December 8, 2023 Best of Simply Money Podcast
SPECIAL EPISODE: An interview with the founder and CEO of Jersey Mike’s.
Steve and Amy sit down with Peter Cancro, the man who turned one sub shop into a multibillion-dollar company.
Plus, they reveal the financial resolutions to make for 2024, and play a little retirement ‘fact or fiction.’
Transcript
Steve: Tonight, I've got a special treat for you, an interview with the founder and CEO of Jersey Mike's. You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Amy Wagner.
You know, if you drive across the country and you see those signs at the exits, you probably noticed about 10 years ago that we started seeing some signs that said Jersey Mike's. And unless you're from the Jersey Shore, it might have been a new name to you. Well, I've got a connection. Back in 1975 as a high school kid, I worked at the original store. I grew up with the founder, and I'll tell you what, he is the hardest-working guy I've ever known. He doesn't know this probably, but he taught me lessons back when I was 16, 17 years old that I still carry with me to this day. Of course, that's the founder and CEO of Jersey Mike's, Peter Cancro.
Peter, thanks for joining us. And I don't think people really know what an American success story you are. I brag on you all the time. Give everybody a little bit of a clue of how a high school kid was able to buy his boss's store and from that point build this into a national franchise.
Peter: Well, we've done pretty well the last, I would say, decade or so. It really took a long time to build and grow, but now it's really just starting to grow, if you will. We just opened 300 stores last year. This year again, over 300 stores, which kind of makes us... If you look at all the magazines, we're the number one ranked franchise, believe it or not, in America, or number two or number three. Every magazine you pick up, that's what it says. And I say, "Well, we must be doing well. I read it in the magazine." So I sort of laugh at that.
And, you know, people say, 'Well, how did you do it?" I said, "Well, you know, we showed up every day." And that's a big part of it and working hard and kind of serving our customers and our franchise owners, you know, trying to pick the right people to do the right thing in the stores. So we got started in '75. A football coach of mine, the story where I went over his house and he said, you know, "I think we can do something." And he did. And back May, and it was March of my senior year, 17 years old, was fortunate to have the opportunity to go after that first store that opened in '56. So 48 years later, I guess overnight success, right, Steve?
Steve: Yeah, but you're a high school kid. And of course, I know you so I know the story. And it wasn't always easy but, you know, you didn't come from money, I didn't come from money and yet you saw something. You worked at a shop and you were able to get a loan to allow you to buy the shop that you worked at and work your butt off. I mean, you worked hard in that shop and built it up from there and eventually built a second store which is double the problems. That's a huge jump, and yet even then I remember you were talking about, you were probably 18 or 19, we're going to franchise, we're going to change the name, we're going to franchise, we're going to go nationwide. How could you think that big at that age? That's incredible.
Peter: Well, yeah, I think when you watch the people getting the subs wrapped to travel, I think you remember that they were taking them all over the country. A fellow used to come in from London and take them over there. And boy, they would say, "Nothing like this around the country." And it was true. We were one of the first brands to ever have an authentic submarine sandwich. You cut the bread all the way in half, fresh slice, fresh grilled, which no one is doing...
Steve: Nobody did.
Peter: ...till today. No one across the country. It's all pre-prepared, pre-sliced. And when you see that and hear it from so many people, you say, "Well, you know, we..." They were kind of demanding us to grow, you know. So that's sort of how it happened to grow.
Amy: You know, Peter, we've got a lot of small business owners who are loyal listeners on the show. In listening to you, you know, it's like, gosh, okay, he went from one store to now, you know, the top of these lists of best franchises. You've got Danny DeVito repping, you know, leading all the advertising. You said it took a long time, but I wonder, are there a couple of critical decisions that you can point to along the way of saying this thing and this thing were some of the keys to the major success that we're seeing now?
Peter: Yeah, no, I wish I could, but no. You know, we started franchising in '87 and really took off and we started opening stores in Ocean and Monmouth County, New Jersey. And Steve, as you know, we went out to Cincinnati and then we went to Tennessee and we found out, wow, we're winning the best sub award in these markets with one store. And people just love the product, and that's how they came in and started and wanted to grow.
Then in '91, we went down hard with the recession then. Banks went out of business in the Northeast. No one was lending money, and boy, we really saw tough times. You know, you expand and you spend all of your money to grow and then when hard times hit, you don't have any capital. Good lesson for an entrepreneur starting out, you know, make sure you have a little bit of a business plan with funds put away.
So after that, we recovered, took several years, and started growing again, but no, it was really just working it. North Carolina happened, and that economy really boomed and we boomed with it. And then certain markets and certain area directors really fueled the growth. So over the years, we started opening more stores each year, slow progression, and, you know, today, now it's really growing.
Steve: How many stories do you have now?
Peter: We'll finish up this year at 2700, and we'll be over 3000 towards the end of next year. Again, looking to open anywhere from 300 to 350 next year, '24, '25, '26. The next 3 years will be more growth than the last 10.
Steve: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Amy Wagner, and we're talking with the CEO and founder of Jersey Mike's Sandwiches, Peter Cancro. Peter, what really struck me at the conference that you had last year was the amount of charitable giving your organization gives. Every year you've got the annual Day of Giving, and you've supported so many extremely worthy charities. Talk to me a little bit about how that came about. Why does Jersey Mike's do what it's doing for charity?
Peter: Yeah, so we grew up in a small Jersey Shore town about an hour south of New York and, you know, everybody knew everybody. It was that kind of a community. You don't lock your doors when you leave, that kind of thing. And coming from a small town community, we watched in high school, some small businessmen, Bob Hoffman, Hoffman's Ice Cream, Jack Baker from the Lobster Shanty in Point Pleasant. They gave unconditionally to the youth on the first day to the community. And being a recipient of that is why, you know, we started giving. I took over the store and I said, "This is what we're going to do."
And our mission statement from 1975 was to give and make a difference in someone's life. The power of the sub sandwich, we called it. So wherever our heart was drawn, that's the charity we got involved in. And it's so great the local charities all around the country, they benefit from the local store owners. They choose who they're going to give the proceeds to in that March Day of Giving, which we raised 23 million in one day. It's really gotten a life of its own, Steve, Amy. So proud of what that's become.
Amy: You know, Peter, my husband and I, we actually own a few small businesses ourselves. I know a lot of entrepreneurs kind of figure out along the way. You learn as much from the things that go badly from those mistakes is you do the things that go well. Are there any things...? You mentioned before, right, not just having enough capital set aside for when the hard times like a recession hits. Anything else that you can say, "Man, we learned not to do that again?"
Peter: Yeah, so many, many things, too long for the program to take in. But it's funny, I never really had any mentor or person that could kind of guide me. I just learned kind of the old-fashioned way, making mistakes in growth. But you don't have to make mistakes and fail to be successful. You know, I've said that all along. You know, you can grow and get in touch with people today and listen and be capitalized. You don't have to fail. But now the lessons would be just have a plan, be a little bit more capitalized, don't spend all your money when you're growing, and just, you know, look at your growth and where you think you'll be. That's the biggest cause for people failing is that capital, then the capital reserves.
Steve: So growing up in the same town, I mean, to give people an idea of how small the town is, I think we graduated somewhere between 100 and 110 seniors out of our high school every year. That's a small town. And yet, you've been able to achieve this incredible success through a shop that you worked at in high school. How much do you think that small town, you know, that environment helped you with your drive? I mean, something clicked in you that was able to make you work as hard as you do, grow the company. And I know it wasn't growing in a straight line. There were pitfalls along the way. What did you find in the small town environment that helped you get to this level of success?
Peter: Yeah, I talk about it today, the mentors, the coaches, the teachers in my life in grade school and high school, they took an interest in me and really had gotten the best out of me in everything I did. And that's really what drove me, is a small town community, people caring about one another, and kind of raising up together. And I guess that's what really made it happen was the sports angle that I got involved in that really kind of helped me rise up, if you will.
