December 1, 2023 Best of Simply Money Podcast
- Don’t be fooled by market predictions 00:05
- Charitable donation advantages 15:33
- Your health and your money 20:01
- When to call an advisor 29:32
- Costly gift returns 35:45
Predictions galore, charitable donation advantages, and four life events when you should call an advisor.
Will the stock market go boom or bust in 2024? Amy and Steve break down the newest predictions and explain why it’s all just a bunch of noise.
Plus, the connection between your health and your money.
Transcript
Amy: Tonight, we're talking predictions for 2024. Should you pay attention? We've got some advice on charitable donations, and for life events, we would say, hey, when this happens to you, maybe you should call an advisor. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. It's been an interesting, I don't know, last couple of years for the market. Last year, down. This year, we've seen some ups, some downs, kind of volatility all over the place.
Steve: I can use less interesting.
Amy: I know. That, like, smooth ride that was going into, like, the late teens into 2020.
Steve: I like straight lines. I hate roller coasters. Exactly.
Amy: We've had a pretty good ride here recently. But if you want to check the headlines, because we're coming up on the end of 2023, there's a lot of people making a lot of predictions about where we're going to go moving forward into 2024. So let's get into it.
Steve: Yeah. You know, we're never at a loss for predictions, and you know, they never pan out. I mean, it's just incredible.
Amy: Everybody's got an opinion.
Steve: Yeah. It's incredible what you see this time of year. Just to put it all in perspective, everybody knows 2022 was just...it was horrendous. I mean, stocks lost 18%. Bonds were down over 10%. It really wasn't any safe haven other than money market accounts, which, you know, okay, fine, you could have done okay if you kept a few bucks.
Amy: Putting it under your mattress.
Steve: Yeah. Yeah. In 2022, that was a viable asset allocation strategy, but okay. How have we done this year? Well, it's been a roller coaster this year. I mean, right now, the Standard and Poor's 500 is up about 20% on the year. We've made back everything we lost last year, and about half of that happened in the last three weeks. So if you're frustrated at, yeah, bad September, bad October, lost a lot of money, things hold a couple more days, you're going to be really happy when you get November statement, because in November, so far, we're up about 9% in stocks. So, you know, where are we going to...is this going to carry forward? Are we going to see a Santa Claus rally? I believe in Santa Claus if he's going to give me a rally, you know.
Amy: Yeah, sign me up.
Steve: So I would love to see this go into December. Well, like you said, there's a lot of opinions out there. Deutsche Bank, I mean, they're one of the biggest banks in the world. Smart people getting lots of data. They think we've got another 12% to go next year, and that may be conservative. It could be higher. I would love to take that to the bank, Amy, but they also said we were going to have a 25% drop this year. No, we're up 20%. Up 20, not down 25. That's what Deutsche Bank predicted for this year. So if they predicted that far off for this year, is there anything worthwhile in their prediction for next year? Probably not.
Amy: I mean, who knows? That's the thing. I mean, you could have one of those balls that you shake up. What are those called?
Steve: Eight Ball.
Amy: Yes, the Eight Balls, right? And you pick it up. I mean, literally, that would be as good as making a prediction or flipping a coin as any of these strategists. Not to say that they are not smart people who have fantastic pedigrees and education, not saying that, but you just don't know. There's so many variables that go into these things.
Steve: Yeah, you can't predict the future.
Amy: How can you possibly make these predictions? My concern, though, is for someone to read these predictions and say, "Oh, that's someone from Goldman Sachs. That's someone from Deutsche Bank. They know what they're talking about. I'm going to change my investment plan. I'm going to change my financial plan."
Steve: Let's take out another mortgage and invest it.
Amy: Let's go all in, yeah.
Steve: You don't know what people are gonna do, yeah.
Amy: Let's go all in on the market in 2024, because here's Deutsche Bank and Goldman Sachs both making pretty positive predictions for it. And I love that you also brought up, hey, by the way, they also made a prediction coming into 2023 that was anything but coming true.
Steve: Yeah. And I love MarketWatch. I mean, I know you read it. Everybody reads MarketWatch in our industry, and they're pretty credible. They bring a lot of these experts out so that you can read their opinions. And you know, the thing about MarketWatch is, today, they'll have something positive about predictions for next year with Deutsche Bank, and then the very next day, they'll come out with something like...I just read about BCA Research, again, another respected firm, been around since 1949. A lot of hedge funds and mutual funds hire BCA Research for their predictions. They're a global research firm. They've got offices in all the big cities around the world. They're predicting, at the same time Deutsche Bank is saying, "Yeah, another 12% up minimum for next year," BCA Research is saying, "Hold on, we're probably going to see a 27% drop in 2024." Which one is right? You know, the truth is it's probably somewhere in the middle. Don't read these things and go and invest money based on predictions, because you know, more often than not, they're not true.
Amy: Yeah. I mean, again, the Magic 8 Ball would tell you just as well as they could which directions the markets are going to go, and we just don't know. There's global factors. There's so many factors that go into these things. And I think that's the perspective that we want you to have with this is, okay, if you want to read these headlines and you want to click through and read these articles, take it with a grain of salt. I mean, some of these predictions are made based on certain things, like maybe the Federal Reserve will start to cut interest rates in 2024, right? It's looking like that's a viable option.
Steve: Well, I like that prediction because the Federal Reserve that does the changes in interest rates, they told us they're going to. They didn't say when, they didn't say in June, on June 15th of 2024, but they said they're going to start cutting interest rates, and they've got a target, about 2.5% lower by the end of 2025. So, all right, when is almost irrelevant. As long as you know they're going to do it, okay, what happens when interest rates drop? Bonds go up, mortgage rates drop. There's a lot of things that you can do based on that. To me, that's a pretty safe prediction.
Amy: You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach, as we dig into the headlines that you're going to see all over the place, not just right now, but probably for the next month or so, as we're heading into 2024, right? Anyone that has any kind of letters behind their name and they work for one of these big banks is going to make a huge prediction about what we're going to see in 2024. And I've been doing this for long enough that we have followed up many times on these shows to say, "Oh, hey, you said this guy was going to fall this year. Did this? Oh, no, actually, this guy didn't fall. The market is up 10%." I've just seen it so many times, and you can read these articles. And the reasoning seems like it's ironclad. You know, they're pointing to this part, and they're pointing to this. And you're like, "Oh, okay, all of this makes sense." They must be right about where the market is going to go. And then those months come and those months go. And, oh, we actually didn't go into a recession, you know?
Steve: Isn't it fun calling them on the carpet? Hey, hey, you know, like, maybe in May or June saying, "Hey, by the way, you said this was gonna happen, like, a year ago." Everybody was saying, "Hey, it's not a question of if, it's a question of what day in the first quarter are we gonna have the recession in 2023. Didn't happen, you know?" And that was a consensus. That was everybody. You know, there's a guy named Lawrence McDonald. He produces something called the Bear Traps Report. By the way, when you hear something like bear traps or anything with the word bear in it followed by newsletter, just, you talk about take it with a grain of salt, take it with a big old salt shaker, you know, because these are the guys. And here's a gambling reference. I know you're never gonna understand this because you've never stepped foot in a casino or done anything like this.
Amy: Never ever.
Steve: But that's the guy at the Don't Pass line that nobody likes, because he's betting against everybody at the table. That's what these people do. And eventually, they're gonna be right, just like a stopped clock is gonna be right twice a day. But these guys just keep saying the sky is falling, the sky is falling, and at some point, it's gonna be correct. But you know, he's saying, "All right, maybe I was wrong last year. Maybe dividend-paying stocks were not the best place to put money in the past year. But you know what, why don't you go ahead and sell them at the loss, because you bought them when I told you to buy them, and then buy them back 31 days later so you can take the loss, but still the IRS lets you participate in the game down the road that I know you're gonna make?" Come on, if he was wrong one time, is he gonna be right every time going forward? You know, it's...
Amy: I feel like that's a little CYA-ish, right? Like, "Hey, I told you to buy these, and you did." And now they're actually not doing so well. So I'm going to save face here a little bit by telling you, now, sell them at a loss, and maybe there's some tax strategies that you can take from this.
