This is not your typical, jargon-filled financial podcast. In fact, the word “budget” comes with a warning label in this episode of The Agent of Wealth Podcast. Today, host Marc Bautis is joined by Emily Guy Birken, a former educator, lifelong money nerd and a Plutus Award-winning freelance writer specializing in the scientific research behind irrational money behaviors. She is the author of five books, including the newly released Stacked: Your Super-Serious Guide to Modern Money Management, written with Joe Saul-Sehy. Together, Emily and Marc break down some of the most important – but frequently overlooked – basics to successful money management.
In this episode, you will learn:
- How to timeline your financial goals to make them more achievable.
- How someone who is typically afraid to even check their bank account can slowly transition into loving the “b word” (budgeting).
- Simple approaches for couples working through financial differences.
- How – and why – to gamify your finances.
- And more!
emilyguybirken.com/aow | Stacked: Your Super-Serious Guide to Modern Money Management | The 5 Years Before You Retire | Bautis Financial: 7 N Mountain Ave Montclair, New Jersey 07042 (862) 205-5000
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth Podcast. This is your host, Marc Bautis. On today’s show, I brought on a special guest, Emily Guy Birken. Emily is a former educator, lifelong money nerd and a Plutus award-winning freelance writer specializing in the scientific research behind irrationally money behaviors. She’s the author of five books, including The 5 Years Before You Retire and Stacked: Your Super-Serious Guide to Modern Money Management written with Joe Saul-Sehy. Emily, welcome to the show.
Thank you for having me.
The latest book you wrote, Stacked, what inspired you to write it?
So the coauthor, Joe Saul-Sehy, is a podcaster – his show is called Stacking Benjamins – and his goal is to offer a lighthearted approach to finance. He actually came up with the idea of writing Stacked, and then brought me on board to coauthor it. I had written four books prior, and he thought I’d be a good partner for the project.
I was super excited about it because I try to bring humor into everything that I do, including my writing. But unfortunately, it often gets edited out. A lot of my financial clients just want the facts, so even the gentle humor I sometimes put in will get edited out. Stacked was an opportunity for me to let my humor off the leash, and I had a lot of fun with it.
It was a very exciting creative process for me. Joe and I split up the book: There’s 14 chapters, so we each took seven. We wrote the first draft of the seven chapters, then switched. So as I was writing, I was thinking, ‘Oh, Joe is going to have a laugh at this.’ And he was doing the same thing, thinking, ‘Oh, this is going to crack Emily up.’ It was a really fun and unique writing experience, one that was very different from how I’ve done my other books.
That’s great. I recently read it and thought it was a great book. The humor really drives home some of the points that you and Joe make. And you’re right, you really don’t see humor in other financial books – or even in the financial industry in general. I also liked the amount of sidebars and stories in the book, it was really relatable. Now, in the title, it specificies money management as being modern. What is modern money management?
Modern Money Management in 2022
In some ways, money management has not changed since the time of our great grandparents. What I mean by that is a lot of the same actions and skills will lead to good money outcomes: things like planning ahead, creating a budget, tracking your income and expenditures, etc. Those are the basics.
What’s different now is there are so many more ways to spend, invest and earn money. That means, for one, we need to put different guardrails around our money compared to what previous generations had to do.
For example, you might remember the old piece of advice to freeze your credit card in a block of ice to keep you from spending money just because you’re tempted. That doesn’t work in the modern day, because websites like Amazon store your credit card information for you – making a purchase is as easy as the click of a button. Freezing your credit card in a block of ice won’t do anything to stop you.
That’s where the change comes, in terms of modern money management. We have to find new ways to put guardrails around our money weaknesses, because we all have them. There are times that we all make suboptimal decisions with our money, but we have to find new ways to handle those weaknesses so that we reach our financial goals.
So you mentioned financial goals. When I work with people as their financial advisor, I typically start all conversations by asking a client what their goals are, or what it is that’s important to them. Some people can rattle off 10-15 different things that they want to achieve. Others are much more vague, perhaps they want to retire someday, or they don’t want to run out of money, but that’s about all they can think of. How do you guide someone along the path of realizing their goals, without leading them?
