Brian Ford (00:03):
Welcome to “Money and Mindset With Bright and Brian,” a podcast to help you become financially confident and boost your mental well-being. I'm Brian Ford, and my background is in financial wellness. I'm here with my pal Bright Dixon, who's an expert in positive psychology. How are you doing today, Bright?
Bright Dickson (00:21):
I'm good. I'm doing well. I'm a little chilly, but all in all, pretty good.
Brian Ford (00:25):
Yeah, it's cold down in these parts myself, but I always get warmed up when we do these podcasts. I think it's more because I'm nervous, but I'll just keep it real. So today, Bright and I are going to give you tips on keeping your finances organized. You'd be amazed how much of a difference this can make in your life.
Bright Dickson (00:42):
Yeah, I've really been waiting for this episode. I'm excited, mainly because I need to know some more myself. I've got questions about staying financially organized, so I can't wait to jump in. But before we do, we're going to take a quick minute to answer one of the recent questions we got from a listener about moving 401(k) contributions to a Roth IRA. Brian, it's clearly a financial question, so I'm going to let you handle this one.
Brian Ford (01:08):
All right. All right.
Bright Dickson (01:09):
All right. The listener wrote, "My wife and I both contribute 10% of our pay to our 401(k)s and receive a 6% match. Would it make sense to lower our 401(k) contributions to 6% and invest 4% of our pay into a Roth IRA so we can have both pretax and after-tax investments?"
Brian Ford (01:31):
Ooh, I like this guy. The short answer is, sure, that would be a fine idea. I like his thinking. He does bring up a couple points that are worth discussing. First, I love that he and his wife are both investing 10% of their income into their 401(k)s. Nice job. Keep that going. I also like that they're receiving a match. That's good stuff. They're taking advantage of that company match. So his 401(k) is traditional, and the IRA they're thinking of setting up is a Roth. Let me explain the basic differences between a traditional and a Roth.
(02:13):
In a traditional, you're getting paid, and you're putting the money in before it's taxed, and then years later when you retire, you pay the tax. In a Roth, you're getting paid and paying the taxes first before the money goes into the investments. And then when you retire, you don't owe taxes. So you're going to pay taxes either way; it's just a matter of when. His question really is, "Am I okay to have both?" And the answer is, sure, it's okay to have a traditional 401(k) and a Roth IRA. It really depends on when you need that tax break. Do you want that tax break now or later? I mean, if you're making good money and you want to lower your tax burden, you probably want the traditional. You want to grab that tax break now.
(03:08):
If you're like, "Look. No, I'm okay. I can pay some more taxes now." Well then maybe a Roth makes sense, because then you put it in and you're done, and that number you see on the screen, that is the number you'll get at retirement in a Roth. So there's just a few differences there. The second point I want to make on this question is this. What makes sense on paper does not always make sense in real life. What I mean is the academic answer to his question is yes, he could do that. He could have both a traditional and a Roth. However, if he's not careful to truly follow through on his plan to take the additional 4% and put it into a Roth IRA, which takes some effort, then he would've been better off just investing the full 10% in the 401(k) and leaving it alone.
Bright Dickson (03:57):
That's interesting. So it's all about the follow-through on that one?
Brian Ford (04:00):
Yeah. Yeah, absolutely. We can lay out these great plans and they make sense academically, and the math works out, but then all of a sudden in real life, it's like, "Oh, boy. They were saving 10% of their income for heaven's sake, and they switched it up to get this little advantage, and all of a sudden then they didn't follow through on it, and they're missing out on that additional 4%, which could be thousands of dollars when they retire."
Bright Dickson (04:22):
Great point, Brian. Thank you. That was a great question from one of our listeners. We appreciate the emails we've been receiving so much. You, too, can send us a note. We want to hear from you, whether it's a personal when, or a question, or maybe it's a topic you'd like us to discuss. Be sure to email us. The email address is askbrightandbrian@truist.com.
Brian Ford (04:42):
Yes. Hit us up. Okay, Bright. You ready to get this organization party started?
Bright Dickson (04:49):
I've got my label maker, and I'm ready, Brian. Let's do it. Brian, I want to kick this one off by asking you a question. So in one of our previous conversations, you said that you clean your car when you're feeling stressed. Can you describe what that feeling's like after you finish, and when you're standing there looking at that clean car.