Steve: I'm going to move on from stock picking and become a tax advisor, because I can't do the first, but I can do the second. Come on, guys, you know. Let's be serious. Stay away from stuff like that. These big predictions that they want you to make, I mean, they're trying to get you to click. They're trying to get you to subscribe. They're trying to get your money in some way, shape, or form, whether they're right or not. Predictions aren't worth the words that are on the paper. They're really not.
Amy: The only thing I hate worse than predictions about where the market's going to go next year are predictions about individual stocks that they should buy, right? These stocks are going to be super-hot for these reasons in 2024, and I think you're also going to see a lot of those in the headlines in the next few weeks. And listen, we're just not huge proponents of going all in on individual stocks for any reason. We would say no less than, in your entire portfolio, 10% of that can be made up of individual stocks. And I don't know that you even pick them based on any of these headlines because I've seen...you were talking about MarketWatch earlier. I've seen one week, this stock is the hot stock, and the next week, someone's talking about why that stock is an absolute dud and why you shouldn't buy it. Same stock, same company, one week later, different people, different opinions, right? And that's all they are, opinions.
Steve: And I won't say what opinions are like, and everybody's got one.
Amy: I'm thinking the same thing.
Steve: Because we are FCC-regulated. So, no. But in all seriousness, just, you know, predictions, all right, there are certain things that you might want to put a little bit of credibility in, like when the Federal Reserve says they're going to do something. Chances are they're going to do it. But, you know, when you see things like, and this was one that drove me nuts, bonds are going to outperform stocks in the first half of 2023, okay, first of all, most people don't understand bonds, but when interest rates go up, if you've got something that pays you 2% interest and rates go up to 4%, nobody wants your thing that pays 2%.
Amy: Give me the 4%.
Steve: It's going to drop in value. That's why bonds go down when interest rates go up. And that's why bonds went down in 2022. Why would they go up in the first half of 2023 unless the Federal Reserve was dropping interest rates? Well, the Federal Reserve didn't drop interest rates. Nobody expected them to drop interest rates. They raised interest rates. So bonds did not do well the first half, and they're just now beginning to come off bottom. Does that mean bonds are a bad investment because they did bad in 2022? No. I mean, they did what they're designed to do. If you know they're going to go down when interest rates go up, well, guess what happens when interest rates come down. They're going to go back up. So, you know, just like you don't want to sell a stock at a bottom, why would you consider selling your bonds when it's pretty much, you know, the Federal Reserve is saying they're going to cut interest rates over the next year to two years? You're probably going to do okay in high-grade bonds.
Amy: Yet there was a headline, right, in 2023 saying bonds will outperform stocks in the first half of 2023. They did anything but that.
Steve: Exact opposite.
Amy: Yes. And so that's why, you know, I love that we look back at these headlines and say, "Okay, this is what we heard coming into '23. These didn't come true." I think you've got to give the predictions for 2024 the same kind of grain of salt that you've given to what happened in 2023. Here's the Allworth advice. Predictions, well, they might come true. They may not. So don't base your financial plan on something that may or may not happen. Stick with the facts.
Coming up next, we've got the charitable giving strategy you might want to implement right now. We'll explain what it is, how you can use it. You're listening to "Simply Money," presented by Allworth Financial, here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you can't listen to our show every night, you don't have to miss a thing. We've got a daily podcast for you. Just search simply money. It's right there on the iHeart app or wherever you turn to to get your podcasts. Coming up at 6:43, maybe you can go alone when it comes to money and saving strategies, but we would say, hey, there's four things that can happen in your life when maybe you should get serious about calling an advisor. We'll tell you what they are.
You know, one of the major gifts...this is a holiday season, right? People are out shopping all the time. I've got four teenagers. Sometimes one of the easier things to do is to buy a gift card.
Steve: Throw in the towel. Throw it in the towel. Yeah, he likes sports stuff. We'll just go to Dick's Sporting Goods, right?
Amy: Guilty. Guilty. Absolutely guilty.
Steve: I'm hitting a nerve. I could tell. I could tell.
Amy: But the thing is when you actually look at the statistics of how many of those gift cards go unused, you might think twice about those as gifts.
Steve: Yeah, no kidding. Bankrate.com did a survey. Half of adults that have bought gift cards are carrying balances or have at least one unused gift card. I mean, why don't you just reach over and throw a $100 bill in the cash register of the place you're shopping at?
Amy: Light it on fire.
Steve: Can you imagine? I'm not an accountant, but can you imagine what a windfall this is? I mean, I could see why a retail company would not want this to be public knowledge, because this is free money. They didn't sell anything, and it's pure profit. I mean, it literally is like putting money in the cash register. My question is, can you regift a gift card if you find that you've got a balance on it?
Amy: You know what, actually, if you get a gift card, and I've done this before, I'm not a huge Starbucks drinker, and you know, people will give Starbucks gift cards and things like that, I've regifted them to other people because it's a place that I will never shop. Now, I didn't gift a gift card that had $2.34 left on it. I don't do that.
Steve: I don't know what happened. It had $100 when I bought it.
Amy: And that's where I think, like, these companies really make money, because even if you're partially using these gift cards, right, you either have to go back and spend more than you would to use the full balance or you keep a balance on there. So I think that's one way. But the average value that a person has on gift cards that aren't being spent, close to $200, 187 bucks.
Steve: I know. I know.
Amy: I would guess maybe $20, $25. Maybe you've got a gift card in your wallet right now worth that. But 187, that's real money. That's something else entirely.
Steve: Yeah, I remember going out when my dad was well into his 80s, we went out. His washing machine broke, and this washing machine was as good as the next, but they were giving back a $100 gift card. Fantastic. Okay, it's going to be mailed to you. In the two weeks that it took for us to get that gift card, we both forgot why that Visa card showed up. And I, "Dad, did you open up a Visa account?" "No, I didn't." "Okay. Well, let's cut it." It was a $100 gift card I just cut in half.
Amy: And then he later remembered what it was for.
Steve: Yeah, about a week later. Yeah, I'm doing real well.
Amy: Keep up with those gift cards. And listen, if you do get a gift card and it's just a place where you would never go and no one that you could regift it to would be interested in, there are websites, CardCash, Raise, there's another one called Gift Card Granny. You can go on there, you sell your gift card. You're not going to get...if you've got a $100 gift card, they're not going to give you $100 for it. Maybe they give you 75 or 80, but you're making something on it. And then someone else can buy that gift card at a discount as well.
Steve: Or just give the ultimate gift card, cash. Cash works.
Amy: Also an option. All right. Speaking of giving, 'tis the season not only for gift cards but also for charitable giving. And these are conversations that so many of the investors that we work with, we have with them all the time, especially toward the end of the year. People start thinking about, "Okay, we did well this year. Markets are up right now. Maybe we want to make some donations, and we just want to talk about an option that you have that maybe you've never considered."
Steve: Yeah. And this is back in the news because of an unfortunate event, when Matthew Perry passed away. And you know, it's pretty common knowledge, he struggled with addiction. Well, they set up a donor-advised fund in his name. And it's a good thing because it got people, you know, not just concerned about, "Okay, how can we help others be treated for addiction?" but it brought up the phrase donor-advised fund. And this is something that really started becoming popular, I'm going to say, 10 years ago. What is it?
Well, it's a much simpler way to make a charitable contribution if you're not really sure right now, in the moment, who you want to give this money to. A donor-advised fund is a legal structure where, "All right, we're almost in December. I want to make a very substantial gift this year, whether it's cash, whether it's highly appreciated stock, mutual funds, whatever the case is, but I'm not really sure how I want to divide that money up between these charities I want to support. I want to research them a little bit more." Well, that's what a donor-advised fund does. You can make a contribution to a donor-advised fund and then decide who that money goes to later.
What does that help you with? Well, it gives you that tax deduction this year. If you normally give $20,000 a year to charities but you want to make a much bigger contribution this year for the larger tax deduction that you need for whatever reason this year where next year you may not need it, you can make the $40,000 contribution to the donor-advised fund, give $20,000 out to charity this year and $20,000 next year after January 1st, and you still can take the deduction if you're eligible for it this year.
