Financial Decisions: It's Not Just About The Numbers
The Emotional Element to Money
Your emotions have more to do with your money than math or any spreadsheet you'll create. Like food, money is deeply tied to our emotions and beliefs.
In this episode, Michelle talks about why you shouldn't just use numbers when making financial decisions. It's often about what's happening in your life, or simply just enjoying life. Listen in to hear how Michelle helps her clients with this topic.
Key Takeaways:
When to make financial decisions
Ways to overcome hopeless, bad or negative feelings
Staying positive and gaining the essense of what you're looking for
From controlling asset distribution to protecting businesses and beneficiaries, we cover it in this episode.
Time Stamps
00:19 Beyond the Numbers: Making Financial Decisions
01:02 The Importance of Lifestyle in Financial Planning
03:10 Real-Life Financial Decision Examples
09:43 The Emotional Aspect of Financial Decisions
11:30 Personal Stories: The Value of Splurging Wisely
13:18 Closing Thoughts: Embrace Your Financial Journey
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Welcome to the Me Financial Podcast!
Hello everyone and welcome again to the me financial podcast. I am Michelle Moses, your host. I am a certified financial planner, a realtor and a former e commerce store owner.
The Importance of Considering More Than Just Numbers in Financial Decisions
And today we are going to be talking about, uh, making financial decisions when it is not only about the numbers. And I think this is important to talk about just because of the way the media talks about finance.
I, uh, get really frustrated with what I read sometimes. And so, um, that's why we're going to talk about this. And I know it's a little esoteric, but I'm going to give some examples of some, some things that my clients have done. And I, you know, I got this idea because some people have called me in the last couple of weeks about what to do, uh, you know, just to talk through some things.
That's a lot of times what I am is just, you know, I feel like just to talk through and decide where, you know, to take the money best or [00:01:00] where to invest it in the best way. And, um, I found that a lot of decisions, it's just not, Oh, it's, it's never a straight maneuvers decision. A lot of times it has to do with your lifestyle, with what's going on in your life and what's going to just make you feel better.
And I always go back to this is that. We are, what I am always, always trying to do is have people feel better about their money. I don't want them laying up at night worrying about their money. And I want them to feel good and excited about what's going on in their life. And mind you, I know I work with people that have savings and they have things going on.
And you know, and it's, it's not that I always talk to those people, but these are the examples that I'm going to be giving. Uh, and so I, you know, Well, let's just get going. I don't need to go more into that, but using the numbers as it's not the, uh, total litmus test. Okay. When you figure out [00:02:00] a return and when you figure out like, Hey, I'm paying this much on my credit cards and I'm only making this much in my savings account.
Yes. Obviously you were paying more on your credit cards than in your savings account, but does it make you feel better to let, to drain your savings account and pay your credit card off? And then you have no cash. It doesn't normally make people feel better. And so the point of this podcast is to, um, just try to use the numbers as one of the factors of your decision, but it isn't the end all be all.
Okay. I think a lot of these articles, they will run the numbers and there'll be like, well, this is a no brainer, especially on Twitter. Twitter is the worst. Uh, about this, uh, is that you should, you know, we should do this. And if you don't, if you're not making this much, then, you know, you're an idiot is basically kind of the implication of it.
And, um, one, don't listen to messaging like that because it's never good. Uh, it's just trying to shame you into doing something. Uh, and then [00:03:00] most of the time your decisions, it's just more about life and it's more about feeling secure. How are you going to feel secure? How is, how is this going to make you feel better?
So let's.
Real-Life Financial Decision Examples: Savings vs. Debt
Let's dive into a couple of examples, uh, and then maybe we can extrapolate from there. So I have one example, uh, that somebody called me a couple of weeks ago and she has a home equity line of credit at 7 percent and then she has her savings and some of her savings is in a 5 percent high yield savings account for now, right?
She was making 3%, whatever, six months ago or a year ago, but right now she's making 5 percent and her HELOC is seven. And, and she had, um, 20, 000 in the savings account and her HELOC is 20, 000. And, um, and she's like, should I pay it off? You know, what should I do? And I was in, and after talking, it made her feel better to just hold onto the money and pay a little bit extra on the home equity line.
