061: How Women Can Prepare For Retirement with Jean Chatzky

[INTERVIEW]

Casey: Welcome to the Retire With Purpose podcast. As always, this is your host Casey Weade and today we are joined by Jean Chatzky. Jean, welcome to the podcast.

Jean: Thank you so much for having me.

Casey: We're excited to have you. You've got a very diverse background. I have read so many of your articles from AARP, so many of the different books that you've read, watched many of your snippets online. You've just got a wealth of information. You've interviewed so many people on your podcast. I want to ask a lot of these different questions that I've got here under so many different topics, but I think we need to start at the beginning. That is, I know you're the financial editor for NBC’s Today Show. How did that happen? How did that come about that you ended up as the editor for NBC’s show?

Jean: I am a journalist by training. I was an English major in college. Knew by the time I hit the first beat reporters meeting at the school newspaper that I wanted to be a journalist when I graduated. That was really the path that I pursued. The fact that I found myself writing and reporting about business was basically a result of being in the right place at the right time. My first job out of school was at a place called Working Woman Magazine, which doesn't exist anymore but at the time it did. I got a job as the editorial assistant to the business editor. Which meant that in addition to fetching her coffee and answering her mail, and it was snail mail in those days, I was able to do some writing and reporting about businesses, companies, careers, management, marketing, all kind of in that vein. I really liked it. I especially loved figuring out how numbers could play a part in telling a story.

When I was ready to leave that job a couple of years later I went wholeheartedly to interview for jobs at business magazines. I wanted desperately to work at Forbes or Fortune or Business Week and nobody would hire me because they didn't really feel that Working Woman was a real business magazine. They didn't think I had the chops to back it up. Along the way I got some advice from the chief of reporters at Forbes who said, “You need to get an MBA. If you want to work here you really need to know the ins and outs of financial statements and that's going to require going back to school.” I did not want to hear that, but more than that I didn't want to do that.

I floundered for a little while. Eventually I took enough time to think about what he was really saying to me. What he was saying was not so much, “I want you to have a piece of paper that says you have an MBA,” but, “I want you to understand and know your way around a balance sheet and a cash flow statement and an annual report.” I applied for jobs in equity research on Wall Street. Whenever I was writing a business story I would interview these research analysts who talk to companies and interview CEOs. If I could get a job on one of their teams then I would learn those financial statements that they were telling me that I needed to know. I worked at Dean Witter for a couple of years. I learned that stuff. Then I came back, went to Forbes. I will answer your question, by the way.

After being at Forbes for a little over a year I was recruited to join the team of a startup staff of a new magazine called Smart Money. Smart Money was all personal finance. It was taking the back of many business magazines. Business Week had a personal finance section in the back and Forbes had a personal finance section in the back. It was putting personal finance front and center, going head to head with Money Magazine. I joined there. When the magazine launched we had a pretty aggressive public relations effort which included putting writers and reporters and editors on television. That's how I found myself on local television in New York first and after doing that for a few years, on the Today Show. That was about 25 years ago.

Casey: Yeah. I get asked this all the time. Actually, I had a gentleman just ask me the other day, he said, “What kind of education do you have in order to offer people financial advice?” Typically they're looking for, you’re a certified financial planner or you graduated with a finance degree. You learned it a different way. I think there's a lot of different ways that you can become and really develop your financial acumen. You have done it mainly, I would guess, and maybe tell me if I'm wrong. You've done this through largely interviews and relationships and talking to other people and really learning from others.

Jean: Yeah. I get to ask smart people questions for a living, which I love. Still to this day, quite frankly, my team will tell you that I still love those days when I'm reporting a story and I can stay the phone and I can talk with people. Universities around the country who are doing incredible research… You mentioned Wade Pfau who has been a source of mine for years. Behaviorists, academics, people who are in there trying to figure out why human beings are the way with money that we are. I find that endlessly fascinating. I still love the fact that I get to learn.

Casey: You’ve interviewed so many people over the years. Who was your favorite interview?

Jean: Oh, yeah. That is just going to put me on the spot. I’ve had so many favorites. Jack Welch was amazing. I loved interviewing him, so-

Casey: That came to mind first. What did you learn from Jack Welch? What was your biggest takeaway?