Amy: And you can also, if you make multiple gifts throughout the year, right, it's an easy way to track them, to keep track of them. I know of one family who just got a windfall at one point and the kids were a little bit younger, but they wanted the kids' voices to be part of how they eventually decided where that money was going to go. So it's like putting the money in a pot. You know, we're going to go ahead and donate the money, and it can stay there, and it can grow in the meantime. And then when the kids got older and they're late teens and early twenties, the family sat down together again and said, "Okay, what's really important to us as a family? Where do we think we can make a difference?" And they made some donations to charities that were involved in, you know, curing cancer and some other things that had touched their family.
And they talked about it through the years. "Well, what do we think we want to do?" until it got to the point of, "Okay, here's what we're going to do." And so I just think this is something that gives you so much flexibility. And then you can also bunch, right? You can, you can bunch those contributions together into one year so that you have enough, right, to make that tax deduction. So there's just lots of flexibility with these.
Steve: Yeah. And all of the large brokerage firms, the big local one that rhymes with modality has one, they all have donor-advised funds. And the key is, okay, just make sure it's one that you're comfortable with that has all of these other charities that you would give money to, otherwise, on their list of eligible institutions. And if you're a last-minute person, like I tend to be, don't wait till the last minute to investigate these, especially if you're going to donate stock. You really want to get started now because if you wait past, let's say, the first week of December, the transfer of stock into the fund that allows you to take the tax deduction may not be done by the end of the year, and these contributions, if you want the tax deduction, have to be done and completed by December 31st.
Amy: And just a reminder, right, for this year, standard deduction is under $14,000 for single filers and about $28,000 for those who are married and filing jointly. So this does, it gives you some options there. But to your point, Steve, you got to get going if you're going to do it this year. Here's the Allworth advice. A donor-advised fund helps you leave a financial legacy to make the world a better place. It also creates some tax advantages for you in the process.
Coming up next, how a common health issue can help provide some insight into what you do with your money, we'll explain. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. We have covered many, many topics on this show over the years, but I got to say, I don't know that I've ever talked about high cholesterol on here. This is a money show, not necessarily a medical show. But joining us tonight is our good friend, Al Riddick. He's president of Game Time Budgeting, and he's saying, "Hey, guys, I think that high cholesterol actually gives you some powerful insights into personal finance." You gotta tell us how, Al.
Al: So first off, Amy, just a couple of months ago, when I did my annual physical, of course, I did the regular blood draw, and that's when I discovered that my body was keeping a secret, you know? So I discovered that my cholesterol was 221, which is outrageous. And then, as you can imagine, I had to think to myself, I said, "Al, you ate your way to this number because of what you're putting at the end of your fork and in your spoon," right? So similarly, you know, when we uncover information that is not so good about our finances, you know, either we can modify our behaviors to change our situation or we can continue down the same path.
So with money, if you aren't satisfied with the results you're getting but yet choose to continue in that same path or on that same path, you already know what the end result will be because you're living it every day. Thankfully, for me, when I got this unfortunate news about my cholesterol, I decided to make a change in my relationship with food. And I had already told my primary care doctor, I said, "Put a note in your system for three months from now, because I want to do another blood draw." So I went from 221 to 183, all because I modified my relationship with food, just like people can modify their relationship with money.
Steve: Al, that's incredible. I mean, that is an incredible drop in numbers. Good for you. I did it kind of differently. I had a similar issue. My cholesterol wasn't that high, but apparently, it was doing some damage. And when I had my heart attack three years ago, that was my wake-up call. So congratulations for finding it before you got to that point.
Al: Thank you. I appreciate it.
Steve: Well, but you make... I was kidding around about the connection earlier off-air, but there is a connection. Because if you expect to do the same things and have a different outcome, that's kind of the definition of insanity. And you realize that, whether it's money, whether it's personal health, you can't keep doing the same things and expect a different outcome. How many people...you know, the heart attack in financial terms would be bankruptcy, I suppose. You know, how many people just continue to not save money and do the same old, same old, and wonder, "What happened? Why did I run out 10 years after I retired?" You've got to make changes.
Al: That is so true.
Amy: You know, also, though, Al, what I hear you saying when you're talking about this is you said, "I realized what I was putting on my fork and on my spoon is what contributed to this number." There was an accountability, right, that you held yourself to, kind of a man in the mirror moment where you're looking at yourself and you're saying, "Okay, I got myself here. I'm the one that's going to get myself out." And I think, so many times, when it comes to money, you can blame it on, well, the paycheck just isn't coming in or everything's costing more so I just have credit card debt. It's easy to blame whatever the situation is on someone else. And I think, for most people, the defining moment of real change when it comes to money is, "Okay, I did this to myself. I have to get myself out of this."
Al: Without question, Amy, and that was, like, the realization that I had to come to. You know, I had to acknowledge that my situation was self-inflicted, and to me, that is, like, the first step on the road to financial recovery is acknowledging that a lot of times we are in the situations we are in because of decisions that we made. And just like when I got my cholesterol number, I felt disappointed. You know, I was angry at myself. I felt shame. I was also embarrassed, but I chose...well, actually, I could have chose to do nothing because when you look at me from the outside, Amy, you know, I look like I'm the picture of good health, you know. I'm a pretty slim kind of guy.
Amy: Yeah, I agree. I was surprised.
Al: Yeah. And you know, also, I don't have the Dunlap disease. For your listeners, that is where my stomach Dunlapped over my belt, you know what I mean? Well, I don't have that. But just like when you look at someone from the outside, they could be living in a very expensive home. They could be driving a very expensive car, driving very...you know, excuse me, wearing very expensive clothing, or even potentially sending their kids to, you know, the big private fancy schools. Now, they may look wealthy from the outside, but that does not mean that they have very good day-to-day behaviors with money. And as you said earlier, you know, we have to accept accountability and responsibility for where we are in life, whether it's related to health or to money. But one of the cool things that I think I did once I found out this bad information, I started telling people that I was going to do something different.
And with money, sometimes we don't do that. So we don't have people that can hold us accountable. But when you choose to put yourself in a situation where you can experience just a little bit of pressure by verbalizing what your goal is as it relates to money or as it relates to health, I think you actually set yourself up for success, because now you don't want to look bad because you put it out in the atmosphere that you're going to make a change, and people are expecting to see the result of that decision.
Steve: Well, you also did something pretty important. You got tested, and you thought you were doing fine until those numbers came back. And I think a lot of people never test their finances. They never test their investments. If you have X number of dollars and you want to retire at a certain date, and you know you want this much money or this much income, if you don't test to see if you're on track, you just assume you're going to be fine. And that's...you can't get by in life without testing both your finances and your health.
I think the key going forward though, Al, is you've got to maintain this. You've got to be strict. Fine. You fixed it short term, but you need to stay on track with your health. And that's true of investing also. If you fix where you went wrong and now you get yourself back on track, if you don't have a follow-up, if you don't have accountability and a long-term gain plan, it's just a short-term fix and you're back where you were before you know it.
Al: Definitely, Steve. And I'm so excited that you used the phrase, you know, you have to give yourself a test, right? So, as it relates to retirement, let's take it back a couple of steps just to do even a more simple type of test. If, for example, you had an interruption of income and you did not make any money for 30 days, that to me is one of the biggest test to see how well you are managing your money, because that's a very small example, but it could happen in real life. And it can happen a lot faster than waiting two, three, four years down the road, seeing that you're way behind regarding your retirement planning goals.
So that's just a small test that you could do, even as it relates to, like, debt-to-income ratio. You know, I'm a big fan of staring at that number as well, because, as you already know, Steve, if the debt-to-income ratio is a little bit too high, that erodes your ability to put away money for the future. And I don't know about you, but by the time, you know, I'm 60, 70, hopefully, 80 years old, I don't want to be stressed out about having to, like, pinch pennies because I failed to prepare in advance. And just like with my cholesterol issue, I look at it as though I have given myself a gift for the future. Because if I just keep the same behaviors, which I have done, I should be able to benefit from better health in the future. Hopefully, I can put off, you know, a heart attack and things of that nature. And even maybe I'm saving myself money in medicines as well, or medications, because if my health stays good, then hopefully, that will allow me to financially benefit in the future.
