance gets so expensive as we age and age and age and age. And so you’re so right about the need to make sure you’re talking to the right people and the right professionals in all of these scenarios. As we wrap this up, Sangeeta, what are your favorite money habits that you think more women, more moms, should latch onto as we come out of the pandemic? What things do you think will help us most?

Sangeeta Moorjani: (26:04)
You know, I’ll share some of my favorite, because I have two kids, and they’re not kids, they’re adult kids now, but that we talk about often. Just something very simple that I’ll start with Jean is practice makes perfect. And so save early and save consistently. My daughter was working last year, despite the pandemic, and I said, you’ve got to put your money away towards a retirement account. And she goes, I don’t want to give up my money. And I’m like, no, no, no, this is not giving up. This is making sure you’re saving for the future. So start early and consistently save. The second thing is having those financial checkups as essential checkups. Just like we have annual checkups for ourselves. Just like we get the cars stickers updated. Make sure you’ve got a trigger in your book to do an annual checkup. And the third thing I would say is, if you’re a parent, involve your kids in financial conversations. Talk to them that you’re doing an annual checkup. Talk to them that you sat down and made a budget. Help them build strong money habits. It will serve them well. And often they will hold you accountable too. And they’ll remind you. And there are so many free resources. You’ve talked about many of them. And, kudos to you for doing so many of these conversations on HerMoney. But, go to Fidelity.com, go to netbenefits.com. There are many tools. There are many programs that can educate you and help you be more confident about the decisions that you can make financially.

Jean Chatzky: (27:39)
Yeah. And I also just want to point out that our listeners, for those of you who have your 401k or your workplace account with somewhere other than Fidelity, you often also have access to free resources through the administrator of your plan. And so if you’re looking for advice, that’s a great first place to start.

Sangeeta Moorjani: (28:02)
And, you know, it’s really great that people are starting to reevaluate their financial plan. We have had record numbers of people reaching out to us to help create a financial plan, to make adjustments, to address life events. And so I encourage everyone to do that. The power of preparedness gives you peace of mind. So please do it today.

Jean Chatzky: (28:27)
A hundred percent. I love the statistic that says that about two thirds of women are telling us that they are now more engaged in managing their money than they were at the onset of the pandemic. And I think that’s great. I think it’s about time, but I also think that’s great. Sangeeta Moorjani, thank you so much for this conversation today.

Sangeeta Moorjani: (28:46)
Thank you. Pleasure to connect with you again.

Jean Chatzky: (28:49)
Pleasure to connect with you too. I hope to do it again soon. And I’ll be right back with Kathryn and your mailbag.

Jean Chatzky: (29:02)
HerMoney’s Kathryn Tuggle joins me now. Hey Kathryn.

Kathryn Tuggle: (29:06)
Hey Jean. How are ya?

Jean Chatzky: (29:07)
I’m a little allergic, but loving these spring days. How are you?

Kathryn Tuggle: (29:12)
Yeah, I’m doing great. I’m loving this spring weather. I think everybody in New York City and probably every city that had a hard winter is ready to see those flowers blooming.

Jean Chatzky: (29:23)
Yeah. There were pictures of all the different tulip installations in the New York Times the other day. And it just made me so happy, even though I wasn’t there in person to see them. Made me so happy to see. I like it when the flowers bloom. And I think, as our listeners know, I’m in the process of moving from my suburban house to an apartment in the city of Philadelphia. And I’m a little worried about missing my peonies. I’ve worked very hard on my peonies for the last 15 years and I wish I could take them with me. But I hope that the new people who have this house enjoy them as much as we have.

Kathryn Tuggle: (30:02)
Yeah. I know that will love them. And I also think Philly does a really good job with just urban planning and little flower boxes here and there. It’s a vibrant city. So I think you’ll get your fill of peonies.

