#4 - Stability Funds with Kristen Euretig
Transcript from interview 4 - Stability Funds with Kristen Euretig
Welcome to the I ALSO Want Money podcast, where our mission is to democratize, demystify and demasculinize making money. I'm your host, Nicole Kyle, and I'm here with my co-host, Sophie Holm and ally, Harrison Comfort.
Today on the podcast, we are talking about the bedrock of our wealth journeys, which of course, is savings. Most financial advisors recommend having an emergency fund before starting to put money into the market. Now the reality is, most people, most millennials, and certainly most millennial women, struggle to save. If we look at the statistics, 53% of 22-to-29 year olds in the UK have no savings. Only 43% of women are adding to their savings each month. The stats say it all. Savings is, of course, proportionate to income. And I think, especially in the UK, where wages are lower relative to the U. S, and other economies, there's a belief that building an emergency fund is impossible, particularly in cities like London, where expenses are high. It's easy to feel defeated, and sometimes savings journeys feel like they've ended before they even begin. To make building an emergency fund feel more possible for the typical woman we've invited Kristen Neurotic [on the show]. She's a certified financial planner, a self -identified women's wealth warrior, and she's the founder of Brooklyn Plans Financial Planning Organization, dedicated to supporting young professional women in taking control of their finances. She's been featured in a number of publications - The New York Times, The Wall Street Journal - and we're really excited to have Kristen with us today. Welcome, Kristen.
Kristen Euretig: 1:52
Thank you so much for having me. My pleasure.
Listen, before we get into the interview, I just want to remind our listeners you'll notice that Kristen's bringing an American perspective to this call. What we love about Kristen's advice is that there's a lot of transferrable tactics and skills she's going to talk about today. In future episodes, on the podcast, we're going to revisit ISAs and some of the UK-specific and other global options for saving. But with that in mind, Kristen, I do want to turn our attention to some of those great savings ideas and just your observations from all of your time working with clients. So to start the conversation, why do you think it's hard for millennial women to save today?
Kristen Euretig: 2:34
I agree, as you said, that it is the bedrock of a financial plan. Having savings really allows you so many other options, like investing or reaching goals, paying off debt. It's an important component of any other part of your financial plan. Origination of savings is having positive cash flow, which goes back to budgeting or a spending plan or whatever you want to call it, but essentially earning more than you spend. So I think it could be hard for a number of reasons, some of which are in our control, and some of which are not. So things have gotten more expensive, leaving less disposable income. That's a fact of if you look at the numbers, so there can be less disposable income available to save, and that's a factor outside of our control. And then, if you look at factors within our control, there's no shortage of things that we want to spend disposable income on. Saving isn't always a top priority for people, or if it is, without a plan to make it happen, it's just kind of like, oh, yeah, I should be doing that without a real way to pull the trigger and make it happen.
Across your client based what is the single biggest area where your clients have ended up saving more than they had expected?
Kristen Euretig: 4:07
Right now, I mean specific to this time, there's a lot of the unexpected savings happening. Gym memberships are on hold. You know, in my family, we have a 20 month old and his daycare was our single biggest expense every month over housing. And they suspended that right now. So the payments are suspended. So there's lots of weird places I never would have expected. You know that there's savings happening right now. Student loan payments in the United States for direct federal loans have been frozen. Interest is frozen, so there's a lot of unexpected things right now and this time. But generally I would say I don't see that much unexpected savings.
Asked the other way around, what is the area where people have expected to save but haven't been able to?
Kristen Euretig: 5:00
I think saving for a house is a big one. People generally can gain some traction with the right set up and things in place to save up for an emergency fund and to put something towards retirement. A lot of my clients come to me that way. They have some money, saving cash. They have their contribution to retirement. But those other goals, like a wedding or buying a house, feel like harder for them to map out and put money towards.
Kristen. I want to come back to something you mentioned a moment ago about how important it is to have a plan for saving. What does a savings plan look like?
Kristen Euretig: 5:46
Yeah, it's actually a lot simpler than people may think it is. I've guided people in workshops through this, and your listeners could do it pretty easily along with us, too. You write down your goals. What are the things that you want to save up for? So this could be paying down debts, a vacation. It could be saving for college for yourself or a loved one. Whatever it is, leave retirement out of it for now because that's a more complex calculation.