Jean: My biggest takeaway was that he was a dogged worker. He was not going to take a shortcut to solve any particular problem. I find that really admirable. Among the other interviews that I've had… Just thinking about people that I've had on my podcast. Like you I have a weekly podcast. It's called HerMoney. We focus on women and women's issues. We've had Gretchen Rubin on Money and Happiness and Arianna Huffington on Getting Enough Sleep and Brené Brown on Strength and Grace. So many other incredible women who have shared their stories. I continue to learn from people like that every day.

Casey: I want to get to the women and money topic here in a little bit. I do want to ask you, and I think your latest book was actually AgeProof, right?

Jean: Yes.

Casey: This was actually a book that I really enjoyed. It was called AgeProof: Living Longer Without Running Out of Money or Breaking a Hip. I know maybe your focus is now shifting a little bit towards women right now. As I see it, and I think a lot of other people will, you had this really big emphasis recently on retirement. I think your original direction was a little bit more general based and now it's more focused on safe retirement and now women. Why this focus on retirement today?

Jean: The focus in AgeProof is broader, I think, than retirement. I wrote AgeProof with a doctor named Mike Roizen, who viewers of The Dr. Oz Show will know as Oz’s best friend. Mike is a brilliant doctor. He's the chief wellness officer at The Cleveland Clinic. We met actually doing a television pilot that went nowhere but we became friends. What had started to occur to me as conversations really focused in the last couple of years on the topic of financial wellness was that you can't separate health and finance anymore. That's particularly true when it comes to retirement. That if you are financially strong but your health is a mess you're not going to remain financially strong for very long. The opposite is true too. If you are very healthy but you don't have a decent financial life or decent financial security, you're not going to be able to stay healthy as you age.

What Mike and I figured out was that in reality the same strategies can be applied to getting both fiscally healthy and physically healthy. That you can take a lot of the same tricks and tools and use them to bolster both areas of your life, like automation. I'm sure you talk a ton about the wisdom of automating your contributions not just to your retirement accounts but to any fund that you're looking to build over a long period of time. If you can just get yourself to set and forget those contributions you have the benefit of knowing that they're actually going to happen, which is huge. What Mike has taught me and what we've discovered health wise is that there's a lot of that automatic pilot that can also be incorporated into your health regimen. Whether it's an exercise class that you schedule on your calendar so that you know that you won't miss it and you know you won’t double book the time for it. Or a couple of healthy breakfasts and lunches that you like well enough to eat regularly and you know you can have on hand so you can just grab and go.

Casey: I imagine you two learned a little bit from each other along the way.

Jean: We did.

Casey: What did you learn from Michael that made an impact on your life? Have you made any changes throughout that process of all that interaction you had with Mike?

Jean: I have. I do jumping jacks now on a regular basis. One of the things that is particularly important for women is bone health as we age. You don't have to spend a ton of time pumping iron or at the gym to boost your bone health. If you can get yourself to do 20 jumping jacks in the morning on a hard surface and 20 jumping jacks at night on a hard surface you've pretty much done the trick. You've given yourself a great gift. I’ve incorporated, thanks to Mike, a regimen of jumping jacks. I know that he has incorporated tracking his spending, which-

Casey: Tracking his funding?

Jean: His spending. Which he did not do prior to meeting me, but learned from that that he was not getting a huge amount of enjoyment out of all of the money that he and his wife were spending eating out. The per meal restaurant ticket was more than he wanted to be spending. He actually didn't shift the number of times he was eating out, but he just chose slightly less expensive places where he says the food is almost as good and the company is the same.

Casey: I know other people would be interested in learning how he did that. I find a lot of the individuals that are pre retirees that come in to visit with us they have trouble budgeting. They struggle with budgeting many times because they've been working in a career that maybe they had a substantial income, or they really just didn't need to budget because they weren't on a fixed income. They could put in overtime over the weekend. They come in, we ask, “So how much are you spending on a monthly basis?” The question is, “I don’t know.” Typically it's about half of what they're actually spending. We have no idea that we're actually spending $6,000 a month when it seems like $6,000 seems like a lot. It's probably only three because those are just my household bills. We don't take into consideration all these little things that we spend money on along the way.

How did Mike incorporate budgeting? Maybe he already had some experience with it and this was just fine-tuning it. How do you help retirees, or what kind of advice would you have for someone that's stepping into retirement going onto a fixed budget to learn how to budget? How do they start that process?