So, oh yes, when I say HELOC, I mean Home Equity Line of Credit. [00:04:00] Uh, I've been getting some feedback that I'm using some lingo and I'm, I apologize for that guys. I don't even realize that I'm doing it. Um, so she has a Home Equity Line of Credit and this money in a savings account and so the end decision was again, that she was just going to pay a little bit extra on the HELOC And, um, so let's say her payment was 300, she was going to pay like 400 so that it makes her feel better that she's paying it off a little bit more and then as she gets money, then she's going to pay off the HELOC, you know, in bigger chunks, uh, or if she can put more in the savings account, then she'll pay it off in more chunks and this made her feel better, you know, so at least she is accomplishing the goal of Paying off the home equity line a little bit faster, but she's also able to hold on to her cash because holding on to cash is key.
I mean, I don't know that I need to explain this to you, but you know, then that gives you the option to, um, do things for the moment or if your car breaks down or, you know, something happens with your house. Uh, you know, we all have those surprise [00:05:00] expenses and depleting all of your cash for your home equity line of credit isn't going to make those surprises.
And so you just want to make sure that you're very careful with your decisions about the cash that you have, in my opinion, uh, just because these things do come up. Uh, and so then she actually called me, uh, cause her business is in, uh, In, um, the real estate. And so she's worried about the future because it things are really low and slow.
Uh, and so that's why she wanted to hold onto her cash. Makes total sense to hold onto your cash if your business is going to be slow. And then you still have this loan, which. They don't care if you pay it. I mean, I know that you're paying more, um, by having the loan in the first place, um, but you know, if it is the status quo, it is what it is and she still has some savings.
Um, okay.
Investment Choices and Risk Management
So the other example I have is a client called me and, uh, wanted, was wondering because we have been, uh, Invested very safely and he felt like he had a [00:06:00] lot of money in um just a savings account at 5%. You know, and isn't there something else that we can, um do with it or that we should, actually he was feeling guilty that he should be doing something else besides having it in this high yield savings account because it is a lot of money.
Um, and it, it it was a very large chunk of change. So uh, And I said, okay, well, you're going to be taking more risk. You know, we're going to be in the stock market to take risk, um, to get that rate of return. That's over 5%. And at the end of the day, after we talked about it, he decided that it wasn't worth the risk.
He didn't want to worry about the market going up and down so that he could maybe make six, seven, eight, 10%. He's happy not taking the risk and making 5%. And sometimes, you know, just your, again, your peace of mind is way more important than earning a couple more percentage points. He's happy with 5%. His, um, spending is under control, like per month, you know, his spending's under control.
He doesn't spend like [00:07:00] gobs and gobs of money. Uh, and so we were just going to decide to wait. And a lot of these decisions, it's just, you know, these decisions are temporary. I mean, with the example I gave you about the HELOC, that is temporary. And, you know, I mean, six months from now, it might be like, Hey, I just made a bunch of money and I'm going to pay a huge chunk of this HELOC off, or, you know, with this example of the 5 percent in the savings account, that could be in six months, it'll be like, okay, there's a good investment.
Let's take some of this money and put it in something else. If you don't have, uh, something you're going towards, You know that you're excited about. Then stick with what? With what it is. You know, like in that conversation about this 5% savings account. You know, Hey, I got all this money in here. Should we do something else?
Well, if there's no other ideas that you're excited about, then yeah, just keep it where it is. You're still earning 5%. I know inflation's high, but it's not gonna be high forever. I mean, that's the thing. All of this stuff is temporary and you're just always checking in, like, is this the best decision for the time?
Okay. It is, you know, I'm good with this. Um, and it's [00:08:00] mostly, I think about just reviewing it and making sure it's, you're good with it. And then once you're good with it and you've kind of like fleshed out all the little things, Then usually, you know, they can sleep at night and they're good and that decision is made.
I guess once the decision is made, that's when they can sleep.
Retirement Planning: Enjoying Life While Being Financially Savvy
Uh, and then the other, uh, example I have is a lot of my retirees, when they, um, first retire, they'll take a little bit extra so that they can travel. So we'll run, um, retirement projections and it will say, you know, you can live on so, so much a month for however many years.