Jean Chatzky: (30:14)
Yes, absolutely. And maybe I’ll plant some. I’m going to dip a toe into those herb gardens that you can plant in your house. I’ll keep you posted on that. I do not, as you know, have a green thumb. I do not. But I have managed to grow herbs in a pot outside here. And the only other thing I can grow is perennials. So we’ll see. I’ll do my best not to kill them.

Kathryn Tuggle: (30:41)
Well, you can always talk to my mom. She has a sprawling herb garden in Birmingham that is very well cultivated. So she can advise.

Jean Chatzky: (30:49)
Okay. All right. She can send me basil cuttings and we’ll take it from there. Anyway, thank you so much for teeing up the financial checkup conversation. I know, and I want to point out to our listeners, that I know we just ran through a lot of topics very quickly. But I went for my physical last week with my doctor, and I know exactly what’s going to happen every time I have a physical. She is going to do an EKG. She’s going to take my blood pressure. She’s gonna look in my ear. I mean, it’s like clockwork. I get on the scale even before the nurse comes in and I take my own weight and height because I know that that’s the first thing. And these financial checkups should feel just like that, right? They shouldn’t feel scary, but they should be something that you do every single year.

Kathryn Tuggle: (31:41)
You know, these are things that we just have to get on the calendar. And if they’re on the calendar, then we won’t skip them.

Jean Chatzky: (31:46)
Yeah. It’s like my quarterly tax payments. I put my quarterly tax payments on the calendar at the beginning of every single year. They show up. I do them. Done. And that’s what this has to be like. I know we’ve got questions. So let’s dig in.

Kathryn Tuggle: (32:02)
We do. Our first question comes to us from Carlene. She writes, hi Jean. I just recently started listening to the HerMoney podcast and I absolutely love it. Thanks for providing such a great forum for women. My question is, I have two sons and I have about $10,000 saved for each of them in a bank account. I’d like your recommendations on what I should do with the money to have it grow from my sons. They are 12 and 14 years old. Thank you so much for your help.

Jean Chatzky: (32:31)
So Carlene, thanks so much for writing. I am going to take you back actually to the very first point that Sangeeta made. And my question to you is, what’s your goal for this money? If your goal is that this is money for college, then I would suggest putting some, if not all of it, into a 529 college savings account for these boys, where you could, if you make the contributions over a couple of years, perhaps get some nice tax deductions for putting the money to work, and also invest the money so that it’s not just earning the minuscule bank rates of interest that we’re getting right now, but actually being invested and growing for them at an appropriate rate. But maybe it’s not for college. Maybe it is to help them buy a home. Maybe it’s to help them start a business. If it is long term, then I think, no matter what, you want to figure out some way to invest the money rather than just allowing it to sit in the bank. But if it’s shorter term, then not taking a sizable amount of risk with the money is, in fact, the right thing to do. I mean, maybe for your 14 year old, you thought I really want this money to buy this child their first car. And that may be your goal. If you thought that that first car was coming at age 16, that’s just two years away. And at that point you don’t want to be investing the money. So I hate to throw this question right back in your lap, but it’s actually what I have to do. Because until I know what the money is for, it’s really hard to advise you. Just think about long term versus short term. Long term, you want to invest it. And if you can do so with tax advantages, by putting the money into a 529, or when your child gets a job, by putting money into a Roth IRA, which you can do for anybody who has earned income, versus short term where you just want to save it, I think that’s going to be the way to go.

Kathryn Tuggle: (35:00)
I love that advice, Jean. And I had a feeling you were going to say 529s and investing. I mean, I think that those are the two best paths for her.

Jean Chatzky: (35:10)
If you’re not going to use the money for a long time, five years or more, then we definitely don’t want it sitting in a bank account where it’s earning one 10th of 1% interest. We want it working for us. But if we need it sooner, then we don’t want to take that amount of risk. And both of those things are perfectly fine, valid, understandable. You’ve just got to know what it’s for.