Steve: I think you had people in your life, and I know I definitely have people in my life that, regardless of what the home situation is or whether you grew up with money or not, you had people looking out for you. I hope it still happens, but I'm not sure it does the way it did for me and you growing up.
Peter: That's right.
Steve: You know, people literally cared about you. Teachers cared about us.
Peter: Yeah, and you got around town by riding your bike. In some of the towns now, you know, kids... You wouldn't let your kid ride the bike and go out on his own in certain areas and towns. But I don't know, for us in that town, it was very unique. And summertime, we got very busy with New Yorkers and North Jersey people. Maybe that toughened us up a bit, you know, the summertime push, right?
Steve: Yeah. Yeah.
Amy: Peter, I just want to ask you, from that very first sub store to the fact that Danny DeVito is now, I mean, your commercials, your name, it's everywhere. There's a line out the door. The Jersey Mike's is by my house all the time. Do you ever just sit back and think, "Wow, I did this?" Like, what does that feel like?
Peter: Yeah, once in a while when you go by, there's a single pizza shop or a single coffee shop. And you go in and you see the owner behind the counter, you know, making breakfast sandwiches. And I look at it and I go, "Oh, my God, that was me." And you've got so much to say to them. And it's just incredible. So Danny DeVito grew up in Asbury Park. And I didn't know that, didn't realize it. And we've really become very close.
And I told him about a story. I was in California behind the counter and somebody comes in. What are you, from Jersey? I look right at the lady and go, "Yeah, you got a problem with that?" You know, just joking with her. She said, "Oh, my goodness, I'm sorry," you know, and we both started laughing. But, you know, the Jersey connotation and all of that, we sort of thrive on that. Authentic sub sandwich, sliced fresh and grilled fresh. Nobody's doing it across the country with the red wine vinegar, olive oil. It's a unique product and still love doing it. So 48 years, overnight success.
Steve: Wow, fantastic.
Amy: It's working for you.
Steve: It absolutely is. Peter Cancro, CEO, founder of Jersey Mike's. Peter, thanks for joining us. Great American success story. Coming up next, three financial goals that should be on everyone's list for 2024. You're listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by All Worth Financial. I'm Steve Sprovach along with Amy Wagner. Hey, if you can't listen to "Simply Money" every night, just wait a day. We're going to put it out on podcast. And if you've got some buddies that can use some financial advice, tell them to just search "Simply Money" on the iHeart app or wherever you get your podcasts.
Straight ahead is retirement, the day that you stop working forever. We're going to separate fact from fiction. That's coming up at 6:43. You know, Amy, one of the worst things you could do is just dive in and pilfer your 401(k). And, you know, unfortunately, we've been saying this for years, but people aren't... They're just not getting the message. I mean, Fidelity did a study and more and more people are raiding their 401(k)s before retirement.
Amy: Well, there's some good news and some bad news here, right? The good news is it's 3% of people who have a Fidelity 401(k) who took a withdrawal. This is last quarter.
Steve: Yeah, but that's 3% too many. That's the problem.
Amy: Yeah, well, absolutely. And that being said, that's actually up a percentage from a year ago. I think the reason why people take this money is because you get this statement. You know, as the years go by, that money grows and grows and grows. You look at it and you're like, "All the things that I could do with this." What you don't understand is it's your current self stealing from your future self. And I don't think people look at it that way. The money that you take out of that account now is the money that doesn't have time to grow, that your future self is really going to wish would have been there when you get to retirement.
Steve: Yeah, one in six people have taken out a hardship loan. And that sounds like, okay, at least I'm not raiding it. It's a loan. I'm paying myself interest. But I have seen that come back and bite too many people. Because when you take out a loan, what happens if you lose your job? What happens if you leave your job?
Amy: Then you have to pay it back immediately. Yes.
Steve: Yeah. And if you don't, well, then that means that's a distribution. And if you're not 59.5, you're going to pay tax plus penalty. And that penalty, it's a 10% penalty on top of whatever tax you pay. Most people that take out a loan aren't taking it out because they're in great financial shape. So losing your job is, wow, now no income. I have to come up with money I don't have. And if I don't come up with that, I've got to pay taxes and penalties with money I also don't have. That's like a triple whammy. Not a good sign.
Amy: No-win situation there.
Steve: No. And, you know, with the holidays coming up quick, we want to talk about New Year's resolutions. Seven in ten people are planning to make at least one financial resolution. Everybody wants to lose 20 pounds. I'm one of them.
Amy: That's a gimme.
Steve: Yeah. But financial resolutions, yeah, maybe let's talk about that a little bit. Let's talk about what kind of minimum goals we should set for financial resolutions in 2024.
Amy: I think if we had our kind of Simply Money Best Financial Resolutions, right, we'd say, "Hey, if you could hit some of these or all of these, you're going to put yourself in great shape in 2024." One of the first things would be, do you have debt? Do you have high-interest debt? If you are carrying credit card debt into 2024, and we know a lot of you probably out of the generosity of your heart, right, buy a lot of things for a lot of people you love over the holidays that you can't necessarily afford to pay off in January. And it just starts this snowball of debt. In fact, there's all kinds of stats that show how many of you, and it's a large percentage, are still paying off 2022's Christmas, right? It can just get really ugly. So we would say this is the year you say enough is enough. No more credit card debt, no more revolving debt, that APR close to 30%. It's just so hard to dig yourself out of that ditch when you get there. Prioritize this and you will sleep better at night.
Steve: Well, and it's not just, okay... Same with losing weight. If you wanna lose 20 pounds, you don't just say, "Okay, I'm gonna lose 20 pounds." You have to make a behavioral change. And finance is no different. I mean, if you're gonna get rid... Let's just say you've got like 80% of the people out there and you carry credit card balances. If you keep doing the same old, same old, you're not gonna change a darn thing. So you've got to make some significant changes in your behavior.
I think that starts with the dreaded B word. I mean, yeah, you need to start budgeting a little bit so that instead of just making the minimum payments on your credit cards, you are consciously setting aside. I don't care if it's $10 or $1,000 a month, you've got to set aside something in your budget and use that, pay that credit card down with that money that you've set aside, at least on paper, at the beginning of the month, instead of waiting till the end of the month and, "Well, if something's left over, I'll pay it down. But if no, no, it didn't work. Wasn't able to do it this month either." You've got to make those actual moves forward and change something about the way you operate your finances to be able to change the outcome.
Amy: Here's another one that I like for 2024. Don't let your emotions get the best of you when it comes to your money, whether it's pessimism and, oh, inflation's so high, the markets have been all over the place. Why am I even trying to save? Why am I even putting money into my 401(k)? To fear, you know, I'm afraid the markets are gonna get even worse. I'm taking this money out and putting it under my mattress, right? We've just seen so many times people make these knee-jerk reactions based on how they're feeling at the time, whether it's negative, whether it's fear, whether it's greed, all kinds of things. But they don't turn out well, those knee-jerk decisions that you make when it comes to your money. You set a plan. You understand this is my long-term financial plan. Even if there are scary headlines, even if there's days that I wake up but I feel super negative about it all, I'm not going to change anything because it will change my plan.
Steve: Yeah, just a change in mindset. Biggest, most important one to me, and I don't think you could do anything we've talked about until you start or build up your emergency fund. I mean, this is critical. If you have unexpected expenses that you just throw on a credit card, you might be paying them down, but the balance doesn't go anywhere because you added more to it because you didn't have an emergency fund. And, you know, it's not just a couple hundred dollars. It should be at least a couple thousand and maybe even a couple of months of living expenses. But that's the only way you're going to break the chain. I mean, it's important.