Amy: I think you make a great point there. There is that literal connection between getting those annual checkups, getting your blood work done, making sure that you're on top of things, and spending less in retirement on those medical things and in all the prescriptions and things like that. Al, once again, you've done it. You've taught us how high cholesterol can teach us about personal finance. I wouldn't be surprised if you brought anything to the table telling us we can learn something about money, because we can learn a lot from you. That's our good friend, Al Riddick, president of Game Time Budgeting.
You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you've got a financial issue you just can't figure out, there's a red button you can click on while you're listening to the show. It's right there on the iHeart app. Record your question. It's coming straight to us. We love to help you figure it out right here on the show. Coming up, why it's going to be more important than ever to buy the right gift this holiday season. We are talking about returns, what you need to know.
There's many people out there, Steve, and I think you would agree, that are just really smart about money. And they can be engineers, teachers, it doesn't matter what your job is, but you've got it pretty figured out when it comes to your financial situation as well. And those people often are do-it-yourselfers, DIYers, when it comes to money. We would say, "Hey, that's great." If you've been able to handle your money by yourself, and invest it, and make smart decisions all these years, fantastic. We'll pat you on the back. But there are certain things that happen where we would say, "Hey, if this is happening in your life right now, you might want to get an expert to just take a look at your financial plan and what you're doing." It's kind of like a medical second opinion.
Steve: Yeah. I mean, I'm a do-it-yourselfer with cars. You know, if it's something pretty basic, sure, I'll take a look at it and fix it. But I'm not gonna replace a piston, you know, and that's where I want somebody that really knows what they're talking about to go ahead. And you know, even if I try it myself, look over my shoulder and say, "Hey, you're doing it perfect," or "Wow, you're making a big mistake here. Let me stop you before this becomes really bad." And you know, there are certain instances in life where, yeah, it's okay to get a second opinion. Get somebody with credentials that's a fiduciary working for you, not for the company they're employed by.
And I think one of those is, you get a big chunk of money dropped in your lap, whether it's an inheritance, a big old bonus. I mean, there's the old joke of, "What did you do with the money?" "Well, I spent it on wine, women, and the rest of it I wasted." You know, that's true in a lot of cases. You wonder, what happened to that big chunk of money? Well, you didn't sit down with somebody and take a look at what's the best use of that money right now. And that's where a CFP, a certified financial planner, or a chartered financial consultant, or somebody that's a fiduciary like that can help guide you.
Amy: It's like when you look at professional athletes, right? So many of them, their professional careers are just a few years. You know, your peak years, and then you're done. So you have to be really smart stewards of that money to make those millions of dollars, right, last for the rest of your life. And there's far too many horror stories out there of these athletes just blowing that money. And it's like, gosh, when you have that much coming in and it's just a game changer in your life, you probably want someone to sit down and talk to you. It's like the people who win the lottery. I think there have been studies that have been done that show most of them are actually bankrupt in seven years.
Steve: Oh, ruined their lives.
Amy: Yeah. And you look at these jackpots, and you think, "There is no way possible that someone could run out of that money," yet they do.
Steve: I would love the opportunity. I would love the opportunity.
Amy: Give you the shot to try.
Steve: Yeah. I think that's a good example. And another is when there's a major life event, like, you know, new job, career, starting a business, retirement. I mean, that's near and dear to me. We, my wife and I, sat down and went over our plan, and I actually brought in another advisor, even though I've been doing this 40 years.
Amy: I love that you did that.
Steve: I wanted her to hear someone other than her know-it-all husband saying, "Okay."
Amy: Everything's going to be okay.
Steve: Yeah, exactly. And after the meeting, and it really, really helped her a lot to understand where the money comes from, how things are going to pan out, how about inflation, yeah, that's in here and all that sort of thing. And you know, she turned to me afterwards and said, "How does anybody go through this without an advisor, without a financial plan?" And a lot of people do it. And like you said, some people are do-it-yourselfers and are fully capable of doing it themselves. But you know what, boy, it's a lot better if you have somebody holding your hand. And as long as they don't charge you an arm and a leg, it gives you a good sense of security. I mean, when people ask me, you know, "What do you do for a living?" Sometimes I flippantly say, "Well, I help people keep their hands from shaking when they sign their retirement papers." Because if you're comfortable with that decision, you're going to be comfortable signing the retirement papers. If you're just saying, "Hey, I'm out of here. I don't know what's going to happen, but this is what I'm doing," it's nerve-wracking.
Amy: I've got another one, and this is one you said, retirement, near and dear to your heart. Here's one that I've been through, getting married or divorced, right? I went through a divorce several years ago and was so grateful that I have the financial background that I do. I mean, I knew things like not to fight for the house. We bought that house with both of our combined incomes. If I was going to go it alone, I didn't want to try to make that work, right? And there's so many decisions that you can make during those times that are just so emotional that can really hurt you later on in life.
So even if you've been going it alone and you are getting ready to merge two incomes together or getting ready to break them apart, I highly recommend it. I've had so many women actually just call me through the years just asking questions about, "Okay, what about this?" when it comes to it. And I'm happy to help them because I've been there and I've done that, and luckily, I have the expertise to be able to say, "Okay, here's how I was able to get myself through that, through a very, very emotional time and not make any major money decisions."
Steve: Well, that's a key. It's very emotional. And if you're a little confused on the financial side, double whammy. Okay, how about kids, whether they're new kids, adult kids? Man, I'll tell you what...
Amy: They're expensive.
Steve: Yeah, they are expensive. And I'll tell you what, if you just had a kid or you're expecting, 529 plans. Talk to an advisor about 529 plans because college is not getting cheaper.
Amy: Also, adult kids coming to you asking for money, right?
Steve: It happens all the time.
Amy: Something else to keep an eye out for. Go to someone else and say, "Can I afford to help them?" Here's the Allworth advice. The people who achieve prosperity rarely do it accidentally. It takes planning, goal setting, and your constant vigilance to get where you want to be.
Coming up next, why you could have to shell out some extra money if you don't buy the right gift this holiday season, we'll explain. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you're looking to save some money this Christmas for yourself and others, you might want to spend a little more time thinking about the gifts that you're buying so that they don't have to be returned.
Steve: Yeah. This costs retailers money and costs them a lot of money. And, you know, last year, I think the number is about 30% of retailers had a restocking fee. It's up to 40%. Retailers are tired of people returning. So I'm not a returner. I hate returning. Do you?
Amy: Not a lot. I mean, I do from time to time, but I usually don't buy. There are certain things that I don't buy online, like clothes from stores that I've never bought from because I don't know how they're going to fit, because I don't like returning them. But yeah, to your point, in some cases, it can cost those retailers up to 40% of the cost of that good in the first place just to return it to you. I don't know if you've ever had this happen. Some of them will say, "Just keep it. It costs us more money to ship the thing that you're returning back to us. We'll just ship you something else, but just keep whatever that thing is."
Steve: That sounds like a scam waiting to happen, doesn't it?
Amy: But there's a number of them that do it. Someone was just talking about their wife bought some coffee on Amazon, and they shipped the wrong thing. Amazon said, "Just keep the coffee. We'll send you the right stuff. But we don't want to pay to ship it back." That can happen.
Steve: I wonder how many times you could pull that off. I actually know somebody that...and this is bad, but they would buy a really nice outfit for the thing they had to dress up for, going out to the theater, okay, and then return it after they used it that night. Yeah. No, no, this isn't good. And I just feel...if you aren't sure about it, then you shouldn't buy it in the first place. To me, I don't wanna put people out. That's really what it boils down to. I don't wanna put people out by having to return things, but sometimes you do. And just don't be surprised if they charge you a restocking fee.
Amy: I was looking at the list of retailers that are charging these fees now, and there are big names on there, likely places that you are shopping from this year. Some of them, up to $12 that they're going to charge you to mail back, to ship back that item, right? So that's a huge cost to you or to the person you bought that gift for. So I agree, you have to be very sure about it. When it comes to Amazon, because I know a lot of people are buying gifts from Amazon, they do make it easy.
Steve: They make it easy, yeah.
Amy: So if you're taking something to UPS, sometimes, over the past year, they have charged a dollar for you to return that, but you can still...
Steve: Literally, a dollar?
Amy: Yeah, a dollar.
Steve: Okay.