Yeah, that's smart.
Kristen Euretig: 6:23
Just like the goal that you have. Let's say in the next 5 to 10 years, and then you put a dollar amount for them as best you can and a time frame. And then it's basic division. How many months do you have between now and when you wanted to achieve that goal? And how much do you have to have? And you divide it by that many months. Most people haven't done that math. I'm not saying that to shame anyone. I'm just saying that to make people realize that it's super common to not have sat down and figured it out. There's app and things. I'm not familiar with one at the top of my head because I know you're gonna follow up and ask me that! [Apps] would do this math even for you and make it even easier. It's really figuring out how much you need and dividing it. Now, that's the first step. But then you might find that it's not doable, and maybe that's part of the reason why we don't sit down and do the math because then you have to kind of pick which is most important. Because if we were to write down all our goals, and how much we need, and how much we want to achieve them, or what timeframe we want to achieve them by, we might find that we can't do it all. And that's stressful and sad and disappointing. And so I think that may be part of the reason why we don't do it, because we'd have to really face our limits on and choice. But that process that I guide people through is actually really empowering, and it's not something to be afraid of. It helps you adjust and course-correct and make decisions that are based in reality and allow you to do more than you would, if you don't go through that process.
Do you have any advice for how to make those trade-offs when it becomes emotional and you realize, wow, I can't save for everything I want to do?
Kristen Euretig: 8:25
I have a template that I did to speak to this. It's an Excel spreadsheet that basically is like what I just described. Your goal, your timeframe divided by the number of months and then priority level low, medium and high. So that's a very quantitative way to go about it. But I think there's certain things that we have in our mind that are nice-to- haves versus things that are really important. And I think that might be a quantitative way to do it. But so some kind of evaluation of listing things in order of importance. For example, I had a client that said that she, in theory, would like to buy a house, but it wasn't a top priority. But she said, Yeah, someday I don't even know when that doesn't seem realistic, but I included it in her plan. Then, when it came down to it, she couldn't save for the house and also move out to a rental in the area that she wanted to that had a good school because for her daughter, and pay that rent and save for the house. So I was like, OK, you know, we're gonna take out the house savings and this is just in excel. And I delete like that line that said home. And she was like, I didn't even know I really wanted that house until you deleted that line. And then [she] was like my house is gone! So anyway, I worked with her to work it back into her plan, and it was like, OK, but if we're doing this like, we can't do all the things, so something else has to give and that's hard. It's hard for people. It's a hard conversation to have. It's hard for me as a planner to tell people, numerically, this doesn't all fit. But when people accept that and move forward, that's where they have a lot of power. That's where they're coming from, a place of real power, as opposed to a place of fantasy.
Really good point, the power in writing it down. And I think a lot of us don't do that because, well, frankly, for emotional reasons. This conversation reminds me of all the rhetoric we hear around, oh, she's good with money or she's bad with money or she's great at saving. In your opinion, do you think some people are just naturally better savers than others?
Kristen Euretig: 10:55
I wonder about this myself. I can't say I have a definitive answer. I will say that I think - I think that there are people that naturally do kind of live within their means, and full disclosure, I'm not one of them. And so I think that's why I'm good at working with people who are also not because I think a lot of financial planners might be drawn to the industry because they're naturally good at building these habits. And I do get clients that come to me, and they're just like little squirrels.
I love that image.
Kristen Euretig: 11:35
They're here and there, in the retirement. And just don't spend. And sometimes that can be extreme. It can be neurotic that people won't spend. So I do think some people have some habits around that I certainly didn't have, and came up with a whole series of ways to trick myself into saving and not overspending. And that became the framework that I share with my clients, is how I sort of trick myself into having better habits.
I'm sitting here realising - I hadn't really internalized - that the biggest reason it's so hard to save and budget plan is that you have to face your priorities of what you can and can't do.
Kristen, do you have any guidance for how to preserve or manage your emergency fund in a downturn like the one we're going through now?
Kristen Euretig: 12:47
I've rebranded it in my practice, and we call it the Stability Fund.
Oh, I like that.