Amy: I would say three to six months. Yeah, three to six months of critical expenses. And sometimes it's just a new car part or something like that. Maybe it is a couple hundred dollars. But you lose your job, you get a major medical bill, anything like that can completely derail things. So this emergency fund is the foundation of everything else.
Steve: Here's the Allworth advice, just as your new year needs a resolution, your future also needs a financial plan. Coming up next, the key financial moves to consider if your marriage isn't going to last. You've been listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Amy Wagner. You know, many people listening, they've either gone through a divorce, know someone who has and understands that both emotionally, financially. It's an incredibly stressful and complex undertaking. So to protect yourself and experience the best possible outcome if you're involved in a divorce, here are some key financial considerations to consider before all the paperwork is final.
Amy: I will start by saying, been there, done that. And, you know, it's funny, I was just talking to our producer, Jason, about this the other day and we were talking about this topic and I said... You know, when I was going through it, I had said to people on our show, you know, and obviously we're very close and people knew what I was going through, I said, "I can't talk about it yet." And then I got to the point where I had healed enough and I said, "Okay, I want to talk about it." And I haven't stopped talking about it since then from the financial perspective, because this is such an emotional time. I'm really passionate about making sure that you don't make mistakes when you're in the midst of all of those emotions that they can absolutely negatively impact your financial future.
So I think the number one thing you have to do is just kind of stand back and assess your priorities. A lot of times some people might feel, and I've talked to so many people through the years who "I just want to stick it to the other person. I'm so upset." No, no, no, no, no. What is your goal? If your goal is that you are going to set yourself up to be financially okay both today, tomorrow, and 10 years down the road, that is the lens at which you look at all other decisions.
I know one of the big things for so many people is the battle over who gets the house. It feels like the material thing and whoever walked away from it walks away the winner, okay? But think about it this way. If you bought that house with both of your incomes, can you afford it with just one income? I actually had to look at it that way myself. I walked away from the house. Was it easy? Absolutely not. It wasn't. But I found a sweet house and a great safe neighborhood where my kids had lots of friends.
And it's so funny I was actually just texting a friend of mine who lived down the street earlier today during that time. We loved it. We love that home. I would have never gone for that transition before. It was purely a financial decision and it turned out to be the best thing long-term for my family. But again, I looked at it from a financial perspective, and then everything else fell into line.
Steve: It's got to be brutal because it's such an emotional time that you're going through. I mean, this is a divorce This is the dissolution of a marriage, but, you know, the financial decisions you've got to make, you're gonna live with the rest of your life. I mean, that's the bottom line. And if you let emotions get involved in the financial side, I mean, that's where you can make some pretty bad decisions. I think that advice is incredible, but how are you able to step away and look at it clinically? I mean, I just can't get over that you were able to just take a cold hard look at the numbers because, you know, the old joke is if you're gonna get married, just take your net worth statement and tear it in half because that's what you're gonna wind up with, you know, and yet you have to look at it that way.
Amy: Well, and I think there's a couple things. First of all, if you have the financial background, you're better off, right? And one of the things we say is, like, conduct your research and really know things, you know, everything that you need to know. But here's the thing. I would say you need to know long before that divorce ever happened, where are all the financial documents held? You know, about how much is in the 401(k), and how much are in the bank accounts? Those things you should know day in and day out, whether you are in the happiest and best of marriages because it's just a smart thing. Then if something does happen, you're not having to research and try to find all these answers. You already know them. So I say you start there.
But, you know, another thing that we don't talk about often is you surround yourself by a good team. And Steve, as much as I know financially, there were still times when it was just too much and I would say, "Okay, let's just walk away from it." And my attorney, during that time, would say, "Nope, we're not going to do that because that's going to make a huge difference to you long term." So I would say you really have to surround yourself with a group of people, a financial advisor, an accountant that you can count on where when the emotions do get the best of you, and they will, they're looking out for your best interest.
Steve: Well, and I think that's good advice because your attorney isn't necessarily an expert on the financial side. And so you might have to pull in your investment advisor into the conversation, and your investment advisor certainly isn't going to be, you know, the expert on the legal side. So I think having a team is incredibly important.
You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Amy Wagner. And we're looking at some of the financial aspects of a divorce or soon-to-be divorce and what is important to consider. I have seen from an investment advisor's perspective what poor communication can result in. And the example I'm thinking of is a couple that came in when their marriage was still relatively healthy, where they didn't have a clue what each other had in their 401(k)s or savings. I mean, they were 100% separated out financially, which tells me that, okay, if you're separated out financially, the marriage might not be long behind because you can get into aspects that once the marriage starts breaking down you don't need to see that. This is my money. And that can cause even more problems.
Amy: I'd say another thing too that you have to make a priority during this time is creating a budget. I mean, your life is inevitably going to change. You know, there were two incomes coming in, you know, a financial future that you were planning for together, and you have to create a new budget and understand it may change things. It may change the lifestyle that you have, but the priority, again for me, and this is what I decided from the beginning, is that I wanted to be financially healthy for myself and for my kids, not only on day one of that divorce, but 10 years out. And so I created a budget that allowed us to do that. It pared back on some things. It also left some priorities in that budget. I wanted to be able to travel with my kids, make new fun memories with them. That was part of the budget, and it gave us a lot of hope and a lot of things to look forward to.
So, you know, I think, yes, it is a financial time, but you can also take a little bit of control when you feel a lot of things are out of control. And this is, I think, an area that you can take great control of, which is, okay, what does the new budget look like? What does this new living situation look like? How do I start from scratch, and how do I build a new healthy foundation? Before you were doing that together with the spouse, now this is you doing it on your own, maybe with some children in the picture as well.
Steve: And I don't think you can say enough about updating legal documents. You've got to take a hard look at, do you have a trust? Well, does it need to be updated? Yeah. Will? Yeah. Powers of attorney? Yeah. I mean, these things are super important to look at. And you can't just say, "Well, I'll get to that sometime down the road."
Amy: Well, and this was one of the first things that I had to tackle, right? And before, it was, you know, okay, my husband knows where these documents are. My husband would know how to take care of things. But when it was just my children and I on our own, I needed to make sure that the will and the estate plan and all of those documents were set up in order to take care of minor children and to make sure that they were set up well. So lots of considerations with these things. And again, it comes down to that team of people that are around you. I'd have a good estate planning attorney, right? As I say these things, it's not that they have to cost you thousands and thousands of dollars. It just has to be someone you can trust, who can work alongside you. But I think that strong financial foundation, long before that marriage goes south, has to be there. It makes everything easier for everyone.
Steve: Yeah, and put things in writing. I mean, change passwords, do the usual things that you're probably already getting advice for. Make sure the kids know, okay, in writing, hey, here's where we keep things. Here's where I keep my stuff. Here's where I bank. Here's where my safe deposit box. Whether you're going through a divorce or not, these are things your children should be aware of in case there's any emergency of any type down the road.
Here's the Allworth advice. A well-crafted financial plan, yeah, it should consider your current financial situation, including income, expenses, assets, liabilities, all that stuff, but please outline steps that you need to take to optimize your resources and help you achieve long-term financial security.
Coming up next, we're gonna play a little retirement fact or fiction. You're listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Amy Wagner. Hey, if you've got a financial question you'd like for us to answer, just click that red button on the iHeart app, record your question, we'll look at them. Straight ahead, what you can learn from people who really watch their money during the holidays. All right, Amy, your favorite game in mind, time to play a little fact or fiction. Fact or fiction, retirement is a day you will quit work forever.
Amy: I know everyone likes...
Steve: We didn't have a different opinion on this.
Amy: What was I going to say? I love that. I know everyone probably wants a cold hard decision on this one, but I think this is it depends. Years ago when my grandpa retired from Cincinnati Milacron, that day had been circled on the calendar forever. He literally crossed over in retirement, never looked back, and he was done. He was done working.