Kathryn Tuggle: (35:32)
Our last question is from Shannon. She writes, hello. Thank you so much for all your insight on your podcast. My sister recommended it to me about a year ago. She’s a boss woman so I knew it was going to be good. You’ve been my constant companions when I retreat upstairs by myself to fold laundry for some much needed alone time when my husband is home on the weekends. I have a question, but first here’s my family’s financial breakdown. My husband’s 34 and I’m 33. We live in the suburbs of Massachusetts with its high cost of living. My husband is a school principal and makes $128,000. I’m currently on a career break from being a teacher to stay home with our two littles ages four and one. In order to make this situation work for our family, I engage in a lot of side hustles and bring in an additional $20,000 a year babysitting other children in our home with my own, refereeing, renting baby gear through baby Quip, working at a dance studio and more. Our emergency savings is $8,000, which I know is too low. I have a 403B of $11,500 from my eight years of working as a teacher in Vermont. My husband’s 403B stands at $53,300. We contribute to our children’s 529s and have saved a total of $4,000. Pitifully low. We own a little over 20% of our house. Our mortgage balance is $363,000, and we just refinanced last year at a 3.25% interest rate. We lease one car and have a car loan on the other of $17,600 remaining. The loan has a 3.44% interest rate. We still owe $10,700 of my husband’s student loans. We just refinanced last year at an interest rate of 4.56%. We also contribute $300 a month to my husband’s parents to help them pay out loans they took out for his education. We’ve never had any credit card debt. In order to make this one income situation work for our family, I’ve made personal finance my passion, and listening to HerMoney has certainly been helpful. A few years ago, we didn’t know where our money was going, we overspent, and we had to pull from savings to pay bills, and we constantly fought about money. Now we budget down to the dollar and have productive conversations about money. My question is, where does teacher retirement pensions come into play with our overall financial picture? I paid into teacher retirement in Vermont for eight years. My husband paid into teacher retirement in Vermont for eight years as well, four years as a teacher and four years as an administrator. He’s now paid into Massachusetts teacher retirement as an administrator for three years. I know I’ve heard you say that you should have one times your salary saved for retirement by the time you’re 30, which we’re nowhere close to, but are there different rules if you know you’re going to get a pension? And how does that work for me, since there’ll be a gap in my years of service. I’ll be on my career for a total of five to seven years. Then I’m hoping to return to my profession. And what about social security? I’ve heard that some states allow teachers to collect and others don’t. We will be teachers in multiple states by the time we hit retirement. Currently we’re sending about $300 a month to my husband’s 403B. I don’t think we could afford to do any more than that. We’ve worked on limiting our spending, but do we need to double down on our efforts and work on saving more? I would love to grow our emergency fund, pay off student loan debt, buy a used car and contribute more to our children’s 529s. I would love any insight you can provide on how our family can grow our financial security. Thank you for all that you do for women in all roles.

