The Personal Finance-sode

0:10Hello, and welcome to a very special episode of Slate Money, your guide to how to money. We are not really concentrating on the business and finance news of the week this week because I, Felix Salmon of Bloomberg, along with my regular co-hosts, Emily Peck of Axios.

0:30Felix Salmon: Hello, hello. And Elizabeth Spires of the New York Times are joined by a maven of personal finance coming to us all the way from Miami, Florida, my past and current colleague, Mr. Adam Auriemma. Adam, welcome. Hello. Thank you, Felix. Nice to be your colleague again. Adam, introduce yourself. Who are you? Sure, I'm Adam Auriemma, and I write about money. I've been covering personal finance for a long time. I was the editor-in-chief of Money Magazine in a prior life. And these days, I am the voice of the Bloomberg Money email newsletter, which comes three times a week with news and views on the markets and everything in the world of personal finance.

1:11As you imagine, we discussed quite a bit of things, but it's really for an audience of retail investors. It's people like me who are interested in money. we're invested we're using 401ks brokerages probably some Roth IRAs maybe some HSAs and we want to know what's going on in the world and how it might affect our investing and what to think of it so I'm not a pundit or an advisor but I do have a pretty clear outlook on investing you have pundit tendencies I subscribe to your newsletter do I I'm really trying not to be I was told not to be a pundit yeah every time I see a pundit I go along to your boss Nicky I'm like he's punditing again.

1:48But I do have a point of view, which is an easygoing point of view. I'm a buy and hold index and chill. So most of the time I'm... You're a passive Easter like the rest of us. So this is going to be a conversation about all the different aspects of personal finance. We're going to talk about rent versus buy. We're going to talk about how often you should check your investments. I think we're going to have like a super nerdy discussion about annuities, which are a big thing these days. We get into all of it this week. So it's all coming up on Slate Money.

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4:31I want to start with the single most universal thing in personal finance, which is budgeting. And we all have a finite amount of money that we can spend, and we all need to worry on some level about spending too much. This seems to be the most universal financial worry in the world. Everyone has an idea that they're spending too much or they should worry about spending too much. Is that worry just part of what it is to be alive in modern capitalism? Or are there people out there who have solved this problem? Are you asking me? I don't know. Adam, I'm asking you. I haven't solved it. Do you get pitches from people who say that they've solved it?

5:13Oh, sure. Some of them come from budgeting apps, of which there are a number of tools to help you. But honestly, I would start by sort of trying to, I'm a very easygoing guy when it comes to money. I try to be very positive. I there's a worry around budgeting, but I love to think about it as an opportunity. If you can get to the point where you are making more money than you're spending, that is just like where you want to be. And then that gap of what you have between what you're bringing in and what you're spending is what you can use to meet your goals, to invest, to give to charity, to support loved ones, like whatever you want.

5:50Like that's the ultimate goal. And you do have to get there with this sort of ugly process of budgeting. There are a few, I think, the gold standard sort of approaches, but they're kind of intense and they don't work for everyone. Like you all know about zero-based budgeting. Is that where you're like...

6:05Felix Salmon: Is that Elon Musk? Is it? No, it's those guys from Brazil, the 3G investimentos guys who are like... You start over every month. You start over like you don't have a mortgage, you don't have a rent. You're like, do I need to live in a big house? No, like this is dumb. We lock these things in. Not quite what I was going to say. It's like it is when you try to understand how much money you're coming in and then you give every dollar of income a job or a task. So this is easier for people who have steady income and harder for people who don't, but they've figured it out. And so if you're making$5 ,000 a month,$2 ,500 goes to the mortgage and this to utilities and this to gym.

6:45And you really go line by line and give everything a job. And hopefully among those jobs is like this much money is going to go to my brokerage or to my 401k or to pay off my credit card debt or whatever. It's beautiful and it works. And the problem is you have to sort of rigorously guard against any other spending coming in and messing up with that plan. which I think to your point, Felix, about why does this feel like a bigger problem right now? Part of it is just like really easy to spend money right now. We're literally waving our phones around and money comes out of our banking accounts. That bleeding of money that it's going out the door and you just don't see it, like a system like zero-based budgeting can help you just get visibility on that stuff because it's the real killer.

7:28So we're going to talk a little bit later about how often one should check one's investments. And I think the received opinion, which we probably all agree on, maybe we'll find out, is that in general, people will check their investments too frequently. And I think it's also almost certainly the case that people check their expenditures too infrequently. Like, in my case, I look back on my expenditures and I try and work out what I spent on what. I'm going to just come out and say zero times a year. Like, this is just a chore that I try and avoid. And I'm like, no, don't. If I don't look at it, I didn't spend it.