Steve: Cold turkey.
Amy: Yeah. For my dad, there was actually a transition. He went from working 5 days a week and probably 50, 60 hours a week, you know, down to 4 days, down to 3 days, and he did this kind of little transition. I know many people who retire from one job, go back to work part-time, you know. And so I think retirement looks different for everyone. So to say, hey, this is a fact, you're going to quit work and you're never going to look back, it's not fair because I think it really depends on your individual circumstances.
Steve: Well, to me, work is a four-letter word. I enjoy what I do. I mean, they don't call it fun, you know. And I can't stay out late Sunday night because I've got to get up early for fun. No, you say I've got to get up early for work. But I don't think work has to be a paying job. I think volunteer, hobbies, I think that can also be something that you're going to continue doing. All right, this one's an important one. Fact or fiction, Medicare is going to take care of your long-term living expenses.
Amy: This is absolutely fiction. And this is a tough pill to swallow because I think a lot of people feel like, oh, when I get to 65, my healthcare plan becomes Medicare and it covers everything.
Steve: Not at all.
Amy: And then they realize, right? I mean, you are knocking on the door of retirement, by the way, here, Mr. Sprovach. And I think, you know, it's like... And I know many people who have been in our profession for years who then when they get to this point themselves, take a look at it and they're like, "This is a lot more expensive to get the kind of coverage that we actually need than I ever would have thought about."
Steve: Yeah, especially if you leave a company with a good healthcare plan. And they bring up this word called COBRA. COBRA is, okay, we can keep our health insurance. So I guess it'll just keep costing me about $20 a month. No, COBRA means you are now picking up 100% of the tab for your health insurance, not the 5% or 10% that you were likely paying before. So you might jump from 20 bucks a pay to $1200 a month is not unusual for health costs.
Never mind, okay, nursing care later in life, Medicare covers that, right? No, no, Medicare does not cover nursing care. Medicaid is the state program that will pick up the costs if you're indigent. And that means you're gonna spend your own money until you are indigent. So this is a fallacy that too many people still believe in. Yeah, if you're concerned about nursing home costs, healthcare costs, talk to somebody who's a fiduciary that can kind of examine your needs.
Amy: I've got one for you.
Steve: Yeah, go ahead.
Amy: I've got one for you. All right, fact or fiction, you're going to need at least about $2 million to be able to retire comfortably.
Steve: Fiction. Fiction. I need $5 million. Kidding me?
Amy: Well, you do because you have 7000 hobbies that aren't cheap.
Steve: Yeah, yeah, no.
Amy: Other people? Maybe half a million.
Steve: It would be nice to have $5 million, but without winning the lottery, that's out of the question. No, everybody has a different number. And so I'm going to pull the fiction flag out for that one. I have seen people, Amy, that have very little in 401(k) savings, but between pensions and social security and a frugal lifestyle, they don't need any more. And I have seen other people that, man, they've got $2 million, they're drawing out $80,000 a year, 4% is a reasonable distribution rate. So, okay, $2 million, 4%, $80,000 a year. And that ain't close to enough, even with social security, because they spend money like crazy, or, maybe and, have a whole heck of a lot of debt. So it kind of depends on your lifestyle and how much debt you carry in retirement. You want to have a much more relaxed retirement. Don't carry any debt into it.
You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Amy Wagner, and we're playing our favorite game, hope it's yours, fact or Fiction. Amy, fact or fiction, time is more valuable than money.
Amy: I think this is an absolute fact. And I think that also money is a tool that can give you more time. I saw some research a few years ago and I thought it was so interesting and it was kind of like the best uses of money. And time and time again people said the best use of money for me is on something that gives me more time. If there's someone that can help me clean my house, if there's something that can help me manage my time better so that I can spend it on things that I actually really enjoy doing. And so I think, you know, yes, money is important but it is a tool that helps you better, probably give you more time. But I think that both of them are things that you have to manage. They're both resources that are valuable that you have to be good stewards of.
Steve: And the older I get, the more important time is because it feels like it's shorter and shorter and going quicker and quicker. All right, fact or fiction.
Amy: It flies, right?
Steve: Yeah. Your investment portfolio must avoid risk in retirement.
Amy: Well, this is absolute fiction because if you are retiring at the age of 62 or 65 or 67 and you are incredibly healthy at that age, odds are you're going to make it to 85, maybe 90, 95. And if you are taking zero risk in that portfolio, the actual risk that you're taking is of going broke safely because inflation is going to start to chip away at those dollars.
Steve: It eats away at your money.
Amy: Yeah. Yeah. You're still going to have to pay taxes, and so that money is going to go less and less far every year that goes by. I remember years ago, the first time I talked to a big group of retirees and they all wanted this, like, magic thing where they could protect all of their money and still see it grow. And if there was a magic bean that you could plant in your backyard, I got to tell you, I would absolutely have it growing in mine. There's just no money tree seed, right? So you have to do both. You have to reasonably protect your money, but you also have to grow. And that means that you can't take on zero risk, most people. If you've got Warren Buffett money, you don't need to take on any more risk at this point. But for most of us, you have to figure out what the Goldilocks point of risk is for you.
Steve: Coming up next, how do frugal people make it through the holidays? Well, we've got some tips for you. You've been listening to "Simply Money," presented by All Worth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by All Worth Financial. I'm Steve Sprovach along with Amy Wagner. Do you struggle a little bit with spending during the holidays? You know, sometimes, Amy... I know I'm an impulse buyer. I know you enough where I don't think you are. But frugal people out there have some pointers that I think at least I can learn from. They've got certain habits where they don't overspend even during the holidays.
Amy: Well, I think it starts with the decorations. And, you know, we've been to so many people's houses that are just gorgeous. And every single square inch is, like, red and green and tinsel and shiny and all the things, all of those decorations. Those add up. And, you know, one trick that I have figured out is you can add a little more to what you have every year. Don't buy it though when they first start going, you know, up over, you know, October. Oh, my gosh, they're probably up in July, the Christmas holiday decorations. Wait until the day after Christmas. Go out to those places, you know, that have all the holiday decorations. They're like 70%, 80% off. Store them. You've got brand new decorations for the next year. So I'm not saying you can't buy holiday decorations, but to blow the budget on them, does it make sense? Wait until they go on a deep discount after the holidays.
Steve: Have you seen the prices even for just a live tree?
Amy: Yes.
Steve: We went shopping for a live tree. The last time I bought a live tree about 10 years ago, 50 bucks. Not anymore, $120?
Amy: Uh-uh, $120, $150, $160.
Steve: Crazy. Just because somebody's frugal doesn't mean they're cheap though. I know some wealthy people that they just consider themselves to be just good stewards of their money. They don't want to blow a lot. And these people don't tend to have 5 different $80 a piece blow up Santa Clauses on their front yards. They're just a little more conscious of their spending. But, you know, it makes sense just to be a little bit smarter about spending your money, especially at this time of year.
Amy: You know, it's funny, there is a house by us that has, and I'm not lying about this, over 100 inflatables in their little yard. And we drive by it with my kids and it's amazing. And everywhere you look, there's all these different figurines and it's crazy. And the two comments that I always make are, how much do they spend on these? My kids are like, "Of course, mom, that's where you go." And I'm also like, "What's their energy bill like in December when they're keeping these things?"
Steve: Like the Griswolds, remember that family Christmas vacation, whatever that was where the electrical...?
Amy: The dial is going up.
Steve: It's just fitting like crazy. Yeah.
Amy: Exactly. Everything in moderation, right? And another thing is a lot of people love to travel over the holidays. Do not wait until the last minute to make those plans. If you are going to travel, book those flights early and also book them on off days, right? Don't be planning on flying to grandma's house on Christmas Eve.
