I couldn’t begin to count the number of hours Chris Farrell and I spent talking with listeners during the six years I hosted the public radio personal-finance show, Marketplace Money. (Chris is an economics editor for the show, as well as a regular contributor to Next Avenue.)
We talked our audience through money problems big (“Help! I’m in foreclosure!”) and small (“Should I spend more than $10,000 on an engagement ring?” “NO!”). It was clear from their questions and feedback that personal finance baffles most people, despite our constant insistence that it really boils down to spending less than you have.
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I recently rang up Chris to have a conversation about the best advice we’d heard — and given — over the years, especially for the chunk of our audience rapidly approaching retirement. Here are the highlights of our chat, which I hope you’ll find helpful:
Don’t Take Money Risks to Catch Up
Tess Vigeland: You know, a lot of what we talked about on the show was that this age is not a time to start taking a bunch of risks, even if you feel like you're behind. When you tell people that, a lot of them don't know what to do. Because they think that if they can't take a risk with whatever money they have, they’ll never get where they need to be.
Chris Farrell: Right. It’s sort of "Well, I don't have much money and if I don't take a flier then I'm going to be really poor." And we pointed out that if you take a flier, you could also be really poor.
Tess: Exactly. One of the best things I ever heard on the show, and I can't remember who to credit for this, was to put away those online calculators. Because if you use them, they will freak you out! You’ll see the number that says you have to have, you know, $12 million in the bank in order to retire. And you'll be like, "Oh no!"
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Chris: There’s this notion that if you’re not a spendthrift you're going to somehow have a bad life. That's not really true.
Tess: So how do you put away all the noise? You see all these people in the ads romping on the beach in retirement because they saved so much money and you say to yourself, "I have to be more like those people — but I can't!"
Money Rules to Live By
Chris: But don't you think that if you were boiling down the conversations we had on Marketplace Money that personal finance is really about developing good habits? You take advantage of a workplace savings plan; you borrow for things where you'll be getting something back, like a college education or a home, and you pay off your credit card at the end of the month. And if you do those things, you're ahead of 90 percent of people, don't you think?
Tess: Yes, absolutely.
Chris: Although, over the years, I shifted my thinking about investing in one big way. If people, particularly in their 50s, ask me what are the most important investments they could be making, I don't talk about their 401(k), IRA or emergency savings fund the way I did in the past. Instead, I talk about what kind of work do you want to be doing over the next five or 10 years? What investments do you need to make, including in your own health, and what networks do you need to develop so you can work longer?
Balance in Your Life Is Vital
Tess: At the same time, though, I think one thing that we also tried to emphasize is that there has to be a balance. When you’re in your 50s and 60s, maybe now’s the time to get some traveling in before something happens when you're older and not able to do it. I think people can get really trapped by this notion that "Oh, I'm going to be eating cat food when I’m older so I'm not going to have any fun now." That's not the kind of life I want to lead when I'm in my 50s and 60s.
(MORE: Preparing for Common Retirement Risks)
Chris: No, absolutely not. Balance is really important. And one of the other things that I've really come to appreciate, partially because my mom is 87, is the importance of thinking about where you’ll live in retirement. It's hard to downsize and move when you’re in your 70s or 80s. So when you're in your 50s, start thinking about where you're going to live down the line and make real estate decisions with that in mind. Are you going to buy a house with stairs soon? Well, what happens when you're older? Don't just say you'll deal with that later.
It’s Not Too Late to Plan
Tess: I guess what this all really comes down to is even if you haven't done the thinking about these kinds of things, it's not too late. And it's actually imperative that you try to visualize what you want those last three to four decades of your life to look like, hoping that you live to 100!
Chris: Yeah. And don't you think it's kind of liberating, too? If the kids are in college or just out of college, you can start asking yourself, "What do I want to do in this stage of my life?"
Tess: So we're looking at that next avenue!
Tess: Hey, look at that! We got the name of the website in there!
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