Kristen Euretig: 12:53
I think saving for an emergency sucks! Nobody's like, oh, yeah, I want to save for that time when I don't expect something to happen, but I break my foot. That's just demoralising. But what we're really saving for - you're not really saving for that emergency, you're saving for your for, what? For your stability. Despite whatever happens, and to me, that's as a little bit more motivating... this is my stability fund. This is going towards me and my stability and my ability to weather anything in my strength, right? It's just a branding thing. Maintaining it in these times. It's funny. I've been thinking about this a lot because I just did a video this morning on saving now, and in times of crisis, and in the future. So some of my tips are, if you're experiencing last expenses right now because everything from gym memberships and childcare to going out to eat and going to the movies, where we may be experiencing reduced expenses on those fronts, to transfer that money to savings instead. So you can keep pretending that you're making those payments as long as their income has held up. Obviously, if you're experiencing reduced or loss of income, saving isn't a reality. Sometimes we're in a drawdown mode, and that's what you saved for. Sometimes, I have clients who are in a position where they need to use their savings and they may feel really demoralized by that. And I always tell them, that's a win! You had savings, you built the savings, and now you need it right? Like if we call it the emergency fund. When you have an emergency, you lost your job. Like now you're gonna need to draw down a little bit, and that's okay. You know, when the income comes back, you go back to it. You put it into [savings].
It's actually really comforting to hear that you identify as someone who's not naturally good at saving. I think that's going to bring comfort to a lot of people, even a financial planner can identify that way. Kristen, you mentioned earlier that you came up with some tricks to trick yourself into saving, and I don't expect you to share them all. That's your bread and butter. But would you mind maybe sharing one or two tricks with us?
Kristen Euretig: 15:11
Yeah. What I saw for myself and a lot of my clients is that I think the default that is set up right now for most people in the way that they manage their money, and the way that checking and savings accounts work and whatever is... your money hits your account, you pay your bills and you spend the rest. And if you wanted to save, you would have to be very proactive and have these habits I mentioned I didn't have. So the default is that we overspend often because we have access to credit cards or other lines of credit and we don't save. So for me that default, I needed a different default, baseline. So what I did was I figured out and this is what I do with clients, but people could do it on their own. It's again, the math isn't that complicated. But you figure out how much you make after taxes, all of your fixed costs. That includes Netflix, Spotify, anything that you're just expecting to have to pay this month. That money is not yours. And that's what I think makes it really confusing is because that money that I have to pay my landlord and I have to pay my electric bill is all mixed in with the money that is mine to spend. But that other money is not really mine to spend. You see, I'm saying it's visiting my account before it's going to someone else's. It's just on a layover. That's how I think of it. It's just touching down. And then it's off somewhere else. But that money is all mingled in my account with all the money that is left for me to actually spend, and that makes it very confusing. I think, in general, to make spending decisions because you have to have a detailed budget or a very powerful mind that can separate that money out in real time as money is coming in and going out. And so very simply, what I advocate for myself and do with my clients is we have two separate checking accounts, one for bills and all of that money, and we figure out how much every month needs to be there, because that money, that number is pretty fixed. And then we separate that out from spending money and then part of that process. I know this is a long trick, but this was kind of the essence of it, to carve out savings as one of those bills that you're paying. So it's kind of more of a system that makes the default saving, because we automate that and living within your means, because we actually put our clients, and I put myself, on an allowance of spending money of how much is safe to spend that week, and that money is replenished every week to that account. So we have to do the math to make sure we get the numbers right. And then we just automate so that the default is a different one, if that makes sense. So that's a system that I worked out for myself, and that's what I use with my clients. And people have shared that, for those that struggle with spending, that it's a game changer to really have that level of clarity because the way that it is set up, it's just very confusing that all of that money is mixed in one pot.
Kristen what is an I also statement that you would want the audience to take away from this conversation?
Kristen Euretig: 18:32
Oh... This is a powerful question. I have to think for a moment. I also can reach my dreams while acknowledging the reality of my situation, I think it's a balance. I think it has to be both. And sometimes that conversation is, look, we're not bringing in enough income to do all these things. How can we get a raise here? How can we get a higher paying job? Like sometimes the facts on the ground don't allow for it. But again, like we're always trying to get to yes, how do we make this happen? What levers can we pull? What options do we have? So think out of the box and make this happen for you.
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