8:04And as you say, like, my money just disappears magically. I wave my phone and the money's gone and I've bought the thing and it's painless and it's easy. And so long as I don't look at it, it didn't happen. Emily's looking at me like, Felix, you are so irresponsible.

8:17Felix Salmon: No, I mean, but the bill comes, like, when you're waving your phone around, is that to your credit card? And then your bill comes to it. I know, right? And then the credit card automatically pulls money out of my bank account. And then there isn't enough money in the bank account. And then the bank sends me a rude note saying, like, you don't have enough money. and I'm like, wait, how did that happen? And then Felix famously accumulates points on all of his cards and doesn't use them. So that's it. I think we need a special episode, a very special episode of Slate Money where Felix sits down with one of these budget gurus and faces some hard facts about the number of sub-stacks subscriptions he has and how much he spends on wine or whatever.

8:57Yeah, it's true. Sub-stacks are adding up, man. And I keep on adding new ones. It's an expensive habit.

9:03Felix Salmon: Yeah, actually, the pace of subscription, the increase in subscription spend, I think, in the most recent quarter was like 7 % compared to just like a 4 % increase in spending overall per some like Bank of America card data I was looking at. Because people are, everything is a subscription now. How often are you supposed to audit your subscriptions? But also, Adam, if I was a zero-based budgeter and I find a fabulous new sub-stack that I want to subscribe to, and back when I created my zero-based budget, I didn't leave a line item for a potential new sub-stack that you might want to subscribe to.

9:40Where does that money come from? Because everything has been accounted for, right? That's the beautiful question. It forces you to make a trade-off. Okay, if I do$10 here, can I pull$10 somewhere else? Oh, I need to literally, if I subscribe to Julie's sub stack, then I need to literally carve that money off some other line item somewhere. That's the idea. Oh my God, this is the worst.

10:04Felix Salmon: No, but you could have a bucket that's like, this is how much my target for subscriptions. And maybe it's$100, but you're only spending$50, so you have room to grow. Like when you plan your budget, you think, oh, okay, this is what I ballpark want to spend, that kind of thing. Yeah. And this level of moving around dollars in your budget is so painful. And I don't honestly think you have to do it all the time forever. But I think if you go through a season of doing this, you can set some really good habits and give yourself a good foundation. Because the other scenario, Felix, is like, you know, you do have enough in your bank account, you're checking to cover your credit card.

10:39So you just cover it. And it's like, oh, well, I didn't make an extra mortgage payment this month. I just couldn't. You know, like you lose the ability to like have those tradeoffs because one part of your budget goes way up and you just sort of like absorb it. And then that's how people can lose track of their goals. What do you recommend that people do if they have unpredictable income so that you can't really be sure exactly what you're working with? Yeah, folks like that usually have to have a bigger emergency fund. Like the emergency fund is just like the liquid money you keep in your savings to cover emergency expenses.

11:12But you kind of have to do some math and figure out how much sort of a buffer you need. And if you can get to a point where you can do like a six month look ahead or your business is seasonal, you might have to look at it yearly. Like I'm not saying it's easy, but probably having a buffer of savings is the most important part there.

11:30Felix Salmon: Isn't the key to having a budget and sticking to it just making a lot of money? Like for a lot of people, it's just you make what you make and you have to make it work within, you know, you have to pay your rent, you have to buy food. The one weird trick that allows you. Yeah, I mean, it's not, it's like very simple, actually. It's just like. Well, having a lot of money, then it's easy because you don't need to worry because whatever you spend, you have the money to be able to afford. That's true. But yeah, having like just enough money that, you know, if your credit card bill is large one month, you can just pull money from savings and cover it and then you're fine.

12:09I think what that does is it really allows you to not stick to your budget or even for that matter, have a budget at all. You can just kind of live in a blithe way, spending money on this and spending your money on that. And it costs what it costs and the money is there. And probably at some point you should have been saving more and spending less. But you wound up going out to a few more restaurants and ordering a couple more bottles of wine and buying a few theater tickets and doing the upgrade on the plane. And by the time it all added up, guess what? You didn't put all of that money into your investment account.

12:46And so you have less money for the future. But who cares about the future? Because let's enjoy life in the present. You only live once. Are we talking about you, Felix? The examples are very specific. They're very Felix coded examples. Yeah, so you buy some artwork after dinner. Exactly.

13:04Felix Salmon: I guess it's like everyone's always like the Susie Ormans of the world and that other guy, the Ramsey guy. They're so focused on like the avocado toast or the coffees when the real budget killers are like, your mortgage payment, your utility bill, your food, gas, stuff like that. Stuff you can't really, it's fixed. The other stuff is just like at the edges. You're just messing around. You're moving things from one little zero budget line to the other little zero budget line.