Amy: But you can still take them to Whole Foods, to Kohl's, to places like that, and they will ship them back for free. So there are still some places where you can avoid it. It's going to be a thing of the past. So I think you've got to be really smart about your gift-giving and how you're shopping this year and in the future.
Thanks for listening tonight. We hope you're going to tune in tomorrow. We're talking about whether you should be putting money into a Roth 401(k). Do you even have that option? You've been listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
Steve: I can use less interesting.
Amy: I know. That, like, smooth ride that was going into, like, the late teens into 2020.
Steve: I like straight lines. I hate roller coasters. Exactly.
Amy: We've had a pretty good ride here recently. But if you want to check the headlines, because we're coming up on the end of 2023, there's a lot of people making a lot of predictions about where we're going to go moving forward into 2024. So let's get into it.
Steve: Yeah. You know, we're never at a loss for predictions, and you know, they never pan out. I mean, it's just incredible.
Amy: Everybody's got an opinion.
Steve: Yeah. It's incredible what you see this time of year. Just to put it all in perspective, everybody knows 2022 was just...it was horrendous. I mean, stocks lost 18%. Bonds were down over 10%. It really wasn't any safe haven other than money market accounts, which, you know, okay, fine, you could have done okay if you kept a few bucks.
Amy: Putting it under your mattress.
Steve: Yeah. Yeah. In 2022, that was a viable asset allocation strategy, but okay. How have we done this year? Well, it's been a roller coaster this year. I mean, right now, the Standard and Poor's 500 is up about 20% on the year. We've made back everything we lost last year, and about half of that happened in the last three weeks. So if you're frustrated at, yeah, bad September, bad October, lost a lot of money, things hold a couple more days, you're going to be really happy when you get November statement, because in November, so far, we're up about 9% in stocks. So, you know, where are we going to...is this going to carry forward? Are we going to see a Santa Claus rally? I believe in Santa Claus if he's going to give me a rally, you know.
Amy: Yeah, sign me up.
Steve: So I would love to see this go into December. Well, like you said, there's a lot of opinions out there. Deutsche Bank, I mean, they're one of the biggest banks in the world. Smart people getting lots of data. They think we've got another 12% to go next year, and that may be conservative. It could be higher. I would love to take that to the bank, Amy, but they also said we were going to have a 25% drop this year. No, we're up 20%. Up 20, not down 25. That's what Deutsche Bank predicted for this year. So if they predicted that far off for this year, is there anything worthwhile in their prediction for next year? Probably not.
Amy: I mean, who knows? That's the thing. I mean, you could have one of those balls that you shake up. What are those called?
Steve: Eight Ball.
Amy: Yes, the Eight Balls, right? And you pick it up. I mean, literally, that would be as good as making a prediction or flipping a coin as any of these strategists. Not to say that they are not smart people who have fantastic pedigrees and education, not saying that, but you just don't know. There's so many variables that go into these things.
Steve: Yeah, you can't predict the future.
Amy: How can you possibly make these predictions? My concern, though, is for someone to read these predictions and say, "Oh, that's someone from Goldman Sachs. That's someone from Deutsche Bank. They know what they're talking about. I'm going to change my investment plan. I'm going to change my financial plan."
Steve: Let's take out another mortgage and invest it.
Amy: Let's go all in, yeah.
Steve: You don't know what people are gonna do, yeah.
Amy: Let's go all in on the market in 2024, because here's Deutsche Bank and Goldman Sachs both making pretty positive predictions for it. And I love that you also brought up, hey, by the way, they also made a prediction coming into 2023 that was anything but coming true.
Steve: Yeah. And I love MarketWatch. I mean, I know you read it. Everybody reads MarketWatch in our industry, and they're pretty credible. They bring a lot of these experts out so that you can read their opinions. And you know, the thing about MarketWatch is, today, they'll have something positive about predictions for next year with Deutsche Bank, and then the very next day, they'll come out with something like...I just read about BCA Research, again, another respected firm, been around since 1949. A lot of hedge funds and mutual funds hire BCA Research for their predictions. They're a global research firm. They've got offices in all the big cities around the world. They're predicting, at the same time Deutsche Bank is saying, "Yeah, another 12% up minimum for next year," BCA Research is saying, "Hold on, we're probably going to see a 27% drop in 2024." Which one is right? You know, the truth is it's probably somewhere in the middle. Don't read these things and go and invest money based on predictions, because you know, more often than not, they're not true.
Amy: Yeah. I mean, again, the Magic 8 Ball would tell you just as well as they could which directions the markets are going to go, and we just don't know. There's global factors. There's so many factors that go into these things. And I think that's the perspective that we want you to have with this is, okay, if you want to read these headlines and you want to click through and read these articles, take it with a grain of salt. I mean, some of these predictions are made based on certain things, like maybe the Federal Reserve will start to cut interest rates in 2024, right? It's looking like that's a viable option.
Steve: Well, I like that prediction because the Federal Reserve that does the changes in interest rates, they told us they're going to. They didn't say when, they didn't say in June, on June 15th of 2024, but they said they're going to start cutting interest rates, and they've got a target, about 2.5% lower by the end of 2025. So, all right, when is almost irrelevant. As long as you know they're going to do it, okay, what happens when interest rates drop? Bonds go up, mortgage rates drop. There's a lot of things that you can do based on that. To me, that's a pretty safe prediction.
Amy: You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach, as we dig into the headlines that you're going to see all over the place, not just right now, but probably for the next month or so, as we're heading into 2024, right? Anyone that has any kind of letters behind their name and they work for one of these big banks is going to make a huge prediction about what we're going to see in 2024. And I've been doing this for long enough that we have followed up many times on these shows to say, "Oh, hey, you said this guy was going to fall this year. Did this? Oh, no, actually, this guy didn't fall. The market is up 10%." I've just seen it so many times, and you can read these articles. And the reasoning seems like it's ironclad. You know, they're pointing to this part, and they're pointing to this. And you're like, "Oh, okay, all of this makes sense." They must be right about where the market is going to go. And then those months come and those months go. And, oh, we actually didn't go into a recession, you know?
Steve: Isn't it fun calling them on the carpet? Hey, hey, you know, like, maybe in May or June saying, "Hey, by the way, you said this was gonna happen, like, a year ago." Everybody was saying, "Hey, it's not a question of if, it's a question of what day in the first quarter are we gonna have the recession in 2023. Didn't happen, you know?" And that was a consensus. That was everybody. You know, there's a guy named Lawrence McDonald. He produces something called the Bear Traps Report. By the way, when you hear something like bear traps or anything with the word bear in it followed by newsletter, just, you talk about take it with a grain of salt, take it with a big old salt shaker, you know, because these are the guys. And here's a gambling reference. I know you're never gonna understand this because you've never stepped foot in a casino or done anything like this.
Amy: Never ever.
Steve: But that's the guy at the Don't Pass line that nobody likes, because he's betting against everybody at the table. That's what these people do. And eventually, they're gonna be right, just like a stopped clock is gonna be right twice a day. But these guys just keep saying the sky is falling, the sky is falling, and at some point, it's gonna be correct. But you know, he's saying, "All right, maybe I was wrong last year. Maybe dividend-paying stocks were not the best place to put money in the past year. But you know what, why don't you go ahead and sell them at the loss, because you bought them when I told you to buy them, and then buy them back 31 days later so you can take the loss, but still the IRS lets you participate in the game down the road that I know you're gonna make?" Come on, if he was wrong one time, is he gonna be right every time going forward? You know, it's...
Amy: I feel like that's a little CYA-ish, right? Like, "Hey, I told you to buy these, and you did." And now they're actually not doing so well. So I'm going to save face here a little bit by telling you, now, sell them at a loss, and maybe there's some tax strategies that you can take from this.
Steve: I'm going to move on from stock picking and become a tax advisor, because I can't do the first, but I can do the second. Come on, guys, you know. Let's be serious. Stay away from stuff like that. These big predictions that they want you to make, I mean, they're trying to get you to click. They're trying to get you to subscribe. They're trying to get your money in some way, shape, or form, whether they're right or not. Predictions aren't worth the words that are on the paper. They're really not.