Jean: My preferred way to budget is to do it backwards. I don't think it works to budget from a clean piece of paper. I think the best thing that you can do is figure out where your money is going now. Of course you need to know what you've got coming in, but then you need to know where it's going. You need to know it with incredible detail in order to make changes about where you want it to go and not go. I start the exercise for everybody with tracking. You've got to track for a solid month making sure to pick up those quarterly expenditures, the insurance premiums and the things that don't hit monthly so that you don't miss them along the way. Once you track for a month- and you’ve got to track the cash as well as the swipes- then you can go back and you can say, “Okay, this is how much was going to this category. This is how much is going to this category.” You can tweak. You can massage it. You're not starting from ground zero. You're starting from a place of knowing what you typically spend. Then you adjust slightly to bring it into line with spending that feels more comfortable with the other goals that you're looking to achieve.

The other thing that I do that ensures successful budgeting is that I save first. I save and invest first. If you have already accomplished your savings goals out of your paycheck because you’ve moved that money automatically, whether you're moving it into a retirement account or a discretionary account for a big trip that you're looking to take, then the massaging of the rest of the numbers is a little bit less high stress because you've protected yourself from making the costliest of mistakes as long as you lay off the credit cards.

Casey: True. I really like that approach. When it comes to saving, and especially during your accumulation years, you set aside, “Hey, I'm going to save X amount of dollars.” If I save that much and nothing's left over that's okay because I've already saved what I was supposed to save. You mentioned tracking. Do you have any favorite tracking apps? Or do you recommend people spreadsheet this, download their bank statements, only stick to using cards for a set period of time or use cash? What's the best way to start the tracking?

Jean: All of the above. Look, I think people will know what kind of people they are. If you're an app kind of person then use an app. Use Mint. Use Digit. There's so many different tracking apps. Clarity Money. You can use any of those to help you. If you're not that kind of person, try to make things simpler by doing all your spending on one credit card or one debit card. Make sure that if you are moving money back and forth electronically, if you're Venmoing with your kids, that you are paying attention to those flows of funds as well. We spend these days mindlessly on iTunes and Amazon and ‘click, click, click’ and it's just gone. You’ve got to make sure that you're capturing that.

Casey: We’re in this before period. You're saying, “Let's go ahead and start tracking now.” Let's start tracking where you're standing. Let's say you're still working and you're a year from retirement. Over the next 12 months you start your tracking and this is what you think your budget is. However, it might change once you get into retirement. How do you see that that budget changes from that preretirement budgeting period to the retirement budgeting period?

Jean: Interestingly, the early years of retirement are very active years. I know you know this, but you’ve got to think about what you're going to do during the day. If you are used to going to an office for eight hours where you spend your day between meetings and appointments and other meetings and other appointments, you're not generally spending a ton of money. All of a sudden when you've got free time it's a lot easier to fill those hours up with things that cost money. Road testing or at least trying to plan how you’re going to live, what you're going to do, what a day and a week and a month are going to look like and how much those days and weeks and months are going to cost you, is incredibly vital.

Even the small things like food come into play. You may be thinking that you aren't going to have to grab lunch at the cafeteria anymore or at the fast casual place down the road. “Oh, that'll be great because I'm going to save myself $10 to $15 a day.” Well, maybe not. If when you're home in the afternoon you're a little bored and you decide you want to take yourself out to the movies or out to lunch with a friend maybe that ends up costing you $20-$25. All of a sudden you're spending more money than you planned on. It doesn't start to work numerically until you start to think about, “What am I going to do and how much is that going to cost?”

Casey: Yeah. Sometimes it can be a lot more than you actually expect. I love walking people through that exercise. You're spending time… Chart out your day hour by hour. Where are you going to wake up? What are you going to eat? Who are you going to spend your time with? I think that's a really valuable exercise that I've walked people through in the past. You wrote Money Rules: The Simple Path to Lifelong Security. This quote you had in there made me think about budgeting and this topic at hand. You said, “To spend less, carry Benjamins not Jacksons.” I really like that. Why do you think that works?