Jean Chatzky: (39:20)
Well, thank you so much for writing. And I just want to say a couple of things before I dig into this. The first Shannon is, thank you and your husband for what you do. I just think that teachers are the best and it’s not just because my own parents were both teachers. But, boy oh boy, we all owe you a huge debt of gratitude and particularly this year, more than most, when I know teachers have just had it so incredibly rough. The second thing I want to say is please stop being so hard on yourself. You are doing a really good job of managing all of your financial priorities. You know exactly where your money is going. You’re having conversations about it. And I want to apologize for the fact that maybe I haven’t been clear enough about the fact that, for people with pensions, the benchmark rules are indeed very different. And let me just break down for you, how it works. I laid out the benchmarks earlier in the show. Kathryn just laid them out again in brief in asking this question. The benchmarks are designed for people who earn between $50,000 a year and $300,000 a year to replace 45% of your preretirement income. The goal is that when you couple that preretirement income with what you can expect from social security, you’ll have enough to live comfortably in very much the same way that you’ve become accustomed to. When you have a pension, you don’t have to replace the full 45%. You only have to replace the amount that the pension is not going to replace. And so, if you and your husband know, because you’ve looked at your own numbers, that your pension is going to replace, say, 30% of your preretirement income, then you only have to replace 15%, which means you can divide those benchmarks by three. It means you would actually only have to shoot to have put away about three and a third times, your income, by the time you actually get to retirement. So the bar is much, much lower. And I hope that I haven’t scared the pants off of anybody who has a pension, because that was never my intention. It’s just that right now, only about 17% of people in this country have a pension and the number is dropping. And so, when I talk in averages, sometimes I think I get ahead of myself. So Shannon, I am sure you are doing much, much better than you think that you are doing. But the other question that you raise here is a really important one. And that is that in a number of states, the teachers do not earn social security credits. So I looked at your states in particular. In Vermont, you do earn social security credits. But in Massachusetts, teachers don’t, and you should check about administrators. And the reason that this becomes important is because the amount of social security that you should expect to receive is based on your 35 highest earning years, where you earn social security credits. So, when we talk about what women lose when we take a break from the workforce, what anybody loses when we take a break from the workforce, we don’t earn social security credits in those years, so they don’t add into our 35 highest earning years. The best way to get a very clear picture of what a social security projection is going to look like for you is to go to socialsecurity.gov, pull your own social security statement, and you should be able to see some examples of what it looks like for people like you. But you’re asking all the right questions and you’re doing all the right things. And it seems to me that when you get back into the workforce in an additional five to seven years, you’ll be able to ramp up your savings and really put a stake in the ground for all of these other goals. But thank you for writing. Thank you for listening and thank you to your sister for recommending us to you.

Kathryn Tuggle: (44:04)
Yeah, thanks for the recommendation. And I totally agree with you about her being too hard on herself. When she talks about how much money she has in the 529, she said it was a pitifully low amount. And anything that you can say for your child is such a beautiful thing. So don’t beat yourself up.

Jean Chatzky: (44:20)
Yeah. Yeah. A hundred percent. Great letters today, Kathryn. Thank you so much.

Kathryn Tuggle: (44:26)
Thank you, Jean.

Jean Chatzky: (44:27)
In today’s thrive, it could take four years to rebuild our savings post pandemic. But with a little bit of help, we could get there quicker. At HerMoney.com this week, we break down how. 71% of Americans made major financial changes in response to COVID, according to a recent survey by the digital bank, One. While some of us were able to save money, another large swath of the population completely depleted their savings accounts and now find themselves in more dire straights. Of those who were forced to spend their savings, 25% estimate it’ll take four years or more to rebuild to where they were prepandemic. That’s too long. One way to get there quicker is by automating. In other words, make your savings automatic. You can instruct your bank to send a certain amount of money straight to your nest egg every time you get paid, so that your money is being saved without you even having to think about it. Doing the same with retirement accounts is a great way to catch up on missed savings for your future, especially if you were forced to pause payments during the pandemic. And keep in mind, your transfers into savings, and Sangeeta pointed this out, they don’t have to be massive. Small increments, even $5 a day can make a huge difference in the long run. You can also look to save in new places. I know we’ve done a lot of cutting back already this year, but what about some untapped areas? According to the survey from One, the top five areas people have saved the most this year are eating out less and cutting down takeout meals, not traveling, reducing shopping, and reducing trips to the salon. And whether you were forced to spend your savings or you were able to save more these past few months, the good news on the horizon is that Americans are expected to emerge from the pandemic with a savings mentality intact, and renewed habits that we can carry with us into better times.

Jean Chatzky: (46:36)
Thank you so much for joining me on HerMoney. Thanks so much to Sangeeta Moorjani for walking us through today’s all important financial checkup. Whether you’ve got some new things to add to your to-do list or you’re just getting started, we are here for you cheering you on. If you like what you hear, I hope you’ll subscribe to our show at Apple podcasts. Leave us a review. We love hearing what you think. We’d like to thank our sponsor, Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through Megaphone. Thanks so much for joining us and we’ll talk soon.


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