Brian Ford (05:14):
Yeah. Well, I have a great feeling. Normally, my stress is less and I have a clean car.
Bright Dickson (05:21):
Yeah, I love that. I do the same thing when maybe something's not going right, I'll organize something or I'll clean out a closet, or a drawer, or do something. Just being able to have peace of mind when you're in your space and dealing with your life really helps, and getting things organized really helps. There's a huge connection between organization and well-being, and there are a lot of benefits to staying organized even though it takes work. So you feel more in control, you know where things are, you know what to do. You're more productive because you're not having to track things down, and you can even get better sleep in a clean space.
Brian Ford (06:01):
Mmm. Yeah, definitely. I've noticed that in my own life, and that's why I'm excited to chat about this subject. I'm excited for what's in store for our listeners, really, in just getting their finances organized. We know that money is a common source of stress, but man, you'd be amazed and surprised by how much you can reduce that money stress just by getting organized.
Bright Dickson (06:23):
Let's do it. All right, Brian. So let's say that I'm ready to get my financial life organized. Where do I start? What's a good place to put my foot in the water on this?
Brian Ford (06:34):
Sometimes a good place to start is to find out where you are. And what I mean by that is where are you financially? And I don't know if you've ever been lost in an amusement park or a really big shopping center.
Bright Dickson (06:49):
Oh, yeah.
Brian Ford (06:49):
Yeah. And you're like, "Man, where am I?" relative to where I park, and maybe you even have to meet someone for lunch on the other side of the park and you're like, "Boy, I am going to be late. Because I don't know where I'm going." You're texting the person, "Hey, I'm coming. I think I know where I'm at." But then sometimes, all of a sudden, when you're lost in one of these places, you come up to this big map, and on that map, there's a big red dot. And next to that red dot, it says, "You are here."
Bright Dickson (07:15):
So helpful.
Brian Ford (07:16):
Yeah. And you're like, "Sweet. Now I know exactly where I'm at in relation to where I want to go, and I can get there much more quickly and efficiently." Well, the big red dot on your financial map is your net worth. And when you calculate your net worth, it's basically going to say, "You are here, financially speaking." I love net worth. In fact, I think we'll probably talk about it in future episodes if I have any say in what we talk about. Because like I said, it is the most important calculation in personal finance. But for today, I just want to break it down in simple terms. The way you calculate it, the math is simple, it's all of your assets minus all your liabilities equals net worth. That's just a fancy way for saying all the stuff you own, minus everything you owe equals net worth. And what's cool about it is it's very accurate. It's true. It's honest. And what I mean by that is, you know Bright, some of the wealthiest-looking people that you might know, they may have a negative net worth.
(08:21):
They look fantastic in their great house or jewelry, they’ve got electronics, they’ve got cool clothes, a sweet car. They don't really own any of that stuff. And the net worth calculation will expose that a little bit. So, net worth is a great place to start because you're forced to list all your assets, you're forced to list your liabilities and do a little math, and figure out that number. So it's a kind of, "You are here,” financially speaking. Another idea to find out where you are is to list all of your expenses, to see where your money's actually going. So that's just another. I wouldn't say do both, pick one, like, "Are you feeling up for calculating your net worth? Awesome. Go," or you're like, "You know what? I just need to get a handle on where my money's going." "Cool. Well, then just take a little bit of time and list out all your expenses. But once you have your net worth or you have your expenses, you'll then have a better idea of what needs cleaned up. It's a jumping-off point to being more organized."
Bright Dickson (09:21):
Yeah. And that's interesting, Brian, because I can imagine myself with both of those. I'm actually going to have to do some organizing to be able to calculate either of those. I'm going to have to figure out some passwords, all that kind of stuff. It might take me a hot minute of organization to even get to the starting point of the bigger stuff.
Brian Ford (09:40):
Yeah. I wasn't going to say that, but that's part of getting folks organized. Yes, you're thinking through this. You're like, "Look," and people get focused on the net worth, and that number, but just by going through that process, they will be forced to do a little organization. Same thing with expenses. You’ve got to look at your bank accounts. You might have to pull out that credit card statement. Going through that process will begin the organization process without even knowing you're getting organized. You're just focused on that task. So, all right, I wasn't going to say that, but you just exposed my little secret way of getting people organized.
Bright Dickson (10:18):
Well, I mean for me, it's good for me to know it out front, because if I get surprised by it, I might quit, and I don't want to quit.