Jean: It’s proven behavioral research. We spend more money with credit than we do with debit, and more money with debit than we do with cash. The reason is that those forms of payment feel not so real. In fact, they are not as real. When you're spending money on a credit card you are not spending your own money, at least not quite yet. You're spending borrowed money. That makes it easier to do. Interestingly, it's very easy- and I’ve seen some research on this- to spend money with Venmo because it doesn't feel quite real either. Following that logic, carrying big bills feels important. It feels like you were five years old and your grandpa gave you a $5 bill. You don't want to break that $5 bill because it's the only $5 bill that you've ever had. You're going to walk around with it and you're really going to think about it before you break it.

When you're carrying 50s, when you're carrying $100 bills we still do that. We still think about, “I'm not going to get a soda. Why would I get a soda? It's not worth breaking a $50.” That can sometimes prevent you from spending. When you go to the ATM these days they give you a choice. “Do you want 20s? Do you want 50s? Do you want a mix of 20s and 50s?” Take some 50s because it will help you hold onto your money for a little while longer.

Casey: I like that. I've got two $100 bills that have been in my wallet for at least two months. I know I walk up to…

Jean: Why are they there?

Casey: I just can't spend them. I just don't want to break those two $100 bills. My dollars, they seem to go fairly quickly if I've got $1 or $5. I think that's great advice. Another piece of great advice you had from AgeProof, your book on health and wealth, was this idea of having a team approach to both health and wealth. What do you think the importance of a team approach is, and what's that look like?

Jean: It means having a kitchen cabinet, so to speak, of people who help you make sure that you're checking all the boxes. That might be a financial adviser for your goals. It might be a financial adviser to help you make sure you're on track with your investments. That you're getting to where you want to go with your portfolio and with your plan for retirement. You at some point may also need a tax advisor either based on your annual tax situation, or because you have a business, or because you've got investments and you want to think about how to structure your withdrawals from those investments in order to make the most sense in retirement. An estate planning attorney to help you make sure that you've covered those boxes to make sure that your wishes will be carried out should something happen to you.

You may also want an accountability buddy on your team. That's not a professional. I have a long-time running partner. Her name's Diane. Four mornings a week we meet on a street corner and we go for a run. I'm going to show up because I know that she is there waiting for me, and she is going to show up because she knows that I am there waiting for her. That's what being accountable to somebody is about. You may want an accountability buddy for finance. If you're working on getting out of debt, if you're working on spending a little less or saving a little more having somebody else in the equation to whom you've confided your goals and shared your objectives and who can help keep you honest is a really, really effective tool.

Casey: Who do you think the right person is for that accountability partner? I have one for… My gym buddy. Every single morning I know he's going to be there at 5:30 so I can't let him down. I've got to show up and I've got to be there. I want somebody that can keep up and also push me to the next level. I don't really want to go and be coaching someone else along the way. When it comes to your finances, how do you make that decision? What kind of criteria are you looking for for the person that you want to be that financial accountability partner?

Jean: I think it's important that it's somebody who likes you but doesn't love you. They can’t-

Casey: It shouldn't be my wife?

Jean: No, it really shouldn't be your wife.

Casey: That was the first person that came to mind when I thought about, who's my financial accountability partner? I said, “It's my wife.”

Jean: If you and your wife are headed toward the same goal and you're working toward it together then I think that that can be very effective. If this is something that you're trying to do for you: if you're trying to rein in the spending, if you're trying to lose five pounds, if you're trying to accomplish some other sort of goal then having somebody who can tell it to you straight is also really, really important. For that reason you don't want your mother who's going to tell you that everything that you're doing is perfectly wonderful and fine. You want somebody who's going to be honest with you, and when you screw up tell you that you screwed up.

Casey: Yeah. I think that's somebody that can really be honest with you. That's why I don't coach my wife in the gym. It's why she doesn't coach me in the gym. We might not take that real well from one another. If I go in with a buddy of mine he can tell me if I'm not doing it the right way. I think that's really important to have somebody like that. That might be your financial advisor. You might have someone… I know I've got clients that I work with that really confide in me and do that so that they can have somebody that can be blunt and be very honest with them, because maybe nobody else is. That can be really good. I love that team approach.

We've talked a little bit about retirement in your book there. I do want to get back to some of those topics inside there, but I really want to make sure that we get to this topic of women and money. I know it's really important to you and it's what's on the top of your mind right now. You wrote the book, Make Money, Not Excuses. You also founded HerMoney, a digital media company focused on personal finance for women. Then of course you've got your podcast, HerMoney. Why this focus on women? You've got a new book coming out. Why this topic? You’re just hitting it so hard right now and it's really something that's so important to you.