How to Set Financial Goals
There’s two sides to this. For the people who know they want to retire someday, but don’t really know what that means, I think it’s helpful to ask them to visualize what an ideal day in retirement will look like. Then, visualize an ideal week, an ideal month, and an ideal year. They should think about:
- What are the kinds of things I would do daily?
- What are the kinds of things I would do monthly?
- What are some things that would repeat year after year?
This exercise can help people who are not so goal-oriented figure out what it is that they value. Because more often than not the problem is that they’re so used to their life as it is right now that they can’t think about what it’s going to be like later on.
Once someone realizes their goals, they can start making the determinations of how much money they’ll need to achieve it. For example, how much money they will need to save to go on a vacation once a year.
The other side, which I think is really helpful – and it’s something Joe introduced me to in writing Stacked – is called timelining your goals.
For the most part, every single financial book starts with the suggestion to write down your goals. And that is a great place to start because studies have shown that writing down your goals increases the likelihood of achieving them.
The problem with just writing them down is that you’re not looking at them on a timeline, as something that will happen in a set period of time – which you can plan for. For instance, let’s say two of your goals are to retire at 57 and to put your kids through college. When you timeline these goals, you realize that you’ll be 57 in 14 years, and your seven-year-old child will be 21 – a junior or senior in college – when you want to retire. Is that going to work? Does that math add up?
In Stacked, we suggest readers get out a piece of paper, draw yourself as a little stick figure, and draw a line from the stick figure to the other end of the page. Then start putting things on that line, including the age you will be when you want to reach your various goals.
By doing this, you’ll say, “Oh, whoops, there’s an overlap with my retirement and my child’s schooling. Will I be able to afford that?” And then you can start finding resolutions by asking yourself, ‘What do I value more?’ Is it more important to pay for the kids’ college, or is it more important to retire at 57? Are you willing to push back your retirement by a year or two? Or is it a good idea to have your child pay for part of their college?
With timelining your goals, you open the door to more dynamic conversations and ideas about your goals than you would if you just wrote down:
Retire at 57
Put kids through college
In this process that you’re talking about, do you recommend using some kind of technology to make projections on the progress of the goals?
I think people should do what’s going to work best for them. When some people hear about calculators and apps they’re like, “Whoa, whoa. I don’t want my financial information on the cloud.” So those people can use Excel, pen and paper, what have you. There are others who don’t even remember high school math, and they’re comfortable using apps or websites that can do the calculations and projections for them. It’s something that really depends on the individual.
There are a huge number of incredible calculators, apps and websites to make projections out there. Every single brokerage has them, so wherever you have your money you should have some type of access to a tool to help you timeline.
Yeah, you’re right. In talking about apps and tools, I think one of the areas of personal finance where people always need help is in tracking their money output. Simply put, budgeting – but so many people don’t like that word. What do you recommend for those who want to get a handle on where their money is going?
The Importance of Knowing Where Your Money Goes
Well, it’s helpful to remember that managing your money is a little bit like laundry, in that it is a task that is never done. When I was in college, I would let my laundry get so piled up that I’d run to Target to buy underwear when I ran out – all so I didn’t have to do laundry. I’d have these like boom and bust laundry cycles. After a while, I finally got disgusted with myself because I would get so frustrated that the shirt that I wanted to wear wasn’t clean, that I had to wear clothes that weren’t appropriate for the weather.
Now, how is that related to money management? We have a similar boom and bust cycle with money if we are not managing it. If you are someone who doesn’t like to budget, you probably only know how much money you have at the beginning of the month, and how much money you have at the end of the month… and you may end up a little bit overdrawn.
What’s happening there is similar to how I was in college with laundry. When you get paid, you feel flush. It’s like the day you do all of your laundry – everything is clean. Then, by the end of the month, you’ve got 47 cents in your pocket, wondering what you’re going to do.
For some, that cycle can feel less stressful than actually taking the time once a week to budget. Some people don’t want to think about money… until they have to. But ask yourself, is it really less stressful to have that constant boom and bust cycle than it is to spend 30 minutes once a week looking at your finances?