Amy: The only thing I hate worse than predictions about where the market's going to go next year are predictions about individual stocks that they should buy, right? These stocks are going to be super-hot for these reasons in 2024, and I think you're also going to see a lot of those in the headlines in the next few weeks. And listen, we're just not huge proponents of going all in on individual stocks for any reason. We would say no less than, in your entire portfolio, 10% of that can be made up of individual stocks. And I don't know that you even pick them based on any of these headlines because I've seen...you were talking about MarketWatch earlier. I've seen one week, this stock is the hot stock, and the next week, someone's talking about why that stock is an absolute dud and why you shouldn't buy it. Same stock, same company, one week later, different people, different opinions, right? And that's all they are, opinions.
Steve: And I won't say what opinions are like, and everybody's got one.
Amy: I'm thinking the same thing.
Steve: Because we are FCC-regulated. So, no. But in all seriousness, just, you know, predictions, all right, there are certain things that you might want to put a little bit of credibility in, like when the Federal Reserve says they're going to do something. Chances are they're going to do it. But, you know, when you see things like, and this was one that drove me nuts, bonds are going to outperform stocks in the first half of 2023, okay, first of all, most people don't understand bonds, but when interest rates go up, if you've got something that pays you 2% interest and rates go up to 4%, nobody wants your thing that pays 2%.
Amy: Give me the 4%.
Steve: It's going to drop in value. That's why bonds go down when interest rates go up. And that's why bonds went down in 2022. Why would they go up in the first half of 2023 unless the Federal Reserve was dropping interest rates? Well, the Federal Reserve didn't drop interest rates. Nobody expected them to drop interest rates. They raised interest rates. So bonds did not do well the first half, and they're just now beginning to come off bottom. Does that mean bonds are a bad investment because they did bad in 2022? No. I mean, they did what they're designed to do. If you know they're going to go down when interest rates go up, well, guess what happens when interest rates come down. They're going to go back up. So, you know, just like you don't want to sell a stock at a bottom, why would you consider selling your bonds when it's pretty much, you know, the Federal Reserve is saying they're going to cut interest rates over the next year to two years? You're probably going to do okay in high-grade bonds.
Amy: Yet there was a headline, right, in 2023 saying bonds will outperform stocks in the first half of 2023. They did anything but that.
Steve: Exact opposite.
Amy: Yes. And so that's why, you know, I love that we look back at these headlines and say, "Okay, this is what we heard coming into '23. These didn't come true." I think you've got to give the predictions for 2024 the same kind of grain of salt that you've given to what happened in 2023. Here's the Allworth advice. Predictions, well, they might come true. They may not. So don't base your financial plan on something that may or may not happen. Stick with the facts.
Coming up next, we've got the charitable giving strategy you might want to implement right now. We'll explain what it is, how you can use it. You're listening to "Simply Money," presented by Allworth Financial, here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you can't listen to our show every night, you don't have to miss a thing. We've got a daily podcast for you. Just search simply money. It's right there on the iHeart app or wherever you turn to to get your podcasts. Coming up at 6:43, maybe you can go alone when it comes to money and saving strategies, but we would say, hey, there's four things that can happen in your life when maybe you should get serious about calling an advisor. We'll tell you what they are.
You know, one of the major gifts...this is a holiday season, right? People are out shopping all the time. I've got four teenagers. Sometimes one of the easier things to do is to buy a gift card.
Steve: Throw in the towel. Throw it in the towel. Yeah, he likes sports stuff. We'll just go to Dick's Sporting Goods, right?
Amy: Guilty. Guilty. Absolutely guilty.
Steve: I'm hitting a nerve. I could tell. I could tell.
Amy: But the thing is when you actually look at the statistics of how many of those gift cards go unused, you might think twice about those as gifts.
Steve: Yeah, no kidding. Bankrate.com did a survey. Half of adults that have bought gift cards are carrying balances or have at least one unused gift card. I mean, why don't you just reach over and throw a $100 bill in the cash register of the place you're shopping at?
Amy: Light it on fire.
Steve: Can you imagine? I'm not an accountant, but can you imagine what a windfall this is? I mean, I could see why a retail company would not want this to be public knowledge, because this is free money. They didn't sell anything, and it's pure profit. I mean, it literally is like putting money in the cash register. My question is, can you regift a gift card if you find that you've got a balance on it?
Amy: You know what, actually, if you get a gift card, and I've done this before, I'm not a huge Starbucks drinker, and you know, people will give Starbucks gift cards and things like that, I've regifted them to other people because it's a place that I will never shop. Now, I didn't gift a gift card that had $2.34 left on it. I don't do that.
Steve: I don't know what happened. It had $100 when I bought it.
Amy: And that's where I think, like, these companies really make money, because even if you're partially using these gift cards, right, you either have to go back and spend more than you would to use the full balance or you keep a balance on there. So I think that's one way. But the average value that a person has on gift cards that aren't being spent, close to $200, 187 bucks.
Steve: I know. I know.
Amy: I would guess maybe $20, $25. Maybe you've got a gift card in your wallet right now worth that. But 187, that's real money. That's something else entirely.
Steve: Yeah, I remember going out when my dad was well into his 80s, we went out. His washing machine broke, and this washing machine was as good as the next, but they were giving back a $100 gift card. Fantastic. Okay, it's going to be mailed to you. In the two weeks that it took for us to get that gift card, we both forgot why that Visa card showed up. And I, "Dad, did you open up a Visa account?" "No, I didn't." "Okay. Well, let's cut it." It was a $100 gift card I just cut in half.
Amy: And then he later remembered what it was for.
Steve: Yeah, about a week later. Yeah, I'm doing real well.
Amy: Keep up with those gift cards. And listen, if you do get a gift card and it's just a place where you would never go and no one that you could regift it to would be interested in, there are websites, CardCash, Raise, there's another one called Gift Card Granny. You can go on there, you sell your gift card. You're not going to get...if you've got a $100 gift card, they're not going to give you $100 for it. Maybe they give you 75 or 80, but you're making something on it. And then someone else can buy that gift card at a discount as well.
Steve: Or just give the ultimate gift card, cash. Cash works.
Amy: Also an option. All right. Speaking of giving, 'tis the season not only for gift cards but also for charitable giving. And these are conversations that so many of the investors that we work with, we have with them all the time, especially toward the end of the year. People start thinking about, "Okay, we did well this year. Markets are up right now. Maybe we want to make some donations, and we just want to talk about an option that you have that maybe you've never considered."
Steve: Yeah. And this is back in the news because of an unfortunate event, when Matthew Perry passed away. And you know, it's pretty common knowledge, he struggled with addiction. Well, they set up a donor-advised fund in his name. And it's a good thing because it got people, you know, not just concerned about, "Okay, how can we help others be treated for addiction?" but it brought up the phrase donor-advised fund. And this is something that really started becoming popular, I'm going to say, 10 years ago. What is it?
Well, it's a much simpler way to make a charitable contribution if you're not really sure right now, in the moment, who you want to give this money to. A donor-advised fund is a legal structure where, "All right, we're almost in December. I want to make a very substantial gift this year, whether it's cash, whether it's highly appreciated stock, mutual funds, whatever the case is, but I'm not really sure how I want to divide that money up between these charities I want to support. I want to research them a little bit more." Well, that's what a donor-advised fund does. You can make a contribution to a donor-advised fund and then decide who that money goes to later.
What does that help you with? Well, it gives you that tax deduction this year. If you normally give $20,000 a year to charities but you want to make a much bigger contribution this year for the larger tax deduction that you need for whatever reason this year where next year you may not need it, you can make the $40,000 contribution to the donor-advised fund, give $20,000 out to charity this year and $20,000 next year after January 1st, and you still can take the deduction if you're eligible for it this year.
Amy: And you can also, if you make multiple gifts throughout the year, right, it's an easy way to track them, to keep track of them. I know of one family who just got a windfall at one point and the kids were a little bit younger, but they wanted the kids' voices to be part of how they eventually decided where that money was going to go. So it's like putting the money in a pot. You know, we're going to go ahead and donate the money, and it can stay there, and it can grow in the meantime. And then when the kids got older and they're late teens and early twenties, the family sat down together again and said, "Okay, what's really important to us as a family? Where do we think we can make a difference?" And they made some donations to charities that were involved in, you know, curing cancer and some other things that had touched their family.