Jean: Yeah. Women are at a real turning point when it comes to our money. We've got more of it. Despite the wage gap we have more money than ever before. We're in control of our money in more cases than ever before as primary breadwinners, heads of household. When you look at the wealth that is coming down the pike over the next 30 years in America, women will inherit the lion's share of that wealth. Yet when it comes to feeling confident about what to do with that money, making decisions and particularly as it relates to investing, many women are not as confident as we should be. I wrote a new book called Women with Money. It'll be out March 26th. I have been spending a lot of my time with www.hermoney.com, HerMoney the podcast, to carry on a continuing conversation about money with women to give us this confidence that we need to manage it well.

Casey: Do you think that in your past you have lacked that confidence? Have you had some experiences that have really got under your skin and lit this fire inside of you?

Jean: Yeah. I got divorced at 40. My father died the same year. That was not a particularly confident time for me. I stuck to the advice that I had been giving for years, including but not limited to really supercharging my saving, and making sure that I was automatically putting money away and investing it wisely for all of my goals. What I know from having done that on my own is- not to the exclusion of financial advisers because I've had financial advisers at many different points of my life- but getting in there, rolling up my sleeves, doing it without a partner is that sometimes you just have to do it in order to get confident with it. Having other people around you to whom you can talk about the challenges and with whom you can share the experiences really helps us get where we need to go.

Casey: In your first book directed towards women it was called Make Money, Not Excuses. What kind of excuses do women make? What's the most common excuse that you hear?

Jean: “I don't know enough.” “I don't have time.” “Nobody taught me how to do this.” There are so many different excuses. The thing that we have to recognize is that they are all valid excuses. They're not going anywhere. Not stepping up and managing your money is not really an option anymore because we are going to outlive the men in our lives in most cases. We've got children that we’re responsible for, in some cases ourselves that we're responsible for, older parents that were responsible for. We need to understand how to do this and be doing it before a crisis hits because it's a much better position to be in rather than having to learn all of these skills on the fly.

Casey: I hear this kind of negative self-talk from women all the time that come in the office. I hear it from their husbands that won't bring their wives in. I hear, “I don't like the whole finance… I just don't get this stuff. I don't like this stuff. I let him handle it.”

Jean: What do you say to them?

Casey: “He's better at handling the finances than I am.” Then you go on to say… I hear all these things from women that they're not good. Not that it's always like that. I've got many women I work with that are sharp as a tack and just love the money stuff. They love the finances. They really like digging into it maybe more than their husband, but many cases in general it seems like it's other way around. Then in your book you say that women are uniquely qualified to handle the finances, maybe more so than their male counterparts. Why do you say that?

Jean: When you look at investing returns, just to take one small slice of things, women have been shown to be better investors on paper than men are. That because of the way we approach investing, we take time before we make decisions. We do our own work. When we invest we tend to stick with the investments that we've chosen to buy at all, to not meddle. The fact that we're not in there trading on a regular basis actually boosts our returns to the point where they're about 0.3% higher than a man's year over year on average. There's that, right?

There's also this idea that the problem that women have getting to the table is that we like answers that can be proven. We like real answers. When it comes to many different areas of money there are right answers. What's the best miles credit card? I can answer that. There's an answer to that. What's the best car for the gas mileage? I can answer that question. What's the best stock over the next 10 years? What's the best mutual fund over the next 10 years? What are the markets going to do tomorrow or next week or next year? I can't answer that. I can't answer it and know that I'm correct. That's really, really difficult for a lot of women to get comfortable with. Doing it, getting in, making an investment, letting it do its thing for the long term… When I say an investment I'm not talking about a fly. I'm talking about put some money into an index fund, put some money into a target date fund, put some money into a diversified portfolio. Keep adding to it every single time you get paid over 5 years, then 10 years, then 15 years. Then go through the process of continuing to visit your accounts. Watch as that money adds up. That's how you build confidence. You build confidence by actually watching yourself succeed. In order to watch yourself succeed you have to participate.