Steve: Good advice. Thanks for listening. Tune in tomorrow. We're going to talk about why taking your own advice can be the best thing you do. You've been listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You know, if you drive across the country and you see those signs at the exits, you probably noticed about 10 years ago that we started seeing some signs that said Jersey Mike's. And unless you're from the Jersey Shore, it might have been a new name to you. Well, I've got a connection. Back in 1975 as a high school kid, I worked at the original store. I grew up with the founder, and I'll tell you what, he is the hardest-working guy I've ever known. He doesn't know this probably, but he taught me lessons back when I was 16, 17 years old that I still carry with me to this day. Of course, that's the founder and CEO of Jersey Mike's, Peter Cancro.
Peter, thanks for joining us. And I don't think people really know what an American success story you are. I brag on you all the time. Give everybody a little bit of a clue of how a high school kid was able to buy his boss's store and from that point build this into a national franchise.
Peter: Well, we've done pretty well the last, I would say, decade or so. It really took a long time to build and grow, but now it's really just starting to grow, if you will. We just opened 300 stores last year. This year again, over 300 stores, which kind of makes us... If you look at all the magazines, we're the number one ranked franchise, believe it or not, in America, or number two or number three. Every magazine you pick up, that's what it says. And I say, "Well, we must be doing well. I read it in the magazine." So I sort of laugh at that.
And, you know, people say, 'Well, how did you do it?" I said, "Well, you know, we showed up every day." And that's a big part of it and working hard and kind of serving our customers and our franchise owners, you know, trying to pick the right people to do the right thing in the stores. So we got started in '75. A football coach of mine, the story where I went over his house and he said, you know, "I think we can do something." And he did. And back May, and it was March of my senior year, 17 years old, was fortunate to have the opportunity to go after that first store that opened in '56. So 48 years later, I guess overnight success, right, Steve?
Steve: Yeah, but you're a high school kid. And of course, I know you so I know the story. And it wasn't always easy but, you know, you didn't come from money, I didn't come from money and yet you saw something. You worked at a shop and you were able to get a loan to allow you to buy the shop that you worked at and work your butt off. I mean, you worked hard in that shop and built it up from there and eventually built a second store which is double the problems. That's a huge jump, and yet even then I remember you were talking about, you were probably 18 or 19, we're going to franchise, we're going to change the name, we're going to franchise, we're going to go nationwide. How could you think that big at that age? That's incredible.
Peter: Well, yeah, I think when you watch the people getting the subs wrapped to travel, I think you remember that they were taking them all over the country. A fellow used to come in from London and take them over there. And boy, they would say, "Nothing like this around the country." And it was true. We were one of the first brands to ever have an authentic submarine sandwich. You cut the bread all the way in half, fresh slice, fresh grilled, which no one is doing...
Steve: Nobody did.
Peter: ...till today. No one across the country. It's all pre-prepared, pre-sliced. And when you see that and hear it from so many people, you say, "Well, you know, we..." They were kind of demanding us to grow, you know. So that's sort of how it happened to grow.
Amy: You know, Peter, we've got a lot of small business owners who are loyal listeners on the show. In listening to you, you know, it's like, gosh, okay, he went from one store to now, you know, the top of these lists of best franchises. You've got Danny DeVito repping, you know, leading all the advertising. You said it took a long time, but I wonder, are there a couple of critical decisions that you can point to along the way of saying this thing and this thing were some of the keys to the major success that we're seeing now?
Peter: Yeah, no, I wish I could, but no. You know, we started franchising in '87 and really took off and we started opening stores in Ocean and Monmouth County, New Jersey. And Steve, as you know, we went out to Cincinnati and then we went to Tennessee and we found out, wow, we're winning the best sub award in these markets with one store. And people just love the product, and that's how they came in and started and wanted to grow.
Then in '91, we went down hard with the recession then. Banks went out of business in the Northeast. No one was lending money, and boy, we really saw tough times. You know, you expand and you spend all of your money to grow and then when hard times hit, you don't have any capital. Good lesson for an entrepreneur starting out, you know, make sure you have a little bit of a business plan with funds put away.
So after that, we recovered, took several years, and started growing again, but no, it was really just working it. North Carolina happened, and that economy really boomed and we boomed with it. And then certain markets and certain area directors really fueled the growth. So over the years, we started opening more stores each year, slow progression, and, you know, today, now it's really growing.
Steve: How many stories do you have now?
Peter: We'll finish up this year at 2700, and we'll be over 3000 towards the end of next year. Again, looking to open anywhere from 300 to 350 next year, '24, '25, '26. The next 3 years will be more growth than the last 10.
Steve: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Amy Wagner, and we're talking with the CEO and founder of Jersey Mike's Sandwiches, Peter Cancro. Peter, what really struck me at the conference that you had last year was the amount of charitable giving your organization gives. Every year you've got the annual Day of Giving, and you've supported so many extremely worthy charities. Talk to me a little bit about how that came about. Why does Jersey Mike's do what it's doing for charity?
Peter: Yeah, so we grew up in a small Jersey Shore town about an hour south of New York and, you know, everybody knew everybody. It was that kind of a community. You don't lock your doors when you leave, that kind of thing. And coming from a small town community, we watched in high school, some small businessmen, Bob Hoffman, Hoffman's Ice Cream, Jack Baker from the Lobster Shanty in Point Pleasant. They gave unconditionally to the youth on the first day to the community. And being a recipient of that is why, you know, we started giving. I took over the store and I said, "This is what we're going to do."
And our mission statement from 1975 was to give and make a difference in someone's life. The power of the sub sandwich, we called it. So wherever our heart was drawn, that's the charity we got involved in. And it's so great the local charities all around the country, they benefit from the local store owners. They choose who they're going to give the proceeds to in that March Day of Giving, which we raised 23 million in one day. It's really gotten a life of its own, Steve, Amy. So proud of what that's become.
Amy: You know, Peter, my husband and I, we actually own a few small businesses ourselves. I know a lot of entrepreneurs kind of figure out along the way. You learn as much from the things that go badly from those mistakes is you do the things that go well. Are there any things...? You mentioned before, right, not just having enough capital set aside for when the hard times like a recession hits. Anything else that you can say, "Man, we learned not to do that again?"
Peter: Yeah, so many, many things, too long for the program to take in. But it's funny, I never really had any mentor or person that could kind of guide me. I just learned kind of the old-fashioned way, making mistakes in growth. But you don't have to make mistakes and fail to be successful. You know, I've said that all along. You know, you can grow and get in touch with people today and listen and be capitalized. You don't have to fail. But now the lessons would be just have a plan, be a little bit more capitalized, don't spend all your money when you're growing, and just, you know, look at your growth and where you think you'll be. That's the biggest cause for people failing is that capital, then the capital reserves.
Steve: So growing up in the same town, I mean, to give people an idea of how small the town is, I think we graduated somewhere between 100 and 110 seniors out of our high school every year. That's a small town. And yet, you've been able to achieve this incredible success through a shop that you worked at in high school. How much do you think that small town, you know, that environment helped you with your drive? I mean, something clicked in you that was able to make you work as hard as you do, grow the company. And I know it wasn't growing in a straight line. There were pitfalls along the way. What did you find in the small town environment that helped you get to this level of success?
Peter: Yeah, I talk about it today, the mentors, the coaches, the teachers in my life in grade school and high school, they took an interest in me and really had gotten the best out of me in everything I did. And that's really what drove me, is a small town community, people caring about one another, and kind of raising up together. And I guess that's what really made it happen was the sports angle that I got involved in that really kind of helped me rise up, if you will.
Steve: I think you had people in your life, and I know I definitely have people in my life that, regardless of what the home situation is or whether you grew up with money or not, you had people looking out for you. I hope it still happens, but I'm not sure it does the way it did for me and you growing up.
