Financial Prepping

054: A Positive Perspective on Financial Prepping

Sep 30, 2021

In the last few years, we’ve all heard about preppers–people who have outfitted their basements with emergency supplies, like food and water. The fact that it’s suddenly become hard to find products like paper towels, toilet paper, and even bottled water has prompted this topic to rear its head all over again.

But what if we told you that financial prepping was also hugely important, especially as we enter into our next phase in life and into retirement? 

In today’s episode, and in the wake of a truly strange time in our economy, we’re talking about how to maintain control of your finances in unprecedented times, how to create a retirement plan that takes that uncertainty into account, and what you can do right now to stop worrying and enjoy your life.

Here are just a handful of the things that we'll discuss:

  • Why our supply chains are completely disrupted across almost every industry.
  • How rampant inflation and rising interest rates affect our cash flow.
  • How to build a safety net into your retirement plan–and why you simply need to have time if you want to stay heavily invested in the markets.

Inspiring Quote

  • “When bad things happen, you need to know what to do next. And the only way to do that is to be financially prepared.” – Ed Siddell

Interview Resources

LeAnne Siddell: It's The Retirement Trainer with Ed Siddell, a podcast about finding ways to help you become financially fit for your future, no matter what financial shape you're in now. What does it mean to be a prepper, a financial prepper? And why is it important as we enter into the next phase in our life and transition into retirement? This is LeAnne Siddell. And here to help us with all our questions and give us some guidance to stay in the best financial shape possible, The Retirement Trainer, Ed Siddell.

[INTERVIEW]

LeAnne Siddell: Hi, Ed. This is something that you get so excited to talk about.

Ed Siddell: Just to hear you say it, it makes me laugh.

LeAnne Siddell: Well, again, a lot's been going on in the news right now. I'm sure everybody's paying attention to the limit, one on toilet paper limit, one on paper towels, which just let me say where you can get your paper towels, I know ordering online because a lot of places are not even able to get them.

Ed Siddell: Yeah, you can't even get it. I mean…

LeAnne Siddell: Not without spending a fortune on it, so.

Ed Siddell: It's crazy. Even bottled water, I mean, I'm not talking about, oh, my gosh, dig a hole in the ground and…

LeAnne Siddell: Well, kinda.

Ed Siddell: I mean, because there is, you're…

LeAnne Siddell: I'm just kidding.

Ed Siddell: You're making me laugh. Don't do that. So, this morning on the news. So, it is, what it is? September 27th, right? And we were watching the news over the weekend, and there are 80 cargo vessels.

LeAnne Siddell: I couldn't remember how many but a lot, yeah.

Ed Siddell: In the L.A., because you've got all these ships coming in, they can't come in because there's no one there to unload them. And then, if they do get unloaded, there's no one to drive them, no truck drivers. And so, this whole supply chain thing, and they're saying half of the cargo ships, they're not completely full because they can't get things in from China. We've been…

LeAnne Siddell: Warned about Christmas this year.

Ed Siddell: You guys, shop now, right?

LeAnne Siddell: Shop now, and what I got to say about that is, it's interesting because everybody relating it back to what we do, it's all about planning, right? It’s all about planning.

Ed Siddell: It is, and that's the whole thing. So, we're not talking about, oh, my gosh, stock up, but it is.

LeAnne Siddell: Kinda.

Ed Siddell: Well, right, but it's more of– I mean, this is what we do. I mean, we prep, but we prep financially. So, it's some kind of using this as a metaphor. I mean, there are some realities, inflation, it's here. I don't care what anybody says. If you do the math, the formula that has been out there to determine the inflation rate, even though the Fed say that it's barely creeping up, I mean, it's there. I mean, you could see it everywhere, right?

LeAnne Siddell: Yeah, I can relate this to our groceries. I'm just going to say I like this particular kind of chips, and they're in the store one week, and they're not in the store. So, when I do find them, I like to buy five of them. And I know I'm paying at least fifty cents more than what I paid six months ago.

Ed Siddell: Absolutely. Absolutely.

LeAnne Siddell: Per bag.

Ed Siddell: So that's inflation. And what does that affect? Cash flow, right?

LeAnne Siddell: Yes.

Ed Siddell: And then you have interest rates now. They said in the last meeting last week that they're not going to make any kind of announcement as far as raising interest rates. Just remember, in the middle of the summer, they said they weren't going to touch the interest rates until 2023, right? Now, they're talking about revisiting that in November because inflation is here. So, as they raise interest rates, again, from a prepping standpoint financially, that affects what?

LeAnne Siddell: Cash flow. Absolutely.