Casey: You have to be engaged in the process. I struggle so much sometimes getting that spouse engaged. Maybe you can offer some advice to me as a financial planner. What can a financial planner do? This probably goes the same for the spouse that’s struggling to get their other spouse involved. What kind of advice would you give to a financial adviser or a spouse to bring that other spouse into the tent, so to speak?

Jean: You may need a separate financial adviser to work with the two of you so that there's somebody talking to her on a level playing field. Just like doctors have doctors, financial advisers sometimes need to have financial advisers who will work with them as a couple and level the playing field for the two of them. The other thing that I think is important is some autonomy. IRAs they’re individual accounts. If your spouse has an IRA then she should be managing that IRA. Maybe she can manage it with an assist from you, but making it clear that it's her account, it's her money to do with as she sees fit I think is a very interesting way to go about it.

Casey: Let's say 80%. David Bach was one of our previous guests and he said 80% of men die married. That means, as you said, most women are going to be inheriting these dollars. Most men will never know if their retirement plan ever works out and the women will. They need to be aware of what's going on before that actually happens. I passionately believe in that. You've had so many great interviews on your podcast, HerMoney. We already talked about your best interviews. Let's just say, what was your biggest takeaway from one of the interviews that you've had here recently?

Jean: Oh boy, you're going to put me on the spot. I'm going to have trouble coming up with one off the top of my head. I actually had David on the podcast fairly recently. He was one of the people who got me interested in the idea of meditation. We've sort of explored that on our podcast recently. That's been a new and different thing for me.

Casey: You have these new things that you're doing as part of HerMoney. It's HerMoney Happy Hours. Tell us about that. I thought this was really cool.

Jean: Thanks. HerMoney Happy Hour is a small gathering of women. We've developed a game, so to speak. A set of cards, a deck where we open up a question and answer session about money. We go around the room and women draw a card and we start talking about whatever happens to be on that card. The whole idea is to have these conversations that we don't have. I hear from women again and again that they wish that they would be able to talk about money with the people in their lives, and it just doesn't feel comfortable. HerMoney Happy Hours are planned conversations about money with wine. Wine makes everything just a little bit easier.

Casey: Couldn't anybody do this? I thought about it. You've put together these groups. Wouldn't it be great if women got together on a regular basis and did this? Or men for that… It seems like men do it all the time. Then of course you've got the clubs. At the country clubs they have their little investing clubs and they get together and talk. If someone wanted to put together their own little HerMoney Happy Hour, what do you think the format should look like? How should they get invites out there? How could they put something together like that? I think it would be a great thing, don’t you?

Jean: Yeah, absolutely. Look, if you've got a book group do it with your book group. I think getting together a group of 8 to 10 women that’s a good size. Come up with some questions that you think you'd like to ask each other about money. If you want to access some of my questions, when the book launches you can go to the website of the book and we’ll have some of the questions there. www.womenwithmoneybook.com. The website's not live yet but it will be. The idea is just to pour a glass of wine and go around the room. It's not that you are the only one that weighs in on your question. You answer it first but then everybody talks about it.

Casey: Before we move on to this next topic I want to ask one question that just popped in my head. You had your divorce. I have couples that I've worked with that have went through divorces and we've helped them through that process. I've met women after the divorce and there are struggles there. What was your biggest financial struggle after your divorce?

Jean: To be quite honest, I was well employed at the time. I didn't struggle the way that some women find themselves struggling. I did have some lofty goals, including putting aside enough money to pay for half of college for my kids in about 10 years, and making sure that I was once again on track for retirement. Getting divorced really knocked me back a bit as far as retirement was concerned. I guess my biggest challenge was an accelerated timetable for some of the biggest financial goals in my life. That meant really supersizing the saving that I was doing and making sure that I was living on substantially less than I was earning in order to make that happen.

Casey: Great. I could probably dig into that a little bit deeper, but there's a couple AARP articles that you wrote that are on topics that I get asked fairly regularly by the families we work with. I want to make sure we hit on a couple of these different things, and they have to do mainly with your kids.

One of those was an article you wrote titled Should You Give Your Kids a Mortgage? You cited a study there by the National Association of Realtors that found that one-third of first time buyers received a gift or a loan from their family to help buy a home. I thought, “One-third of first time home buyers are getting a gift or a loan from a family member?” I just couldn't believe it. That was a mind blowing statistic for me. If that's the case, if we've got that many family members… Of course I've worked with families that are doing this. Do you think this is a good idea?

