Welcome to another edition of the Chicks on the Right Show. We are talking to our friend and sponsor of the show, Zach Abraham from Bulwer Capital Management. Zach, there was an article in Money Talks News, which is I'm sure a publication that you read every single day, and it was about the eight expenses that retirees regret not cutting sooner. And so I wanted to talk to you a little bit about those eight expenses because I myself am spending
money on all of these things. Of course, so I'm freaking out now, totally freaking out, because yeah, there's a lot. I mean, I'm sure that there's probably even more on the list because you've been doing this for a while, you have been advising people on all things financial. I'm going to give you some of the examples and then we can talk a little bit more about it. But like phone bills, telecom bills is one of them, Eating in nice restaurants or even not nice restaurants, just eating out,
and bougie grocery. I mean, like, let's face it, you don't really need those tiny mini Reese's peanut butter cups from that fougie grocer. I mean, they're really good, but you know what I mean. Debt in general was number three. Transportation was number four. New cars interests. People like new cars, you know, they don't like used cars. Clothing. The average American household spends more than two thousand dollars a year on apparel and services like dry cleaning, which is kind
of that's you know, reading materials. I thought this was interesting, especially older people they still like to read, whereas these young whipper snappers like things in small little bits, you know, but they have subscriptions to things that are you know, outdated.
Then there's a couple more.
One of them, which I think is very interesting, is contributions to traditional retirement accounts. And then there's the whole bucket of other stuff, which was the number eight, which was like you know, cleaning services, home renovations, stuff like collections, lawn services, crap like that description pet food like you know,
yeah needs. So like, what would you say is the first thing that should be cut if you were if somebody came to you and said, I want to retire in like five to seven years, what what do you see in your practice?
So, first of all, is it relates to is it relates to retirement everybody is different, and truthfully, as long as you've got a income plan laid out to some degree, and you stick inside the confines of that of that income plan, meaning let's determine that for whatever year, for whatever you're retiring right now, and you're a client of ours, right, So we'll have this.
Conversation at point yep, we will.
And we're like, okay, so what what are our needs? What is that monthly income? And let's say we decide with the different things going on that you and your husband need to pull And I'm just throwing a number out. Let's say it's sixty thousand a year out of your retirement assets. And that's right, that's going to be the amount of money that we've got going forward, and and that's going to be our budget. So sixty grand a year, uh five random month income okay, and we plan for
that as long as you stay inside that budgets. As your advisor, I don't really care what you spend it on, right, as long as because my whole thing is what is your total spend as a percentage of your overall asset base? Right, And we want to keep we want to keep that number between four to five percent. Okay, Okay, Now different conversation is, like you said, I've got five to seven years, I want to sock away a lot of extra I
want to see things as lean as possible. So so I would prioritize it this way, and I do that with clients. A get rid of as much debt as you possibly can.
That's number one.
Yeah, because because now and we'll get to other things like phones, but you're going to always need a phone, so there's going to be a built in cost to that, right. Right. Another thing that we talked to clients about, okay, especially today, that may or may not mean paying aggressively trying to pay down your mortgage. Right, So again I hope we mortgage is a debt, okay, but it's a different Cars.
Our cars a debt. Do you consider cars a debt?
Yes?
That was like the whole other thing on this list. I thought it was so interesting that they that debt was one thing, but then you know, like cars were a whole different thing, and I thought cars are a debt. Cars a house, I mean those are all come to me, that's a debt.
Yes, yes, Now a house again, okay, so we got to treat a house a little bit differently, because a house is an appreciating asset over a long period of time, and we have to live somewhere, and so housing should be looked at really in its own category. Okay. But what I would say though, and this is why. Look, I'm not saying this to drive business to us, but
it's just factually true. This is really why you need to start working with an advisor or a planner on some level prior to retiring, right, because it's the right. The last ten years leading into retirement, quite honestly, are more important than the beginning of retirement financially right, making sure that we're in the right position, right. So, like I said, it's prioritizing it. I can't tell you how many times I've looked at clients have been like, no, stop,
do not pay your mortgage off, Zach. Why wouldn't we want to pay our mortgage off because you've got ten years left on your mortgage, right, And they go yes, And I go, okay, well we can go buy a ten year treasury paying twice the amount of interest per
year that your mortgage costs you. Okay, So what we're going to do is we're going to take that money you were going to use to pay off your house, okay, and we're gonna let We're gonna let that excess interest pay off your mortgage for you, and that way you maintain both assets. You've got the house and you've got the cash. Right now, I'm not saying you shouldn't pay off your house. I'm saying you should talk to somebody like us to see if that's a good idea.
Right yeah, Okay, So on that vein, I hate to interrupt it, but on that vein, like, do you do you recommend that people or do you find it? I feel like this is probably common sense. You're probably gonna I think I probably know the answer. But would you rather have a client who is, you know, fifty five and getting ready to retire in ten years or would you rather have a client that's thirty five and has like.