Peter: That's right.
Steve: You know, people literally cared about you. Teachers cared about us.
Peter: Yeah, and you got around town by riding your bike. In some of the towns now, you know, kids... You wouldn't let your kid ride the bike and go out on his own in certain areas and towns. But I don't know, for us in that town, it was very unique. And summertime, we got very busy with New Yorkers and North Jersey people. Maybe that toughened us up a bit, you know, the summertime push, right?
Steve: Yeah. Yeah.
Amy: Peter, I just want to ask you, from that very first sub store to the fact that Danny DeVito is now, I mean, your commercials, your name, it's everywhere. There's a line out the door. The Jersey Mike's is by my house all the time. Do you ever just sit back and think, "Wow, I did this?" Like, what does that feel like?
Peter: Yeah, once in a while when you go by, there's a single pizza shop or a single coffee shop. And you go in and you see the owner behind the counter, you know, making breakfast sandwiches. And I look at it and I go, "Oh, my God, that was me." And you've got so much to say to them. And it's just incredible. So Danny DeVito grew up in Asbury Park. And I didn't know that, didn't realize it. And we've really become very close.
And I told him about a story. I was in California behind the counter and somebody comes in. What are you, from Jersey? I look right at the lady and go, "Yeah, you got a problem with that?" You know, just joking with her. She said, "Oh, my goodness, I'm sorry," you know, and we both started laughing. But, you know, the Jersey connotation and all of that, we sort of thrive on that. Authentic sub sandwich, sliced fresh and grilled fresh. Nobody's doing it across the country with the red wine vinegar, olive oil. It's a unique product and still love doing it. So 48 years, overnight success.
Steve: Wow, fantastic.
Amy: It's working for you.
Steve: It absolutely is. Peter Cancro, CEO, founder of Jersey Mike's. Peter, thanks for joining us. Great American success story. Coming up next, three financial goals that should be on everyone's list for 2024. You're listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by All Worth Financial. I'm Steve Sprovach along with Amy Wagner. Hey, if you can't listen to "Simply Money" every night, just wait a day. We're going to put it out on podcast. And if you've got some buddies that can use some financial advice, tell them to just search "Simply Money" on the iHeart app or wherever you get your podcasts.
Straight ahead is retirement, the day that you stop working forever. We're going to separate fact from fiction. That's coming up at 6:43. You know, Amy, one of the worst things you could do is just dive in and pilfer your 401(k). And, you know, unfortunately, we've been saying this for years, but people aren't... They're just not getting the message. I mean, Fidelity did a study and more and more people are raiding their 401(k)s before retirement.
Amy: Well, there's some good news and some bad news here, right? The good news is it's 3% of people who have a Fidelity 401(k) who took a withdrawal. This is last quarter.
Steve: Yeah, but that's 3% too many. That's the problem.
Amy: Yeah, well, absolutely. And that being said, that's actually up a percentage from a year ago. I think the reason why people take this money is because you get this statement. You know, as the years go by, that money grows and grows and grows. You look at it and you're like, "All the things that I could do with this." What you don't understand is it's your current self stealing from your future self. And I don't think people look at it that way. The money that you take out of that account now is the money that doesn't have time to grow, that your future self is really going to wish would have been there when you get to retirement.
Steve: Yeah, one in six people have taken out a hardship loan. And that sounds like, okay, at least I'm not raiding it. It's a loan. I'm paying myself interest. But I have seen that come back and bite too many people. Because when you take out a loan, what happens if you lose your job? What happens if you leave your job?
Amy: Then you have to pay it back immediately. Yes.
Steve: Yeah. And if you don't, well, then that means that's a distribution. And if you're not 59.5, you're going to pay tax plus penalty. And that penalty, it's a 10% penalty on top of whatever tax you pay. Most people that take out a loan aren't taking it out because they're in great financial shape. So losing your job is, wow, now no income. I have to come up with money I don't have. And if I don't come up with that, I've got to pay taxes and penalties with money I also don't have. That's like a triple whammy. Not a good sign.
Amy: No-win situation there.
Steve: No. And, you know, with the holidays coming up quick, we want to talk about New Year's resolutions. Seven in ten people are planning to make at least one financial resolution. Everybody wants to lose 20 pounds. I'm one of them.
Amy: That's a gimme.
Steve: Yeah. But financial resolutions, yeah, maybe let's talk about that a little bit. Let's talk about what kind of minimum goals we should set for financial resolutions in 2024.
Amy: I think if we had our kind of Simply Money Best Financial Resolutions, right, we'd say, "Hey, if you could hit some of these or all of these, you're going to put yourself in great shape in 2024." One of the first things would be, do you have debt? Do you have high-interest debt? If you are carrying credit card debt into 2024, and we know a lot of you probably out of the generosity of your heart, right, buy a lot of things for a lot of people you love over the holidays that you can't necessarily afford to pay off in January. And it just starts this snowball of debt. In fact, there's all kinds of stats that show how many of you, and it's a large percentage, are still paying off 2022's Christmas, right? It can just get really ugly. So we would say this is the year you say enough is enough. No more credit card debt, no more revolving debt, that APR close to 30%. It's just so hard to dig yourself out of that ditch when you get there. Prioritize this and you will sleep better at night.
Steve: Well, and it's not just, okay... Same with losing weight. If you wanna lose 20 pounds, you don't just say, "Okay, I'm gonna lose 20 pounds." You have to make a behavioral change. And finance is no different. I mean, if you're gonna get rid... Let's just say you've got like 80% of the people out there and you carry credit card balances. If you keep doing the same old, same old, you're not gonna change a darn thing. So you've got to make some significant changes in your behavior.
I think that starts with the dreaded B word. I mean, yeah, you need to start budgeting a little bit so that instead of just making the minimum payments on your credit cards, you are consciously setting aside. I don't care if it's $10 or $1,000 a month, you've got to set aside something in your budget and use that, pay that credit card down with that money that you've set aside, at least on paper, at the beginning of the month, instead of waiting till the end of the month and, "Well, if something's left over, I'll pay it down. But if no, no, it didn't work. Wasn't able to do it this month either." You've got to make those actual moves forward and change something about the way you operate your finances to be able to change the outcome.
Amy: Here's another one that I like for 2024. Don't let your emotions get the best of you when it comes to your money, whether it's pessimism and, oh, inflation's so high, the markets have been all over the place. Why am I even trying to save? Why am I even putting money into my 401(k)? To fear, you know, I'm afraid the markets are gonna get even worse. I'm taking this money out and putting it under my mattress, right? We've just seen so many times people make these knee-jerk reactions based on how they're feeling at the time, whether it's negative, whether it's fear, whether it's greed, all kinds of things. But they don't turn out well, those knee-jerk decisions that you make when it comes to your money. You set a plan. You understand this is my long-term financial plan. Even if there are scary headlines, even if there's days that I wake up but I feel super negative about it all, I'm not going to change anything because it will change my plan.
Steve: Yeah, just a change in mindset. Biggest, most important one to me, and I don't think you could do anything we've talked about until you start or build up your emergency fund. I mean, this is critical. If you have unexpected expenses that you just throw on a credit card, you might be paying them down, but the balance doesn't go anywhere because you added more to it because you didn't have an emergency fund. And, you know, it's not just a couple hundred dollars. It should be at least a couple thousand and maybe even a couple of months of living expenses. But that's the only way you're going to break the chain. I mean, it's important.
Amy: I would say three to six months. Yeah, three to six months of critical expenses. And sometimes it's just a new car part or something like that. Maybe it is a couple hundred dollars. But you lose your job, you get a major medical bill, anything like that can completely derail things. So this emergency fund is the foundation of everything else.