Jean: I think it can be a good idea, but I think it depends on the parameters around the loan or the gift. I think you have to be particularly careful for different reasons around both. If it's a gift you have to be careful that the gift of the down payment is not allowing you to buy a house that you can't otherwise afford. The down payment is only step one. Then you've got not just the cost of the mortgage and the taxes and the insurance, but you've got the cost to actually live there. I’ve walked and seen enough people go through the home buying process to know that sometimes people get so fixated on the monthly mortgage cost that they forget that there is a cost to lawn care and furniture, and the fact that sooner rather than later something's going to break or something's going to leak. You need to keep the amount that you're spending on your housing in a range that you know that you can not only just handle it, but handle it and then continue to save for the rest of your goals. That's one thing to think about.

The second is if you're doing it in terms of a loan, loans ruin families. Think about the parameters that you're establishing. Think about making sure that you're incredibly comfortable with the timetable that you're setting out for repayment. Making sure that you're not going to be resentful about the fact that you're making this loan. The last thing that you want to do is be out to dinner with your kids and looking at what they're ordering and feeling really resentful because they haven't paid you back yet. If that's going to be the case then you're better off not loaning them the money to begin with.

Casey: I've had a lot of personal experience with this over the years. I just won't do it. I won't loan money to friends or family because I saw what it did to my parents. They did that many times over the years to different family members, to friends and they lost a lot of money doing that. They lost more than money. They lost a lot of friends along the way. I never wanted to experience that. When people ask me this question I say, “Just think of it as a gift.” If they pay you back you're going to be gracious. If they never pay you back make sure you're not going to harbor any resentment, because there is that chance. This relationship probably means a lot more to you than money. Let's keep it within a reasonable amount so if you never see the money again at least you still have that really valuable relationship.

Jean: Yeah.

Casey: You had also along those lines another AARP article titled Read This Before You Cosign. Talking about giving your kids a mortgage, we also find that we cosign for things time to time. For my very first car I ever bought my dad cosigned for that car. It worked out really well, but it doesn't work out for everyone. You cited a study from www.creditcards.com that said 38% of cosigners lost money because the primary borrower whiffed. 28% saw their credit score drop. 26% said that the relationship soured. It seems like the risks are pretty high when it comes to cosigning. Should we just not do it at all?

Jean: I think if you can avoid it you don't do it.

Casey: If we decide we're going to do it are there things that we should be thinking about? Is there a checklist or something that we should go through?

Jean: Yeah. You want to go through the checklist of why the person couldn't get a loan to begin with. If you are being asked to cosign you should really understand why. Sometimes it may be because that person has no credit history. Sometimes it may be because that person has a credit history and it's dismal. I’m a lot less worried about the person who doesn't have a credit history, the student loan that you have to cosign for because there's no credit history, than I am for the person who botched their own credit and now is asking you to step in and help them get credit that they really can't qualify for on their own.

Casey: Yeah. I think that's some really good advice on both notes whether you're cosigning or you're putting out a mortgage for your kids, or cosigning for a mortgage for that matter. Really important topics and things for you to think about before you dive into those kind of risky maneuvers. You had a book titled The Ten Commandments of Financial Happiness. In there you conducted a study, a survey. You said you surveyed 1,500 Americans about their financial attitudes and behaviors, and a lot of this had to do with financial happiness. One of the questions that is often asked is “What's your number? Or how much do you need in order to be happy?” How much do you think people really need in order to guarantee a happy and comfortable life?

Jean: What I learned from that research- and you're right. We conducted a primary research study. 5,000 thousand people- is that the amount is the amount that you need to live comfortably. If you can pay your rent or your mortgage, if you've got a decent car to get you back and forth to work or wherever it is you're going, if you're able to eat out once in a while and take a vacation every once in a while that's what you need. More than that is not going to make you more happy generally. Daniel Kahneman a few years after I did this actually put a number on it of about $75,000 a year. It varies tremendously based on where you live but comfort is the barometer. It's not luxury.

Casey: What did you find was the difference between the happy people and the unhappy people? Was there anything that stood out?