Just like laundry, find a way to make budgeting a part of your routine. Even if you do have a boom and bust cycle because you get busy one week, it’s not going to be the same kind of panic as before you got clarity around your finances.
There’s No “Wrong” Way to Budget
The other thing is that there’s no wrong way to budget – well, if bank robbery is part of your budgeting scheme, then that’s a wrong way to budget… but we have this sense that budgeting has to look like a very specific thing. We think of it as deprivation and spreadsheets. First of all, that’s wrong. It’s not about deprivation. It’s not about spreadsheets. It’s about figuring out how your money can best work for you to get you the things you want.
If you start thinking of budgeting like that – there’s no wrong way of doing it – you’re more likely to make progress towards the things that are most important to you in your life.
For some people, that means logging into their bank portal once a week to look over their various expenditures. Maybe those purchases reflect exactly what they want to be doing with their money, or maybe they can locate areas of improvement. For example, if you spent $300 in dining out last week and that’s not what you want to be doing, it’s an opportunity to make a plan for next week: How do you want to shift your behavior?
That can be budgeting. It does not have to be an ominous task that makes you feel terrible about yourself. It just comes down to keeping an eye on things and making sure that what you’re doing matches what you want.
You talked about how budgeting gets you to what’s important. Let’s say the person who wants to retire at 57 and put their kids through college is doing a budgeting exercise, and acknowledges that in order to hit their goals, they need to adjust their spending. Do you recommend that person slowly transitions their spending routine, or cuts a bunch of costs cold turkey to achieve the savings ratio needed to get them to their goals? Where do you see people having more success?
How to Improve Your Spending Habits
It’s really helpful to remember that you want progress, not perfection. Some people like to change their behavior cold turkey: They just start over. For others, it has to be a slow, ease into the changed behavior. You need to know what kind of person you are. Are you the sort of person who jumps in with both feet, and that works really well for you? Or, are you the sort of person who needs to settle in slowly?
Now, there are a lot of people who make new year’s resolutions and are good about sticking to them for two or three weeks. But by the time February rolls around, they’re back to their old ways. That’s what you want to avoid.
You want to focus on ways to make consistent progress, so that three weeks from now you’re still doing what you started today. Then six weeks from now, you can add another goal or behavior. Nine weeks from now, you can add two new goals or behaviors. And so on.
Until you get to that point where you can say, “Oh, wow, it made a difference,” you want to do something that you can keep up with – no matter what your personality is.
To add another level of complexity, what happens if you have two spouses or partners on different wavelengths in terms of money management? Is there a way that they can get to a place or agreement or solidarity?
How Couples Can Work Through Financial Differences
It’s impossible for two people in a relationship to have the same view of money. Even two people raised in the same household are going to have two different money philosophies, so this is something every partnership or relationship faces.
There are a couple of things that can be helpful when it comes to getting on the same page. First, you have to have compassion for each other when it comes to financial differences. We tend to have these beliefs about money, and we don’t fully examine them. We think that they are just what is true about money. And that’s partially because in our society, we don’t talk about money. When we’re children, we come up with these beliefs around money, at a time when we don’t have a full understanding of it.
As a non-financial example, my mother tells this story of when she was a little girl, she had this idea that doctors were not allowed to get sick or else they’d go to jail. It’s funny, right? But she was just a little girl putting together pieces of information and generating a belief. Now, because we talk about doctors, illness and jail, she was soon disabused of that notion and has since shared it with people, saying, “Isn’t that funny that I thought that?”
Think of the amount of beliefs we have about money that we hold but don’t talk about. There are people who believe they need to save every penny they earn, or else it will be taken away. You, listening, might have that belief, but we don’t talk about that. We don’t talk about where that belief comes from.
Often these beliefs come from financial trauma in childhood. Then, as an adult, you’re navigating the world with a belief system and your spouse – who does not have that belief system – is like, “Hunny, of course we can spend a little extra money to upgrade our seats. Why are you so worried about this?” That sort of thing can cause a great deal of friction in a partnership, because neither spouse understands that you’re speaking different languages.