Steve: Here's the Allworth advice, just as your new year needs a resolution, your future also needs a financial plan. Coming up next, the key financial moves to consider if your marriage isn't going to last. You've been listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Amy Wagner. You know, many people listening, they've either gone through a divorce, know someone who has and understands that both emotionally, financially. It's an incredibly stressful and complex undertaking. So to protect yourself and experience the best possible outcome if you're involved in a divorce, here are some key financial considerations to consider before all the paperwork is final.
Amy: I will start by saying, been there, done that. And, you know, it's funny, I was just talking to our producer, Jason, about this the other day and we were talking about this topic and I said... You know, when I was going through it, I had said to people on our show, you know, and obviously we're very close and people knew what I was going through, I said, "I can't talk about it yet." And then I got to the point where I had healed enough and I said, "Okay, I want to talk about it." And I haven't stopped talking about it since then from the financial perspective, because this is such an emotional time. I'm really passionate about making sure that you don't make mistakes when you're in the midst of all of those emotions that they can absolutely negatively impact your financial future.
So I think the number one thing you have to do is just kind of stand back and assess your priorities. A lot of times some people might feel, and I've talked to so many people through the years who "I just want to stick it to the other person. I'm so upset." No, no, no, no, no. What is your goal? If your goal is that you are going to set yourself up to be financially okay both today, tomorrow, and 10 years down the road, that is the lens at which you look at all other decisions.
I know one of the big things for so many people is the battle over who gets the house. It feels like the material thing and whoever walked away from it walks away the winner, okay? But think about it this way. If you bought that house with both of your incomes, can you afford it with just one income? I actually had to look at it that way myself. I walked away from the house. Was it easy? Absolutely not. It wasn't. But I found a sweet house and a great safe neighborhood where my kids had lots of friends.
And it's so funny I was actually just texting a friend of mine who lived down the street earlier today during that time. We loved it. We love that home. I would have never gone for that transition before. It was purely a financial decision and it turned out to be the best thing long-term for my family. But again, I looked at it from a financial perspective, and then everything else fell into line.
Steve: It's got to be brutal because it's such an emotional time that you're going through. I mean, this is a divorce This is the dissolution of a marriage, but, you know, the financial decisions you've got to make, you're gonna live with the rest of your life. I mean, that's the bottom line. And if you let emotions get involved in the financial side, I mean, that's where you can make some pretty bad decisions. I think that advice is incredible, but how are you able to step away and look at it clinically? I mean, I just can't get over that you were able to just take a cold hard look at the numbers because, you know, the old joke is if you're gonna get married, just take your net worth statement and tear it in half because that's what you're gonna wind up with, you know, and yet you have to look at it that way.
Amy: Well, and I think there's a couple things. First of all, if you have the financial background, you're better off, right? And one of the things we say is, like, conduct your research and really know things, you know, everything that you need to know. But here's the thing. I would say you need to know long before that divorce ever happened, where are all the financial documents held? You know, about how much is in the 401(k), and how much are in the bank accounts? Those things you should know day in and day out, whether you are in the happiest and best of marriages because it's just a smart thing. Then if something does happen, you're not having to research and try to find all these answers. You already know them. So I say you start there.
But, you know, another thing that we don't talk about often is you surround yourself by a good team. And Steve, as much as I know financially, there were still times when it was just too much and I would say, "Okay, let's just walk away from it." And my attorney, during that time, would say, "Nope, we're not going to do that because that's going to make a huge difference to you long term." So I would say you really have to surround yourself with a group of people, a financial advisor, an accountant that you can count on where when the emotions do get the best of you, and they will, they're looking out for your best interest.
Steve: Well, and I think that's good advice because your attorney isn't necessarily an expert on the financial side. And so you might have to pull in your investment advisor into the conversation, and your investment advisor certainly isn't going to be, you know, the expert on the legal side. So I think having a team is incredibly important.
You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Amy Wagner. And we're looking at some of the financial aspects of a divorce or soon-to-be divorce and what is important to consider. I have seen from an investment advisor's perspective what poor communication can result in. And the example I'm thinking of is a couple that came in when their marriage was still relatively healthy, where they didn't have a clue what each other had in their 401(k)s or savings. I mean, they were 100% separated out financially, which tells me that, okay, if you're separated out financially, the marriage might not be long behind because you can get into aspects that once the marriage starts breaking down you don't need to see that. This is my money. And that can cause even more problems.
Amy: I'd say another thing too that you have to make a priority during this time is creating a budget. I mean, your life is inevitably going to change. You know, there were two incomes coming in, you know, a financial future that you were planning for together, and you have to create a new budget and understand it may change things. It may change the lifestyle that you have, but the priority, again for me, and this is what I decided from the beginning, is that I wanted to be financially healthy for myself and for my kids, not only on day one of that divorce, but 10 years out. And so I created a budget that allowed us to do that. It pared back on some things. It also left some priorities in that budget. I wanted to be able to travel with my kids, make new fun memories with them. That was part of the budget, and it gave us a lot of hope and a lot of things to look forward to.
So, you know, I think, yes, it is a financial time, but you can also take a little bit of control when you feel a lot of things are out of control. And this is, I think, an area that you can take great control of, which is, okay, what does the new budget look like? What does this new living situation look like? How do I start from scratch, and how do I build a new healthy foundation? Before you were doing that together with the spouse, now this is you doing it on your own, maybe with some children in the picture as well.
Steve: And I don't think you can say enough about updating legal documents. You've got to take a hard look at, do you have a trust? Well, does it need to be updated? Yeah. Will? Yeah. Powers of attorney? Yeah. I mean, these things are super important to look at. And you can't just say, "Well, I'll get to that sometime down the road."
Amy: Well, and this was one of the first things that I had to tackle, right? And before, it was, you know, okay, my husband knows where these documents are. My husband would know how to take care of things. But when it was just my children and I on our own, I needed to make sure that the will and the estate plan and all of those documents were set up in order to take care of minor children and to make sure that they were set up well. So lots of considerations with these things. And again, it comes down to that team of people that are around you. I'd have a good estate planning attorney, right? As I say these things, it's not that they have to cost you thousands and thousands of dollars. It just has to be someone you can trust, who can work alongside you. But I think that strong financial foundation, long before that marriage goes south, has to be there. It makes everything easier for everyone.
Steve: Yeah, and put things in writing. I mean, change passwords, do the usual things that you're probably already getting advice for. Make sure the kids know, okay, in writing, hey, here's where we keep things. Here's where I keep my stuff. Here's where I bank. Here's where my safe deposit box. Whether you're going through a divorce or not, these are things your children should be aware of in case there's any emergency of any type down the road.
Here's the Allworth advice. A well-crafted financial plan, yeah, it should consider your current financial situation, including income, expenses, assets, liabilities, all that stuff, but please outline steps that you need to take to optimize your resources and help you achieve long-term financial security.
Coming up next, we're gonna play a little retirement fact or fiction. You're listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Amy Wagner. Hey, if you've got a financial question you'd like for us to answer, just click that red button on the iHeart app, record your question, we'll look at them. Straight ahead, what you can learn from people who really watch their money during the holidays. All right, Amy, your favorite game in mind, time to play a little fact or fiction. Fact or fiction, retirement is a day you will quit work forever.
Amy: I know everyone likes...
Steve: We didn't have a different opinion on this.
Amy: What was I going to say? I love that. I know everyone probably wants a cold hard decision on this one, but I think this is it depends. Years ago when my grandpa retired from Cincinnati Milacron, that day had been circled on the calendar forever. He literally crossed over in retirement, never looked back, and he was done. He was done working.
Steve: Cold turkey.