And, um, and. Usually, you know, they're okay. Cause they're not going to retire until this, the, uh, until the software says it's okay. And, uh, we decide to take a little bit extra because they're like, you know what I saved for a really long time. I have the money and I feel like I'm going to travel a lot in my first 10 years.
And then after that, I probably won't travel a lot. [00:09:00] And so I would like to take a little bit extra and enjoy it. And I can tell you. , every single time somebody has done that, it has ended up that they weren't able to travel by the age of like 83 or 82 or, you know, whatever it was. And I just think that you should follow.
And I, I feel like it was their gut instinct, you know? They, they were like, I need to do this. Um, and I, I said, okay, you know, I'm, I'm okay if it's your money. You know, do what you want to do with it. Um, and they knew the risks of, of doing that, but it. has always turned out like, I don't know how to explain it, but they just like know that they know.
And again, that wasn't a pure numbers decision. It was based on, I want to enjoy my life. Now, I don't want you to take my advice and go, okay, I'm going to splurge on this trip, even though I have no money, or I'm going to, you know, that's not what I'm talking about here. I'm talking about when you're trying to make a decision and you are looking at it.
The life goals [00:10:00] and your lifestyle and you're looking at the rate of return that things are happening. Do not make the decision solely based on the numbers. The decision on the number, the numbers is a factor in your decision, but it is not the entire decision. and it really frustrates me the way that the media makes the numbers the entire decision.
Hence why I have this podcast, uh, is because I want you to put your emotions and your lifestyle into your money because we are feeling beings. We are people that are not here to just earn money to pay for our mortgage. We are here to take vacations and we want to enjoy our lives and be with people that we love and do fun things.
That is why we love having money, right? Is so that you can do what you want to do. So I want you to, you need to. Be aware of the numbers, but they don't need to be your sole decision maker. Um, and so I, you know, when it comes to like the splurging and things like that, I think that's a, a totally, [00:11:00] uh, a whole nother topic.
But I don't want you to extrapolate this out that, oh, I should go buy these clothes. Um, if you have the money.
I would not recommend you do that, but if you're, um, earning money and you're just trying to make a decision of where you should invest it, uh, if you're trying to make a decision, and if you're retired, you know, should I spend a little bit more, you Then I do think that the lifestyle, you know, comes in handy.
Lifestyle Choices and Financial Decisions
And, um, there's times where I had this summer where I went and visited family and I real, I have all these cousins that are younger than me, but they're all between the ages of 17 and 30 and they were home and available this summer and, and I got home and I was like, I need to take my kids. To go see them and it cost a lot of money.
Um, but I did it and I've, I don't know that I've ever spent that much on a vacation just to go see my family, but it was worth it so that my kids could meet all of these cousins before they get married, before they go off, [00:12:00] you know, to move to other towns and all that. They were all in town this summer so that they could spend time with my kids.
That to me is worth it. That's why I earn and save money is so that I can spend it on things like that. I could splurge on, um, like seizing the moment and, um, being able to do that. And it was not a great numbers decision. I did not get the best deal on the tickets. I didn't get the best deal on the house.
Uh, but it was a wonderful trip and I'm glad that I did it. And so that to me is a worthwhile splurge. And so those are the kinds of things I'm just trying to give you some examples here of what are some worthwhile splurges and then when you should really just make some decisions based on, on the numbers.
And there's definitely decisions that people make, um, even with, um, investments, you know, like the numbers look great. And then they look at it and they're like, ah, just something's not right about it, or they won't invest in it because they don't want to invest in like student loans. Like those are some investments out right now is investing in student loans and some people just [00:13:00] won't do it just from a moral standpoint, you know, so, you know, there's a lot of caveats where your money is not just a numbers game.
There's a lot of emotion that goes behind money and we need to acknowledge that. That is very, very important and that the numbers are just a slice of the pie.
Concluding Thoughts on Financial Well-being
So I hope you got something from this or maybe you feel better about your financial life because of this. I just don't want anybody to feel guilty about what you're doing.
Every day is a new day to start over and feel good and to know what is going on with your money. And I just hope that you feel a little bit better. Thank you so much for listening, you guys. Um, please review, send your, um, Send this to your friends and I just want to get the word out there, um, and get some, I don't know, help people feel better about what's going on in their financial lives.
So thank you for listening, you guys. [00:14:00] Thanks.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.