Jean: Control. It's all about control. It's all about feeling as if you are in control of whatever money you have. People, for example, who pay their bills as they come in rather than waiting and paying them all in a big stack once a month, they’re significantly happier because they feel in control of their flows of money. People who are saving habitually. It doesn't have to be saving 15% or even 10%. If you’re saving 5% on a regular basis that gives you a feeling of control. People who talk to their significant others about money on a regular basis they feel happier because they are feeling as if the money is not controlling them, but they are making decisions about the money.

Casey: That's really interesting. That's very insightful because control. One of the things about our planning process is that I see a lot of folks that come in that have these large investment portfolios. Maybe they have a half a million, million, five million. Whatever. It's just a number stuffed away in a bunch of mutual funds and it kind of feels out of control. Maybe they don't understand that portfolio and ultimately they're not sure how it's going to create the security that they're looking for in retirement. I like the idea of repurposing those dollars. Setting funds aside for emergencies, setting funds aside for income. This is for inflation protection. This is for health care. This is for legacy. Now you've really identified what that money is. It's put you back in the driver's seat.

Jean: Yeah, that's right. People who have goals are happier. Not just who have goals, but who are making progress toward their goals in a step-by-step kind of manner. I haven't thought about this research in a while, but one of the most surprising things about the finding on goals was that once you actually achieved your goal there was a little bit of a letdown. The process of working your way there was so much fun that you needed another one to replace it.

Casey: That's great. I know we're running out of time. I've gotten some questions here from fans et cetera. I want to wrap it up with a couple of general questions. The first one is, what was your biggest money mistake?

Jean: Probably accumulating some credit card debt when I was right out of college. That was a biggie. On its heels I actually withdrew money. I cashed out a 401k when I was leaving my very first job because I didn't understand what it was.

Casey: Cashing out that 401k can cause some big old taxation along with the loss of the tax-deferred growth, the ability to have that money there for retirement along with a little 10% penalty. That probably hurt a little bit on your way to retirement. Now you might be getting a little bit closer to retirement of your own. One of the questions I always like to ask almost everyone that I come across that has retirement on their mind is, what does retirement mean to you? In your words, what does retirement really mean?

Jean: Being able to decide what I want to do with my time.

Casey: When you get there what are you going to do with that time?

Jean: I think I’m working for a while. Not necessarily because I'm going to have to but because I'm going to want to. I really like what I do and I think that I’m not ready to stop anytime soon.

Casey: I think retirement is changing a lot for a lot of people. I've got more families that are coming in that are really starting second careers. Or they're just finding financial freedom that allows them continue to work in a capacity that maybe they don't earn as much as they used to, but they get a lot of enjoyment and a lot of fulfillment out of that next leg of their life. Sometimes work can be spending time with your grandkids. I know we've got a lot of families that are spending a tremendous amount of time with their grandkids. They want to make sure they have the biggest impact they possibly can in their lives, just like my grandparents did in mine.

You have written some different books on financial literacy. You've teamed up with Time for Kids and the PWC Charitable Foundation on the launch of a financial literacy magazine. My last question is when it comes to money lessons for the grandkids, what do you think grandparents can best do to make the biggest impact on their children's lives so that they ultimately become fiscally responsible adults?

Jean: I think grandparents can do a couple of things. We love spending time with our grandparents as grandchildren, and so they have an opportunity to teach us things that maybe we aren't so interested in learning from our parents. My grandfather spent a lot of his time watching his stocks and paying attention to the stock market. I learned some of my early lessons about stocks from him. I do think if grandparents can help in any way with the cost of college these days that is the gift that keeps on giving. So many kids are facing these huge student loan bills that come due when they graduate. If grandparents can see their way to helping with those, and I know that many want to, that's an incredible gesture.

Casey: Finding things that maybe the parents aren't teaching or maybe that's not their specialty. Maybe they're just not focusing on. Maybe they don't have the time to focus on with their children. As a grandparent you've got some more time. Maybe you've got some experience and expertise in other areas that the parents don't. They can go back and you spend some time educating them on those things. Sometimes that can be a really fun process. I know from personal experience. Also college of course huge expense, so make sure you're helping those kids save for college if you're not doing it for them.

Thank you so much, Jean, for joining us here on Retire With Purpose. I hope you had a good time.

Jean: Great time. Thank you for having me.

Casey: Good. We'll see you soon. Thank you.

Jean: Bye.

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