Amy: Yeah. For my dad, there was actually a transition. He went from working 5 days a week and probably 50, 60 hours a week, you know, down to 4 days, down to 3 days, and he did this kind of little transition. I know many people who retire from one job, go back to work part-time, you know. And so I think retirement looks different for everyone. So to say, hey, this is a fact, you're going to quit work and you're never going to look back, it's not fair because I think it really depends on your individual circumstances.
Steve: Well, to me, work is a four-letter word. I enjoy what I do. I mean, they don't call it fun, you know. And I can't stay out late Sunday night because I've got to get up early for fun. No, you say I've got to get up early for work. But I don't think work has to be a paying job. I think volunteer, hobbies, I think that can also be something that you're going to continue doing. All right, this one's an important one. Fact or fiction, Medicare is going to take care of your long-term living expenses.
Amy: This is absolutely fiction. And this is a tough pill to swallow because I think a lot of people feel like, oh, when I get to 65, my healthcare plan becomes Medicare and it covers everything.
Steve: Not at all.
Amy: And then they realize, right? I mean, you are knocking on the door of retirement, by the way, here, Mr. Sprovach. And I think, you know, it's like... And I know many people who have been in our profession for years who then when they get to this point themselves, take a look at it and they're like, "This is a lot more expensive to get the kind of coverage that we actually need than I ever would have thought about."
Steve: Yeah, especially if you leave a company with a good healthcare plan. And they bring up this word called COBRA. COBRA is, okay, we can keep our health insurance. So I guess it'll just keep costing me about $20 a month. No, COBRA means you are now picking up 100% of the tab for your health insurance, not the 5% or 10% that you were likely paying before. So you might jump from 20 bucks a pay to $1200 a month is not unusual for health costs.
Never mind, okay, nursing care later in life, Medicare covers that, right? No, no, Medicare does not cover nursing care. Medicaid is the state program that will pick up the costs if you're indigent. And that means you're gonna spend your own money until you are indigent. So this is a fallacy that too many people still believe in. Yeah, if you're concerned about nursing home costs, healthcare costs, talk to somebody who's a fiduciary that can kind of examine your needs.
Amy: I've got one for you.
Steve: Yeah, go ahead.
Amy: I've got one for you. All right, fact or fiction, you're going to need at least about $2 million to be able to retire comfortably.
Steve: Fiction. Fiction. I need $5 million. Kidding me?
Amy: Well, you do because you have 7000 hobbies that aren't cheap.
Steve: Yeah, yeah, no.
Amy: Other people? Maybe half a million.
Steve: It would be nice to have $5 million, but without winning the lottery, that's out of the question. No, everybody has a different number. And so I'm going to pull the fiction flag out for that one. I have seen people, Amy, that have very little in 401(k) savings, but between pensions and social security and a frugal lifestyle, they don't need any more. And I have seen other people that, man, they've got $2 million, they're drawing out $80,000 a year, 4% is a reasonable distribution rate. So, okay, $2 million, 4%, $80,000 a year. And that ain't close to enough, even with social security, because they spend money like crazy, or, maybe and, have a whole heck of a lot of debt. So it kind of depends on your lifestyle and how much debt you carry in retirement. You want to have a much more relaxed retirement. Don't carry any debt into it.
You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Amy Wagner, and we're playing our favorite game, hope it's yours, fact or Fiction. Amy, fact or fiction, time is more valuable than money.
Amy: I think this is an absolute fact. And I think that also money is a tool that can give you more time. I saw some research a few years ago and I thought it was so interesting and it was kind of like the best uses of money. And time and time again people said the best use of money for me is on something that gives me more time. If there's someone that can help me clean my house, if there's something that can help me manage my time better so that I can spend it on things that I actually really enjoy doing. And so I think, you know, yes, money is important but it is a tool that helps you better, probably give you more time. But I think that both of them are things that you have to manage. They're both resources that are valuable that you have to be good stewards of.
Steve: And the older I get, the more important time is because it feels like it's shorter and shorter and going quicker and quicker. All right, fact or fiction.
Amy: It flies, right?
Steve: Yeah. Your investment portfolio must avoid risk in retirement.
Amy: Well, this is absolute fiction because if you are retiring at the age of 62 or 65 or 67 and you are incredibly healthy at that age, odds are you're going to make it to 85, maybe 90, 95. And if you are taking zero risk in that portfolio, the actual risk that you're taking is of going broke safely because inflation is going to start to chip away at those dollars.
Steve: It eats away at your money.
Amy: Yeah. Yeah. You're still going to have to pay taxes, and so that money is going to go less and less far every year that goes by. I remember years ago, the first time I talked to a big group of retirees and they all wanted this, like, magic thing where they could protect all of their money and still see it grow. And if there was a magic bean that you could plant in your backyard, I got to tell you, I would absolutely have it growing in mine. There's just no money tree seed, right? So you have to do both. You have to reasonably protect your money, but you also have to grow. And that means that you can't take on zero risk, most people. If you've got Warren Buffett money, you don't need to take on any more risk at this point. But for most of us, you have to figure out what the Goldilocks point of risk is for you.
Steve: Coming up next, how do frugal people make it through the holidays? Well, we've got some tips for you. You've been listening to "Simply Money," presented by All Worth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money," presented by All Worth Financial. I'm Steve Sprovach along with Amy Wagner. Do you struggle a little bit with spending during the holidays? You know, sometimes, Amy... I know I'm an impulse buyer. I know you enough where I don't think you are. But frugal people out there have some pointers that I think at least I can learn from. They've got certain habits where they don't overspend even during the holidays.
Amy: Well, I think it starts with the decorations. And, you know, we've been to so many people's houses that are just gorgeous. And every single square inch is, like, red and green and tinsel and shiny and all the things, all of those decorations. Those add up. And, you know, one trick that I have figured out is you can add a little more to what you have every year. Don't buy it though when they first start going, you know, up over, you know, October. Oh, my gosh, they're probably up in July, the Christmas holiday decorations. Wait until the day after Christmas. Go out to those places, you know, that have all the holiday decorations. They're like 70%, 80% off. Store them. You've got brand new decorations for the next year. So I'm not saying you can't buy holiday decorations, but to blow the budget on them, does it make sense? Wait until they go on a deep discount after the holidays.
Steve: Have you seen the prices even for just a live tree?
Amy: Yes.
Steve: We went shopping for a live tree. The last time I bought a live tree about 10 years ago, 50 bucks. Not anymore, $120?
Amy: Uh-uh, $120, $150, $160.
Steve: Crazy. Just because somebody's frugal doesn't mean they're cheap though. I know some wealthy people that they just consider themselves to be just good stewards of their money. They don't want to blow a lot. And these people don't tend to have 5 different $80 a piece blow up Santa Clauses on their front yards. They're just a little more conscious of their spending. But, you know, it makes sense just to be a little bit smarter about spending your money, especially at this time of year.
Amy: You know, it's funny, there is a house by us that has, and I'm not lying about this, over 100 inflatables in their little yard. And we drive by it with my kids and it's amazing. And everywhere you look, there's all these different figurines and it's crazy. And the two comments that I always make are, how much do they spend on these? My kids are like, "Of course, mom, that's where you go." And I'm also like, "What's their energy bill like in December when they're keeping these things?"
Steve: Like the Griswolds, remember that family Christmas vacation, whatever that was where the electrical...?
Amy: The dial is going up.
Steve: It's just fitting like crazy. Yeah.
Amy: Exactly. Everything in moderation, right? And another thing is a lot of people love to travel over the holidays. Do not wait until the last minute to make those plans. If you are going to travel, book those flights early and also book them on off days, right? Don't be planning on flying to grandma's house on Christmas Eve.
Steve: Good advice. Thanks for listening. Tune in tomorrow. We're going to talk about why taking your own advice can be the best thing you do. You've been listening to "Simply Money," presented by Allworth Financial on 55KRC, THE Talk Station.
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