Ed Siddell: So, for us, when we talk about prepping, aside from the stuff from the family and getting to make sure we have toilet paper and the necessities, as people enter that next phase in their life, and that's our target audience, right? It's that 50 plus within 10 or fewer years of retirement or in retirement, and you have to prep. And the way that we do it is to have that plan. And it is so important because, well, I mean, Christmas, that supply chain is being interrupted. I mean, so preparing for everything in life is so valuable, but again, when it comes to finances, it's key because everyday life happens. I mean, it does, and we're seeing it from one day to the next. And I don't mean to keep laughing, it's not funny, but every day is a box of chocolates because you never know what you're going to get when you turn on the TV. And look, we don't subscribe to Chicken Little, the sky is falling and everything else. And if you do it the right way, it'll give you a little bit more comfort so that you can enjoy life financially.

LeAnne Siddell: Well, and again, negative, negative, negative. I'm tired of watching the news and all the negativity. Look, negativity breeds negativity, and the opposite, coming from a planning perspective, that gives everybody which if you say you're not a control freak, I would disagree. There are parts and pieces of our lives that all of us want to control what we do or not. And the control factors in there just give us in some way, it organizes our brain to say that we're okay, right?

Ed Siddell: Yeah.

LeAnne Siddell: That we're going to be all right. So, when you come from a positive perspective on this is my funds, my bills right now, this is how it's going to change. This is the income I have. Again, this plan gives you that peace of knowing, okay, even if things do change.

Ed Siddell: They go a little sideways.

LeAnne Siddell: What is it going to look like for me? Or it's going to be okay. And again, that's a positive perspective, but let's plan for stuff so that we don't come from a, oh my gosh…

Ed Siddell: You're right.

LeAnne Siddell: I'm short and I'm getting that money is not coming in and I'm not meeting my bills. And then what happens? The roller coaster down from there. So, I think the planning gives you that positivity. It gives you the ability to look at things from that perspective on the worst-case scenario and go from there. It's all about…

Ed Siddell: Well, yeah, because our brains are filing cabinets, right?

LeAnne Siddell: Yeah.

Ed Siddell: And as you start to fill up those files in those drawers, and that's really what a financial plan does, so that that way you know, okay, this is what we're spending now. We know that our mortgage is going to be paid off or it already is, and we have money set aside for this trip or we're already planning on that. We're retiring early. So, we know we're assuming these health care expenses plus inflation, 6.75%. Yes, we are accounting for enjoyment in retirement because if you can't enjoy it, then you shouldn't retire. I mean, really, that's the whole key, right? And you have to account for inflation. All these things come into– and that's what prepping is, financial prepping. You got to make sure that you have everything there. You say it all the time, life happens when bad things happen as they sometimes do, you need to know what to do next. And the only way to do that is to be financially prepared.

LeAnne Siddell: I think the conversation needs to be had a lot of people go to financial planners, they go to their CPA, they go to people that give them the advice on what that long-term planning looks like, but sometimes you don't necessarily like giving all the information that is necessary for you too. So, I wanted…

Ed Siddell: For the action plan, step by step. Okay, now this is great info, but now, what do we do with it? Because remember, our brains are filing cabinets, so we need a little bit of direction, too, right?

LeAnne Siddell: And knowing why you ask the questions that you do, I mean, the budget worksheet that we give to our clients, and it goes through certain line items because we know inflation needs to be built into those line items, but there's also other areas, like looking at your liabilities and the mortgage that you have on your house. And why do we ask all these questions? Well, again, all of it goes into the plan. All of it goes in to give us all the information so that we are accounting for everything in that picture.

Ed Siddell: Well, like we were talking about this morning with annual reviews. So, that's why everyone brings their physical binder back in their plan, and we update it, but before they do that, what do we ask for? Hey, can you give us an updated budget? Can you give us an update for all these things because we want to make sure that we're prepared so that you're prepared? And that's really what it comes down to, you've got where the hidden tax inflation, okay, I mean, last week or whenever it was, our last podcast was about taxes. We talked a little bit about inflation, rising interest rates. The impact that rising interest rates were already kind of seeing that because everything is based on them. The yield of the 10-year treasury rate as that goes up, that means the interest in savings accounts and things like that typically will go up, down the road. And so, people are going to look for a safe haven.