Their whole adult life ahead of them?
Because I have kids who are at thirty and thirty five, and I'm like, you got to go talk to Zach and then like that, I think, my god, they will be able to retire like twenty years, like less than twenty years, because you know what I mean, what's like what's better? But I'm obviously it's better for them to come to you early, right, or come just have a financial advisor early.
Yeah, for them. I mean, now for me, if you give me that quar question, I'm going to take the fifty five year old person every single time or older. Why is that they have more money?
Yeah? Right, it's a great okay, yeah.
So and so I get it, you know, and I get it. The other thing, truthfully, outside of just financial is that they look, if you're thirty to thirty five years old, having an awesome retirement is a choice. It doesn't take any and and because of that, it's weird because it seems like I'm selling our own services down down the road. I'm not. But what I'm saying is we can deliver substantially more value to somebody that already has saved a significant amount of right, and and somebody
that is time constrained. Right. So, like a fifty five to sixty year old person, the clock is ticking. They're going to retire at some point in the next ten, ten, twelve years right now question yeah, right, and so and so risk management at that point becomes much more important, right. Diversification, laying things out, planning, that incomes strategy where when I look at a young person, do I think that they would do better with us over the next twenty or
thirty years? Sure, but do I think it's going to be life changing? No? And I tell all these young people, I go, look, if you want an unbelievable retirement, do one do one thing and one thing alone. Max out your retirement plan every single year yep. And anytime the market drops more than twenty percent, throw more money at it period end of story. And they're like, well, I don't want to lose. I go, You're not going to lose. This is all money that's stuck in a retirement account anyway,
like it eventually will come back. And they're like, you're saying the market's going to always go up, And I go, yes, if for no other reason, just for inflation over time, right, And the people are like, well, if you think that's your take, why do you think you need to manage risk? And I'm like, well, because guys, there are multiple times in the history of our country where stock markets have been negative for you know, for over twenty five years.
So eventually is a eventually is on the side of a thirty five year old e thirty five years.
Old can do that? Yeah, totally do that.
Well. Well, and here's the thing you can they can actually make really good progress too. So for instance, from the years of two thousand to twenty thirteen, the stock market was flat. Okay, it didn't go anywhere for thirteen years. Hey, Yet at the same time, I've got several clients who saw substantial gains in their four oh one K. Why well because during the downtimes they kept contributing into their four oh one k. So when the markets got back
up to their highs, their account balance was significantly greater. Right, And so you can you can even make significant progress in a flat market. Well, if you're pulling money out of your account every single month, it doesn't work the same way, right of a flat market for thirteen years will kill you, right because you're just you're pulling money out, you're not putting any back in.
Right.
So in getting back to what we look at, so I would say, look that the number one most onerous and odious type of debt is credit cards. Okay, so get get rid of that credit card expense.
And then cars, yep, car cars.
And hey, and and you know, be smart about cars I tell this to you know, I tell this to as many people as you you will listen. Every time you see a car, just see a money incinerating pit.
Oh my god, you just literally just set it on fire. You set you on fire when you buy a car.
It is and it is so it is so shocking to me when you see people that make good money too. And I'm not saying this isn't you know, there's a good income. But even even if you go to people that are making let's say in the range of two hundred and fifty to four hundred thousand dollars a year, the average car loan right now is over one thousand dollars. Oh my goodness.
I can't like that.
I still I think it's average new car loan or something like that.
But it's old where it pains me because I live in a world where I'm like, I only want my car payment to be like three hundred dollars a month. Yeah, yeah, that person, you know what I mean, because I was raised in the eighties and I don't even I either don't want a car payment, or if I have a car payment, I don't want it to be more than
like three hundred dollars. I'm so cheap when it comes to that, I cannot even imagine to wrap my brain around one thousand dollars a month of a car payment, which I guess.
Here's well, and here's the crazy part. Okay, let's say you've got two Let's say and this is well with the normal. Let's say you have two people. You got a household making four undred thousand dollars a year, right, great level of income total, Okay, And let's and let's say you've got twenty three hundred dollars a year in car payments. Okay, twenty three hundred dollars a year. You're looking at twenty four let's call that, you know, twenty
eight thousand dollars a year. Okay, Yeah, so you're you're four hundred grand, right, let's carve off thirty percent right
off the top. So you're you're four hundred grand. You're you're like two fifty right, So let's call that two fifty two sixty take home pay because a tax, that's right, yeah, because Texas, so ten percent of your take home pay, ten percent you're making thousand dollars a year, ten percent is going to a depreciating asset that has absolutely zero chance to deliver you a positive net return, right and so so quote unquote can you afford that payment? Well, yes, but it what cost?
Right?
If you have a car payment, it should be a rounding error on your annual income, a rounding error and buy that. I'm talking like less than five percent of your take home Yeah, okay, agree if it's If it's not, don't buy that car. If it's not, save up for an extra year, right, or buy a lesser car. It is like it it just kills me because you sit there and you watch it, and you go, look, if you made a different decision today, I guarantee you your outcome will be better down the road. And yet and
yet we still do it. I mean, like, think how crazy that is, even if you're making foreigner grand a year to be driving one hundred and twenty thousand dollars car.