And they talked about it through the years. "Well, what do we think we want to do?" until it got to the point of, "Okay, here's what we're going to do." And so I just think this is something that gives you so much flexibility. And then you can also bunch, right? You can, you can bunch those contributions together into one year so that you have enough, right, to make that tax deduction. So there's just lots of flexibility with these.
Steve: Yeah. And all of the large brokerage firms, the big local one that rhymes with modality has one, they all have donor-advised funds. And the key is, okay, just make sure it's one that you're comfortable with that has all of these other charities that you would give money to, otherwise, on their list of eligible institutions. And if you're a last-minute person, like I tend to be, don't wait till the last minute to investigate these, especially if you're going to donate stock. You really want to get started now because if you wait past, let's say, the first week of December, the transfer of stock into the fund that allows you to take the tax deduction may not be done by the end of the year, and these contributions, if you want the tax deduction, have to be done and completed by December 31st.
Amy: And just a reminder, right, for this year, standard deduction is under $14,000 for single filers and about $28,000 for those who are married and filing jointly. So this does, it gives you some options there. But to your point, Steve, you got to get going if you're going to do it this year. Here's the Allworth advice. A donor-advised fund helps you leave a financial legacy to make the world a better place. It also creates some tax advantages for you in the process.
Coming up next, how a common health issue can help provide some insight into what you do with your money, we'll explain. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. We have covered many, many topics on this show over the years, but I got to say, I don't know that I've ever talked about high cholesterol on here. This is a money show, not necessarily a medical show. But joining us tonight is our good friend, Al Riddick. He's president of Game Time Budgeting, and he's saying, "Hey, guys, I think that high cholesterol actually gives you some powerful insights into personal finance." You gotta tell us how, Al.
Al: So first off, Amy, just a couple of months ago, when I did my annual physical, of course, I did the regular blood draw, and that's when I discovered that my body was keeping a secret, you know? So I discovered that my cholesterol was 221, which is outrageous. And then, as you can imagine, I had to think to myself, I said, "Al, you ate your way to this number because of what you're putting at the end of your fork and in your spoon," right? So similarly, you know, when we uncover information that is not so good about our finances, you know, either we can modify our behaviors to change our situation or we can continue down the same path.
So with money, if you aren't satisfied with the results you're getting but yet choose to continue in that same path or on that same path, you already know what the end result will be because you're living it every day. Thankfully, for me, when I got this unfortunate news about my cholesterol, I decided to make a change in my relationship with food. And I had already told my primary care doctor, I said, "Put a note in your system for three months from now, because I want to do another blood draw." So I went from 221 to 183, all because I modified my relationship with food, just like people can modify their relationship with money.
Steve: Al, that's incredible. I mean, that is an incredible drop in numbers. Good for you. I did it kind of differently. I had a similar issue. My cholesterol wasn't that high, but apparently, it was doing some damage. And when I had my heart attack three years ago, that was my wake-up call. So congratulations for finding it before you got to that point.
Al: Thank you. I appreciate it.
Steve: Well, but you make... I was kidding around about the connection earlier off-air, but there is a connection. Because if you expect to do the same things and have a different outcome, that's kind of the definition of insanity. And you realize that, whether it's money, whether it's personal health, you can't keep doing the same things and expect a different outcome. How many people...you know, the heart attack in financial terms would be bankruptcy, I suppose. You know, how many people just continue to not save money and do the same old, same old, and wonder, "What happened? Why did I run out 10 years after I retired?" You've got to make changes.
Al: That is so true.
Amy: You know, also, though, Al, what I hear you saying when you're talking about this is you said, "I realized what I was putting on my fork and on my spoon is what contributed to this number." There was an accountability, right, that you held yourself to, kind of a man in the mirror moment where you're looking at yourself and you're saying, "Okay, I got myself here. I'm the one that's going to get myself out." And I think, so many times, when it comes to money, you can blame it on, well, the paycheck just isn't coming in or everything's costing more so I just have credit card debt. It's easy to blame whatever the situation is on someone else. And I think, for most people, the defining moment of real change when it comes to money is, "Okay, I did this to myself. I have to get myself out of this."
Al: Without question, Amy, and that was, like, the realization that I had to come to. You know, I had to acknowledge that my situation was self-inflicted, and to me, that is, like, the first step on the road to financial recovery is acknowledging that a lot of times we are in the situations we are in because of decisions that we made. And just like when I got my cholesterol number, I felt disappointed. You know, I was angry at myself. I felt shame. I was also embarrassed, but I chose...well, actually, I could have chose to do nothing because when you look at me from the outside, Amy, you know, I look like I'm the picture of good health, you know. I'm a pretty slim kind of guy.
Amy: Yeah, I agree. I was surprised.
Al: Yeah. And you know, also, I don't have the Dunlap disease. For your listeners, that is where my stomach Dunlapped over my belt, you know what I mean? Well, I don't have that. But just like when you look at someone from the outside, they could be living in a very expensive home. They could be driving a very expensive car, driving very...you know, excuse me, wearing very expensive clothing, or even potentially sending their kids to, you know, the big private fancy schools. Now, they may look wealthy from the outside, but that does not mean that they have very good day-to-day behaviors with money. And as you said earlier, you know, we have to accept accountability and responsibility for where we are in life, whether it's related to health or to money. But one of the cool things that I think I did once I found out this bad information, I started telling people that I was going to do something different.
And with money, sometimes we don't do that. So we don't have people that can hold us accountable. But when you choose to put yourself in a situation where you can experience just a little bit of pressure by verbalizing what your goal is as it relates to money or as it relates to health, I think you actually set yourself up for success, because now you don't want to look bad because you put it out in the atmosphere that you're going to make a change, and people are expecting to see the result of that decision.
Steve: Well, you also did something pretty important. You got tested, and you thought you were doing fine until those numbers came back. And I think a lot of people never test their finances. They never test their investments. If you have X number of dollars and you want to retire at a certain date, and you know you want this much money or this much income, if you don't test to see if you're on track, you just assume you're going to be fine. And that's...you can't get by in life without testing both your finances and your health.
I think the key going forward though, Al, is you've got to maintain this. You've got to be strict. Fine. You fixed it short term, but you need to stay on track with your health. And that's true of investing also. If you fix where you went wrong and now you get yourself back on track, if you don't have a follow-up, if you don't have accountability and a long-term gain plan, it's just a short-term fix and you're back where you were before you know it.
Al: Definitely, Steve. And I'm so excited that you used the phrase, you know, you have to give yourself a test, right? So, as it relates to retirement, let's take it back a couple of steps just to do even a more simple type of test. If, for example, you had an interruption of income and you did not make any money for 30 days, that to me is one of the biggest test to see how well you are managing your money, because that's a very small example, but it could happen in real life. And it can happen a lot faster than waiting two, three, four years down the road, seeing that you're way behind regarding your retirement planning goals.
So that's just a small test that you could do, even as it relates to, like, debt-to-income ratio. You know, I'm a big fan of staring at that number as well, because, as you already know, Steve, if the debt-to-income ratio is a little bit too high, that erodes your ability to put away money for the future. And I don't know about you, but by the time, you know, I'm 60, 70, hopefully, 80 years old, I don't want to be stressed out about having to, like, pinch pennies because I failed to prepare in advance. And just like with my cholesterol issue, I look at it as though I have given myself a gift for the future. Because if I just keep the same behaviors, which I have done, I should be able to benefit from better health in the future. Hopefully, I can put off, you know, a heart attack and things of that nature. And even maybe I'm saving myself money in medicines as well, or medications, because if my health stays good, then hopefully, that will allow me to financially benefit in the future.
Amy: I think you make a great point there. There is that literal connection between getting those annual checkups, getting your blood work done, making sure that you're on top of things, and spending less in retirement on those medical things and in all the prescriptions and things like that. Al, once again, you've done it. You've taught us how high cholesterol can teach us about personal finance. I wouldn't be surprised if you brought anything to the table telling us we can learn something about money, because we can learn a lot from you. That's our good friend, Al Riddick, president of Game Time Budgeting.