And as they do that typically, the market adjusts. I'm not seeing a correction or bear market, but it goes down, and we're kind of seeing that. We saw that last week. We're seeing it a little bit this week. They're a little bit of pullback. The technology stocks, I mean, that was always like the safe haven, but it's been a struggle this year in the Nasdaq overall. I mean, there's been a couple winners here and there, but these, if you have that plan, like our process, using our method of safety, income, and growth. And how much money do you have for your emergency fund? 6 to 12 months, making sure that if something happens, I mean, a ton of people lost their jobs during COVID, and those families that we work with, they were able to weather that storm. And it's proven, right? It worked with us during the housing bubble last year. So, having that safety net is important.

And then the income, the main sources that people have for income in retirement, for most people, it's Social Security and then pensions unless you're on OPERS or STRS, and then there's that Offset, but we work with a lot of federal employees, so they have their federal pension and they're able to get Social Security. And really, pension, I mean, is just an annuity, is really all it is. And some people use annuities, they have rental income, but all these things, they're affected by inflation and interest rates, that spending power. And then if the market adjusts, then you have that growth side. Well, the growth is everything that's in the market. You've got your stocks, your bonds, your mutual funds, exchange-traded funds, variable annuities, real estate, anything that can fluctuate up and down where you can lose your money. Now, everyone's like, okay, so are you saying don't invest in the market? No, I'm not saying that at all because it works, historically, mathematically, over time.

LeAnne Siddell: You just have to have the time.

Ed Siddell: Well, that's it, that's the depleting asset that you have to have that you can't recoup is time. And so, if you have enough money in your income bucket, your conservative bucket, to weather the storm, in order for that growth side, the stock market to come back up, then you're going to be in good shape. And look, no one's got a crystal ball. No one has any ideas to what's going to happen this afternoon, let alone tomorrow or next year or five years down the road, but again, it's about being very pragmatic when it comes to planning, planning for the worst, and praying for the best because that's really it. And if you have everything set up in safety income and growth, and the software that we use with using the math to kind of back it all up, and as life happens, that plan, it's evolving, it changes, as people change jobs, as they pay off certain debt, their mortgages, cars, and that's the prepping that I'm talking about.

LeAnne Siddell: Well, again, we're going to relate this to something that you do every year, or most people do a checkup, they go to their physician. They get blood work. They make sure everything is working well. You do the same thing…

Ed Siddell: Unless you’re a guy.

LeAnne Siddell: Unless you're Ed Siddell, which again, but you're a prepper in all things, right?

Ed Siddell: Yeah, absolutely.

LeAnne Siddell: So, there are just some things that I think that when it comes down to our annual reviews that are done, everybody always has that question. Why do you need to know that? What does that have to do with my financial picture? But it all…

Ed Siddell: It’s a financial checkup. That's a great example, it really is. Look, when you go to the grocery store, you have a list. You prep when you go to the grocery store because if you don't, what happens?

LeAnne Siddell: I always think that that is you get a bunch of stuff that you don't want or that you shouldn't want and…

Ed Siddell: I get all the stuff that I do want, but I shouldn't.

LeAnne Siddell: Well, I think people are shocked when they go and they do a budget for themselves because it's amazing how much, when you do a budget and you say this is how much I spend on groceries, and then you go look at the last three months and see how much you've spent on groceries and how it's changed, it's shocking. It's actually shocking to see that. So, it's important that you do that is what I'm trying to say.

Ed Siddell: It is, and we've even gone so far with some of the families that we help because they're spending money all over the place, a lot of it is cash. So, we tell them to get one of those tiny little spiral notebooks and write down absolutely everything, every stick of gum, every cup of coffee. And at the end of 30 days, let's put something together. Let's get together and take a look at it. And they're all shocked.

LeAnne Siddell: Yeah.

Ed Siddell: They're like, oh, my gosh, we're spending an extra $200, $400, $800 a month that we didn't realize that we're spending on stuff that we really could cut out and that's going to make a huge difference. So, that's that prepping part, just having a really good idea as taking stock in your own inventory.

LeAnne Siddell: Yeah. So, I think we're going to end this podcast basically bringing it all back together. It's all about having the plan.

Ed Siddell: I’m a prepper, you’re a prepper. Wouldn’t you like to be a prepper, too, right?

LeAnne Siddell: So, if you have questions or you would like more information, the way you get a hold at Ed is at EGSIFinancial.com, or you can email us at info@egsifinancial.com. You can also give us a call at 614-526-4118.

Ed Siddell: Yeah, I mean, look, if you're with us, you already know that you're financially prepared and in the best financial shape possible, but if you want to be a financial prepper and you're not, give us a call. We'll do a complimentary plan. We'll just talk to you and see what we can do to help you out and point you in the right direction.

LeAnne Siddell: Great. Thanks, Ed.

Ed Siddell: Alright, thanks, LeAnne.

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