And I see people do it all the time. I know, I see people around me do it all the time, and it's like, what.
Are you doing?
It's the norm and I and but.
Again I still go back to the whole I'm I guess it's maybe it's an age thing because I'm like, I remember when you could buy a condo for one hundred and twenty.
Thousand dollars, I'm like, I just can't. I can't do it, and they can't.
I know, it's crazy, it's all.
It's all crazy.
So on the phone thing too, on the phone thing too, there's another one right there where I sit there and go look at the phone plans. There's all these other phone plans out there right now, and they're competing.
They're all eating with one another.
I'm doing with that with my mom, who is I guess considered elderly. She would really get mad if I called her that. But we do that with our mothers. My husband and I try to get them better plans because they you know, there's no reason that a person, one individual, should be spending one hundred fifty dollars a month on a phone. So it's like, there's just no reason because there's a lot of people, a lot of
companies competing with one another to get your business. Do your research because you can probably get a phone for like fifty.
Bucks a month, honestly, yeah, or loss even in some.
Yeah, one other quick one to look if you can afford it, and it works long term health, long term care insurance, right, long term care. Everybody's freaked out about long term care costs. If it works, it can be a wonderful thing. Okay. The problem is is if you are considering that. Again, I'm not saying this to drive people to us, but you need to speak to somebody.
Because long term healthcare, long term care insurance that you could buy fifteen twenty years ago, it was incredible, okay, but it was so good that it actually drove several of the companies issuing it out of business. Really, yeah, since then, because people are living so much longer since then. Basically, a lot of these quote unquote long term care insurance plans that you see effectively, what they are is their
pre paid long term care. So meaning if I've got to put in and this is common, if i have to put in two hundred to two hundred and fifty thousand dollars into a long term care policy, okay, and that gives me a million dollars of coverage. Okay. When you start doing some math over a fifteen or twenty year period of time, what you start seeing is that you're what you're doing is you're be paying the insurance cost. It's not really giving you a big insurance You know what I'm saying.
Yep, So there's another place that people need to be Yeah, it'd.
Be it'd be sort of like paying it'd be sort of like paying the equivalent of five hundred thousand dollars for a million dollar life insurance policies.
Oh my gosh.
Yeah, you know what I'm saying.
That's such a rate. That's a great analogy.
Yeah, if something happens to you, it's going to work out, but chances are it's not going to and you'd be better off because remember seven percent returns your money, double your money every ten years. Right. So if I'm buying a long term care policy, let's say at the age of fifty five, and I'm putting up two hundred thousand dollars in that policy, Well, if I just get a seven percent rate of return, that two hundred thousand dollars is going to be four hundred thousand by the time
I'm sixty five. Okay, then it's going to be eight hundred thousand by the time I'm seventy five. Well, most most cases do not. You're not going to run into long term care needs typically before seventy three seventy four, So you know, then you're looking at it and going, Okay, I've got eight hundred thousand dollars of cash sitting here versus a million dollars in a long term care policy.
But the cash I can use for anything the long term care policy is you know, if I pull money out of it, it affects the it affects the coverage, it does all these things. So again it's it's cutting back on expenses but also making sure that we're positioning our money to where it's giving us, you know, for lack of a better term, the biggest bang for our buck, and that this is.
This is the good stuff. I love this stuff. Yeah, yeah, it's I turned out over this stuff.
I totally geek out over it, Like the where can I because listen, I Like I was telling our producer at Kuran before we got on that I am the person who buys all the Starbucks mugs from every single like state and Starbucks, Like I'm that crazy old lady that I need to stop spending money on that stupid crap, right, So I'm guilty of it too. We're all guilty of places where we could save money. At certain places and
people need to come talk to you. I know you're saying I'm not trying to sell this or anything, but you are the person to talk to Zach. You are the guy to talk to you about money. If people need to get their crap together, how can they.
Get a hold of you.
Yeah, So easiest way is go to Borwercapitalmanagement dot com or Know Your Risk podcast dot com. But yeah, Bullwarkcapitalmanagement dot com. Give us a call. We've got our roadshows that we do every six weeks. We've got one coming up where we kind of run through how we do, who we are, how we do, what we do, what we do, and you know, so you go to one of those and it's free, no obligation, and you'll leave with a really good understanding of of who we are
and how we do what we do. So that's probably the easiest way to get all of us.
Yeah, good stuff, you guys. Check them out.
Thanks Bach, Thanks as always. Investment advisory services offered through Trek financialc and SEC registered Investment advisor. The opinions expressed in this programer for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. Any references to performance of security so it thought to be materially accurate, and actual performance may different. Investments involved risk and are not guaranteed.
Past performance doesn't guarantee future results Trek twenty four to three, Zeroly