Brian Ford (10:27):
Okay.
Bright Dickson (10:27):
So, Brian, what other tips have you seen people do as a way to simplify and declutter their financial lives?
Brian Ford (10:35):
Yeah, so, here are three smaller, quick ways to declutter our financial life. First, follow what I call the one-or-two rule. Work with one or two primary banks, one or two major insurance carriers, one or two financial professionals. Also, we can limit the number of credit cards we use to one or two as well. Anything that you can think of financially, you just don't need too much of it. Because over time, we tend to accumulate too much stuff. This is true of our financial life as well. So let's get rid of some of this financial stuff and limit ourselves to one or two.
Bright Dickson (11:18):
Very, very rational.
Brian Ford (11:20):
Cool. So second, set up a simple filing system. This can be digital, on your computer or your phone, or it can be real, like for hard copies. But the idea is that we want to keep all of our financial records and important documents in one place, so that if I were to say, "Hey, go get this mortgage statement," that shouldn't stress you out. You should be able to find that without too much time or hassle. So the second is a simple filing system. Third, use online banking and go paperless whenever possible. The good thing about paperless is you have less paper. However, having lived this, you will receive more emails. That's just the way that it works. So every once in a while, go through your emails and unsubscribe or block emails from people or organizations you don't need anymore.
Bright Dickson (12:15):
I love that. I take great satisfaction in unsubscribing. It's one of my favorite activities.
Brian Ford (12:20):
Good.
Bright Dickson (12:21):
Yeah. So as someone who loves simplifying and being intentional with my time and space, I love those tips, and I think that they really make a ton of sense. Brian, I know you're really big on automation.
Brian Ford (12:34):
Mmm.
Bright Dickson (12:35):
How does this play a role? It might go along with online baking, but it sounds like there's an added level here.
Brian Ford (12:41):
Oh, absolutely. When we automate our financial life, there's just less to do. There's less to organize because it's doing its thing automatically. One of the most important parts of being organized is just not asking too much of our own willpower. Any financial plan that requires our constant supervision, and restraint, and vigilance, this is going to sap our energy, probably won't work long term. So in other words, we need to remove the need for endless discipline by putting automated systems in place that don't rely entirely on our willpower for their maintenance. Lots of tools are available for us, for automating our financial systems. A few that I really like are direct deposits. So just the way that you receive your money, make sure that's occurring automatically. Automatic transfers are great. Just going back and forth. And again, this all comes back to online banking, by the way, which we just talked about.
(13:38):
Online bill pay, another wonderful feature of online banking, which is great, and automatic payment plans as well. But really, when it comes down to it, this is something I think our listeners will appreciate. Every financial principle we learn—so anytime you learn a financial principle, whether it's on this podcast or you're reading a book or a cool article—every financial principle that we learn, we should ask ourselves, "Can this be automated?" If the answer is yes, let's do it. And, Bright, we mention this a lot because I think this is one of our big themes, our mantras. And I'd like to just say in summary of these several ideas we've been discussing so far, I'm bringing back one of our favorite phrases around these parts. "Focus on what you can control. You are the boss of your money."
Bright Dickson (14:26):
Yes, 100%. We love that. Control what you can. And with automating, control what you can. And one of the things you can control is not having to control all the time. It's a meta way to think about it, but automating things takes that. You're still in control, but you don't have to be constantly vigilant about it.
Brian Ford (14:45):
Yep.
Bright Dickson (14:46):
All right. So next, we're going to talk about how to mentally prepare yourself to go through this process of organization. We'll be right back.
Brian Ford (15:04):
Okay, Bright. We've discussed the practical tips for getting our finances in shipshape. But without the mindset piece guiding us to take those steps, it can feel really hard to start. How do we get our minds right to organize our finances?
Bright Dickson (15:19):
Yeah. A lot comes out, Brian, when we organize. Like I think about you and your car, cleaning out your car. You've probably got to take some stuff out of your car first to really be able to get in there, clean, organize, and put it back in the way it needs to be. And it's the same thing here. So sometimes, we've got to get a little bit messy first. And for those of us who have emotions around money, which is all of us, we've got to be aware that we might feel some emotions as we're going through the process. Those come out too. So the first thing to do to stay in the game is to write down your why for getting organized. So why are you doing it? What are you getting out of it? Really answer that question and literally write out your answer on a piece of paper, and put it someplace that you'll see it through your whole organizing process. Because sometimes we can get off track, maybe we’ve got to go get something or we get interrupted. Being able to come back, sometimes, is the hardest part.