You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you've got a financial issue you just can't figure out, there's a red button you can click on while you're listening to the show. It's right there on the iHeart app. Record your question. It's coming straight to us. We love to help you figure it out right here on the show. Coming up, why it's going to be more important than ever to buy the right gift this holiday season. We are talking about returns, what you need to know.
There's many people out there, Steve, and I think you would agree, that are just really smart about money. And they can be engineers, teachers, it doesn't matter what your job is, but you've got it pretty figured out when it comes to your financial situation as well. And those people often are do-it-yourselfers, DIYers, when it comes to money. We would say, "Hey, that's great." If you've been able to handle your money by yourself, and invest it, and make smart decisions all these years, fantastic. We'll pat you on the back. But there are certain things that happen where we would say, "Hey, if this is happening in your life right now, you might want to get an expert to just take a look at your financial plan and what you're doing." It's kind of like a medical second opinion.
Steve: Yeah. I mean, I'm a do-it-yourselfer with cars. You know, if it's something pretty basic, sure, I'll take a look at it and fix it. But I'm not gonna replace a piston, you know, and that's where I want somebody that really knows what they're talking about to go ahead. And you know, even if I try it myself, look over my shoulder and say, "Hey, you're doing it perfect," or "Wow, you're making a big mistake here. Let me stop you before this becomes really bad." And you know, there are certain instances in life where, yeah, it's okay to get a second opinion. Get somebody with credentials that's a fiduciary working for you, not for the company they're employed by.
And I think one of those is, you get a big chunk of money dropped in your lap, whether it's an inheritance, a big old bonus. I mean, there's the old joke of, "What did you do with the money?" "Well, I spent it on wine, women, and the rest of it I wasted." You know, that's true in a lot of cases. You wonder, what happened to that big chunk of money? Well, you didn't sit down with somebody and take a look at what's the best use of that money right now. And that's where a CFP, a certified financial planner, or a chartered financial consultant, or somebody that's a fiduciary like that can help guide you.
Amy: It's like when you look at professional athletes, right? So many of them, their professional careers are just a few years. You know, your peak years, and then you're done. So you have to be really smart stewards of that money to make those millions of dollars, right, last for the rest of your life. And there's far too many horror stories out there of these athletes just blowing that money. And it's like, gosh, when you have that much coming in and it's just a game changer in your life, you probably want someone to sit down and talk to you. It's like the people who win the lottery. I think there have been studies that have been done that show most of them are actually bankrupt in seven years.
Steve: Oh, ruined their lives.
Amy: Yeah. And you look at these jackpots, and you think, "There is no way possible that someone could run out of that money," yet they do.
Steve: I would love the opportunity. I would love the opportunity.
Amy: Give you the shot to try.
Steve: Yeah. I think that's a good example. And another is when there's a major life event, like, you know, new job, career, starting a business, retirement. I mean, that's near and dear to me. We, my wife and I, sat down and went over our plan, and I actually brought in another advisor, even though I've been doing this 40 years.
Amy: I love that you did that.
Steve: I wanted her to hear someone other than her know-it-all husband saying, "Okay."
Amy: Everything's going to be okay.
Steve: Yeah, exactly. And after the meeting, and it really, really helped her a lot to understand where the money comes from, how things are going to pan out, how about inflation, yeah, that's in here and all that sort of thing. And you know, she turned to me afterwards and said, "How does anybody go through this without an advisor, without a financial plan?" And a lot of people do it. And like you said, some people are do-it-yourselfers and are fully capable of doing it themselves. But you know what, boy, it's a lot better if you have somebody holding your hand. And as long as they don't charge you an arm and a leg, it gives you a good sense of security. I mean, when people ask me, you know, "What do you do for a living?" Sometimes I flippantly say, "Well, I help people keep their hands from shaking when they sign their retirement papers." Because if you're comfortable with that decision, you're going to be comfortable signing the retirement papers. If you're just saying, "Hey, I'm out of here. I don't know what's going to happen, but this is what I'm doing," it's nerve-wracking.
Amy: I've got another one, and this is one you said, retirement, near and dear to your heart. Here's one that I've been through, getting married or divorced, right? I went through a divorce several years ago and was so grateful that I have the financial background that I do. I mean, I knew things like not to fight for the house. We bought that house with both of our combined incomes. If I was going to go it alone, I didn't want to try to make that work, right? And there's so many decisions that you can make during those times that are just so emotional that can really hurt you later on in life.
So even if you've been going it alone and you are getting ready to merge two incomes together or getting ready to break them apart, I highly recommend it. I've had so many women actually just call me through the years just asking questions about, "Okay, what about this?" when it comes to it. And I'm happy to help them because I've been there and I've done that, and luckily, I have the expertise to be able to say, "Okay, here's how I was able to get myself through that, through a very, very emotional time and not make any major money decisions."
Steve: Well, that's a key. It's very emotional. And if you're a little confused on the financial side, double whammy. Okay, how about kids, whether they're new kids, adult kids? Man, I'll tell you what...
Amy: They're expensive.
Steve: Yeah, they are expensive. And I'll tell you what, if you just had a kid or you're expecting, 529 plans. Talk to an advisor about 529 plans because college is not getting cheaper.
Amy: Also, adult kids coming to you asking for money, right?
Steve: It happens all the time.
Amy: Something else to keep an eye out for. Go to someone else and say, "Can I afford to help them?" Here's the Allworth advice. The people who achieve prosperity rarely do it accidentally. It takes planning, goal setting, and your constant vigilance to get where you want to be.
Coming up next, why you could have to shell out some extra money if you don't buy the right gift this holiday season, we'll explain. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you're looking to save some money this Christmas for yourself and others, you might want to spend a little more time thinking about the gifts that you're buying so that they don't have to be returned.
Steve: Yeah. This costs retailers money and costs them a lot of money. And, you know, last year, I think the number is about 30% of retailers had a restocking fee. It's up to 40%. Retailers are tired of people returning. So I'm not a returner. I hate returning. Do you?
Amy: Not a lot. I mean, I do from time to time, but I usually don't buy. There are certain things that I don't buy online, like clothes from stores that I've never bought from because I don't know how they're going to fit, because I don't like returning them. But yeah, to your point, in some cases, it can cost those retailers up to 40% of the cost of that good in the first place just to return it to you. I don't know if you've ever had this happen. Some of them will say, "Just keep it. It costs us more money to ship the thing that you're returning back to us. We'll just ship you something else, but just keep whatever that thing is."
Steve: That sounds like a scam waiting to happen, doesn't it?
Amy: But there's a number of them that do it. Someone was just talking about their wife bought some coffee on Amazon, and they shipped the wrong thing. Amazon said, "Just keep the coffee. We'll send you the right stuff. But we don't want to pay to ship it back." That can happen.
Steve: I wonder how many times you could pull that off. I actually know somebody that...and this is bad, but they would buy a really nice outfit for the thing they had to dress up for, going out to the theater, okay, and then return it after they used it that night. Yeah. No, no, this isn't good. And I just feel...if you aren't sure about it, then you shouldn't buy it in the first place. To me, I don't wanna put people out. That's really what it boils down to. I don't wanna put people out by having to return things, but sometimes you do. And just don't be surprised if they charge you a restocking fee.
Amy: I was looking at the list of retailers that are charging these fees now, and there are big names on there, likely places that you are shopping from this year. Some of them, up to $12 that they're going to charge you to mail back, to ship back that item, right? So that's a huge cost to you or to the person you bought that gift for. So I agree, you have to be very sure about it. When it comes to Amazon, because I know a lot of people are buying gifts from Amazon, they do make it easy.
Steve: They make it easy, yeah.
Amy: So if you're taking something to UPS, sometimes, over the past year, they have charged a dollar for you to return that, but you can still...
Steve: Literally, a dollar?
Amy: Yeah, a dollar.
Steve: Okay.
Amy: But you can still take them to Whole Foods, to Kohl's, to places like that, and they will ship them back for free. So there are still some places where you can avoid it. It's going to be a thing of the past. So I think you've got to be really smart about your gift-giving and how you're shopping this year and in the future.
Thanks for listening tonight. We hope you're going to tune in tomorrow. We're talking about whether you should be putting money into a Roth 401(k). Do you even have that option? You've been listening to "Simply Money," presented by Allworth Financial here on 55KRC, the Talk Station.