Starting from a place of compassion is important. Instead, say, “Okay, I can see this is stressing you out. Why? Can you help me understand?” That can be really helpful.
The other thing that I found worked in my own marriage is starting with a sense of fun can be a great way to get on the same page.
My husband and I got our financial views aligned after a long road trip we took. I don’t remember how the conversation started – this was pre-podcasts – but we were listing our top 10 vacation destinations. We had a wonderful time talking about it.
His number one vacation destination was Lamont, France, which has a 24-hour automotive race (he’s an automotive engineer). I majored in French in college, so I said, “I am down with this plan. I would love to go to France.”
That started off as a fun conversation, and about a week after the road trip was over, I said to him, “How about we start saving $75-100 bucks a month to go to France?” He was like, “Oh, okay. Alright. Let’s do that.”
So we started a targeted savings account together. Seeing that money grow really helped him to see the way that I do things, because I’m much more of a money nerd than he is. It also helped make it clear that we could be on the same page and work together towards things. Because we were talking about fun stuff, instead of thinking about the deprivation side of it, we were successful. That, then, meant that we were in a better place to start the bigger discussions about the larger financial goals that we have, like retirement.
In Stacked, you talk a little bit about gamifying your finances. Is that another way to have success?
How – and Why – to Gamify Your Finances
Gamifying your finances gives you an external motivation (or extrinsic motivation) to do something until that internal motivation (or intrinsic motivation) kicks in.
I’ll give you an example, which again, happened in my life. My husband and I had a home equity line of credit when we were first married from when he bought his house in 2005. It was back when they were basically throwing bags of money at anyone with a pulse. His down payment was a home equity line of credit. I mean, it boggles the mind.
Anyway, when we got married, I told him, “I’m really uncomfortable carrying $30,000 in debt on this. Let’s work on paying it off.” So we lived on his income and we used mine to pay off that debt as quickly as possible.
What we did was we got a dry erase board for the kitchen and on it, we drew in a debt payoff thermometer. Every time we got a statement from the HELOC, we would fight each other over who got to open it and color in the thermometer.
Paying off $30,000 of debt was not fun, but we made it fun because we had this thermometer game to motivate us. It really changed the way that we looked at the debt payoff – instead of it being very boring, even agonizing, it became a game. We would throw extra money at the HELOC whenever we could afford to fill in the thermometer sooner than expected.
For people who don’t typically like dealing with their money, seeing it as a game can help it feel much more manageable. When perceived as a game, you think, ‘Okay, if I fall behind… It’s okay. I can still win.’
I can see that being a solution, and I’m sure there’s plenty of ways to gamify your finances. You just have to get creative. I like that you and your spouse focused on something fun, too. Not only is it motivating, but once you’re able to achieve that first goal, it gives you the confidence to move on to others. I forget where I read this, but I know that getting that initial win creates momentum that’s a lot easier to build on. Small wins eventually become big wins, and you eventually get to where you’re trying to go.
Absolutely, yeah. The psychological boost you get from a small win is an amazing motivator for going after the medium win, then the big win. Once you have several of those under your belt, you feel very confident and competent, which is one of the problems with money. People often feel like they’re not good with money. The thing is, I would say there’s no such thing as being good with money… that doesn’t mean anything specific. I wager that everyone is good with some aspect of money. You may feel like you’re not good with money, but you know how to find a deal like nobody’s business. You may think you’re not good with money, but you’re really good about borrowing. There are any number of different things that may be a skill that you can have with money.
Definitely. Well, we’re just about out of time. Emily, I want to thank you for being on The Agent of Wealth Podcast. You gave some great tips on how someone can better manage their money. How best can Agent of Wealth listeners reach out to you to find out more about what you do?
I have a page specifically set up for Agent of Wealth listeners, it’s emilyguybirken.com/aow. There you can find out more about me and the books I’ve written. There’s a link to order a copy of Stacked, or any of my other books. You’ll also see that I offer money coaching services, and I have a worksheet on retirement readiness that you can use to figure out what you need to do to be ready for retirement.
Great, we’ll link to all of that in the show notes. Thank you again, Emily. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.