(16:23):
So keep yourself motivated by knowing what that end goal is, and make sure that that end goal, your why, is really, genuinely true for you. So not something maybe you heard Brian and me say that seems like a good idea but isn't really connecting with you. Make it be real for you. You actually want to feel hope and excitement when you read it. It's got to be real for you. The second thing is to get ready for those emotions. So we often avoid doing things like this because we know we're going to experience some negative emotions while we do it. Maybe anxiety, maybe some guilt, maybe some shame. The trick here is to let them surface without letting them stop you. So it can help to jot down your thoughts and feelings as they arise. There's a lot to learn there. So maybe you're going through your credit card statement, and all of a sudden you start hearing yourself saying, "I'm a terrible person. I'm a terrible person." There's something to learn there. It's not true that you're a terrible person, but there's something to learn.
(17:22):
So if you stay focused on your why, you can keep going. So that's why you made it in the first place. So the way out of that is to stay with it, notice it, but keep focused on what you're doing. And the last thing for me, and this may seem a little amateur, but make a plan. How are you going to go about this? What are you going to need? How much time do you estimate it's going to take? What documents, account numbers, passwords, other information do you need to get together to really get into the organizing piece? And I think that's where the net worth piece can come in. That's a great way to kickstart that. As you were saying, Brian, writing down all of your expenses, going through it that way. That's going to help you get all of that stuff together.
Brian Ford (18:05):
Yeah, I like these thoughts here. I like the thoughts around better understanding my why for organizing. Whenever I'm more clear about my why, I'm more motivated. And usually, my why comes down to things that I care about. Like some of my deepest values, whether that's my family and I'm like, "Man, I got to get this organized because my wife's pissed at me. I got to pick up my socks." Or a lot of times it's peace of mind, it's a feeling of security. And so when I'm focused on those things, it really helps me to get through stuff that maybe I don't want to do. I will say the second thing that you mentioned is interesting for me. It's around these get ready for those emotions. And you mentioned that, oftentimes, we don't like doing things because we know we're going to experience some negative emotions.
(18:50):
That's an interesting one for me, because only recently have I realized that, Bright, in my life I used to have these negative emotions, and I used to avoid certain things, but I didn't always know totally why. It was almost like on a subconscious level. But now I'm like, "Ah, that's why." And I'm okay to have those surface, and I'm a little bit more prepared for them. And I'm like, "It's all right. I'll let those pass and then I'll continue on." But being more cognizant of those feelings only in the last couple years has been a pretty big breakthrough for me, for my mental wellness, which is cool. So anyway, I appreciate those thoughts.
Bright Dickson (19:23):
Yeah. Thanks for saying that, Brian. I think so many of us walk around that way, and we're avoiding things because it's going to make us feel something we don't want to feel. And that pretty much always holds us back, especially from something that's relatively simple and relatively straightforward like organizing your finances. There are ways to do it. So many of us don't do it, because we're avoiding something. Don't let that get in your way.
Brian Ford (19:52):
Love it. It's good stuff. And we do know that getting organized, it can take a little self-discipline. But nowadays, man, instant gratification. Things are so easy to come by. My goodness, you can refresh Instagram for new content. We now have one-day shipping. One-day shipping. I ordered a book. I think it was just last week and it came that afternoon. It was crazy.
Bright Dickson (20:18):
Yeah. I ordered a Christmas present yesterday at 1, and it was here at 4.
Brian Ford (20:23):
It's crazy.
Bright Dickson (20:24):
Wild, right?
Brian Ford (20:25):
Yeah, it's nuts. And you and I are like, "This is amazing." The next generation, when it comes the next day like one-day shipping, they're like, "This is bullcrap."
Bright Dickson (20:37):
I know.
Brian Ford (20:37):
We're like, "What? That's insane. That's amazing." We can get food delivered with a few clicks. Basically, there's a lot of instant gratification going around. But what are some ways we can get better at self-discipline, knowing that getting organized takes a little bit of it?
Bright Dickson (20:54):
So Brian, I'm with you on, as much as you can, make things automatic rather than relying on willpower for everything.
Brian Ford (21:02):
Woo-hoo.
Bright Dickson (21:03):
And if you can't fully make something automatic, do all of the things that line up, that are going to make you be more likely to do it. The idea of putting out your exercise clothes at night so in the morning, you don't have to push over the barrier of finding your shoes. So you're more likely to do it. It's the same thing. And really, the only way to build self-discipline is to practice self-discipline. And that is the unfortunate truth. But getting organized can help you do that, and automation can too. So part of a good organizing strategy is developing a system for staying organized for the future. So, so much of self-discipline is really just about good systems, setting reminders, creating a monthly financial review ritual.
(21:52):
Whatever works for you, do what works for you. If you don't know yet what works for you because you haven't been sustainably financially organized, you're probably going to go through some trial and error to figure out what does work for you. And this is a place where your why, again, is going to help you come back to what you need to do, because you're really in touch with the benefits of all of this effort. So self-discipline, it's part of it. But self-discipline really only goes so far. Set up your systems and make sure you stay true to why you're doing this.
Brian Ford (22:29):
Mmm. That's good stuff. I like that. I remember ... If our listeners have ever read the book “The 7 Habits of Highly Effective People.” I've really liked Dr. Covey's material. This reminds me of that, as far as organizing and putting systems in place because with the seven habits, there's these different areas we can live in. And I remember a lot of people live in this urgent category, and sometimes when we're not organized, we always feel like we're going from one emergency to another. And to get out of that, we need to live in a totally different quadrant, which is important but not urgent. And organizing is one of those types of things that once you start doing it, it actually helps with everything else in your life, which is fantastic, and allows you to remain organized, not just get organized. So I like those thoughts. Well, Bright, what about enlisting help?
Bright Dickson (23:23):
Yes. Ding, ding, ding. Absolutely. Get help. So if you're not doing it well yourself, or even if you are and you just want some backup, reach out to a financial planner, a counselor, a coach to help you get organized to make the best decisions for your goals and where you are in life. So it's likely going to cost you some money to hire someone, but that's also likely to be a really good choice. I think that's one of those spends that's really an investment over time, because if your financial life is organized, you're probably going to end up making the most of your money. And that'll be basically a one-time fee that is an investment in you being able to do that over time. The same piece here goes with any kind of social support. So, one of the things you can do is find a friend.
(24:17):
Find a friend who also needs to get organized. You probably won't have to look very far, and do it together. Say, "Hey, I want to get this together. Will you be my accountability partner? And if you want to do it too, I'll be your friend on this." And maybe you can't find a buddy on that, but just ask a friend to check in on it. So ask a friend to ask you every two weeks, "Hey, how's that financial organization thing going?" When we have social accountability, we are more likely to achieve our goal. Other people help other people really matter.
Brian Ford (24:52):
I agree. I'm a big fan of enlisting help, especially when it comes to organizing. I'm not sure about you, but when a certain part of my house, like a closet or a room has gotten a bit out of control, and I just want to keep ignoring it, I find that when someone jumps in and begins to help, a new energy surfaces for me, and then I gain momentum, and then we get the job done way faster. I think the same thing can occur with your financial life. Enlist the help of someone, and the combined energy can make one plus one equal three.
Bright Dickson (25:29):
Yep. And keep in mind, this isn't an all-or-nothing kind of thing. You don't have to do a complete overhaul of everything at once. Even doing just one or two of these tips can get you a little more organized and help you build that much more financial confidence. So you've got to balance your finances with your life, and getting organized is going to pay off. So like our last guest, Valorie Burton, mentioned, "Progress is better than perfection." Thanks for listening to this episode of “Money and Mindset With Bright and Brian.” Let's take a moment to recap the top takeaways from today.
Brian Ford (26:12):
First, find your financial starting point. Identify where you are as a way to give you an idea of where you need to go next. Second, declutter and simplify your financial life.
Bright Dickson (26:25):
And number three, find your why and work your plan. Take control of what you're working with and move in the right direction for you.
Brian Ford (26:33):
And if you like this episode, be sure to subscribe for episode alerts or share it with someone else. And don't forget the resources we have on the Truist Money and Mindset website. There's actually a great article on this topic you can find by simply going to Truist.com, and in the little search box, you just search decluttering. All right. That's it for today. Looking forward to next time.
Speaker 3 (27:13):
This episode of “Money and Mindset With Bright and Brian” is brought to you by Truist.