13:42Felix Salmon: you know what happened to me i was sitting at my desk at home working reading something some analysis getting ready to do some reporter calls i was in the flow then i look at my computer screen to my left and I see a direct message from my wonderful producer. And it says, are you getting on the Zoom? And I'm like, what? What is she talking about? Turns out, you guys, we had scheduled a recording with a Nobel Prize winning economist. I didn't remember I had this recording. I hadn't prepared for it. It was on the one calendar I don't look at all the time. I have two Gmail calendars and sometimes things get lost in the cracks.

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17:43So this is actually the perfect segue, Adam, because, I mean, these are actually deeply related questions, and I don't want to sort of pretend that they're not. When we are working out what our housing situation is, one of the things I say on this show often is that we are all born short housing. We all need to cover that short somehow. And you either cover it by buying a house or by renting a house. And you can do that in a bunch of different ways. You can buy a$3 million house or you can buy a very cheap rental. But that is a budgeting decision more than anything else, right? ultimately the amount that you spend on putting a roof above your head is a budgeting decision.

18:24And what is a decent sort of heuristic? How should one think about what is a sensible and what is an irresponsible amount of money to spend on housing? Yeah, I mean, that's actually just the thing. I've been writing about this a lot lately. And what I've found is that a lot of people are making these decisions not from a budgeting perspective. A lot of people are making these decisions sometimes reflexively because, for example, buying a house is something that their parents did and they always expected they would do and it just seemed like the right thing. And sometimes, you know, otherwise. But I have found that you can basically justify your renting or buying decisions a lot of different ways if it lines up for your lifestyle and you look at it really practically.

19:07But a lot of people kind of aren't necessarily doing that. I wrote about myself, which I'm 39 and I'm a renter. I always have been and I don't have any immediate plans to buy a house. Like it just doesn't. It's a terrible time to buy right now. Have you seen the mortgage rates? Yes, I have. I mean, I don't pay much attention, but I don't want to buy a house and I don't want to own a house. That's just how I feel. Now I've gone back and run the numbers and it turns out that's actually a pretty good financial decision that I've made. Over the time that I've been an adult, the stock market has gone up dramatically.

19:41I mean, the S &P has gone up like 300 and something percent in the last decade. And so the opportunity cost of buying is like, it's that down payment is not in the stock market. It's now stuck in a house, which some people think of as an asset, but can equally be seen as a liability. You know, you could have put that down payment into a house and then next thing you know, it needs a new roof. And then now what are you going to do? this exactly. This is my worst fear. Emily is shaking her head. She and I have had this conversation on the pod before, but Emily believes in home ownership.

20:13Felix Salmon: I mean, I like owning a house. I like that I don't have to worry about the landlord raising my rent, that kind of thing. And I think for parents, the cost of owning a house is also like, it's almost like you're paying for private school for your kids if you're living in certain suburbs and things like that. And it is cheaper than private school. I just made that up. But I think it's true. Depending on the size of the house. I think it's actually true. And the security of having your own home, the ability to do what you want to it, and the security of knowing that you're not going to see a big rent increase or someone's not going to throw you out, stuff like that.

20:45Felix Salmon: Those are non-monetary benefits with home ownership that you can't have with a rental. But all of those things are true. It's not a financial decision fully, you know? But let me ask you, Emily, like when you were house shopping, the last time you were house shopping, did you set a budget for yourself? And if so, how? Well, my husband is really the budget guy. And we did have a budget. And then we don't need to get into it. But, you know, we look at projected monthly mortgage payment, how much are we going to devote to fixing the house, how much are we going to spend on all the things, food, electricity, utilities.

21:23So I guess one of the things you used to hear certainly during the big housing boom is buy as much house as you can afford. Houses are a good investment. You want to sort of max out your house because you're living in it. It's like bigger is better. And so there is a sense in which in this grand sort of budgeting conversation that we're having, you put together your budget and you're like, how much house can I afford? my budget is basically the most that I could spend on a mortgage. And then you look at all of the different houses and the more expensive ones are nicer. And you're like, well, I can afford the more expensive one, which is nicer.

21:59So I should pay the more expensive one. I can afford it. I feel like Adam and I would probably push back against that idea and be like, no, because just imagine all of the other things you could do with that money if you weren't spending it on mortgage payments or rent payments.

22:15Felix Salmon: You know, Harold Pollack, the author of the index card famously, co-author of the index card, everything you need to know. Friend of the pod. He's been on the pod. He's been on the pod. When I talked to him about a separate topic about paying for care for disabled or elderly loved ones was the topic. But he did a whole detour into how when he was looking for to buy a house, he looked for the cheapest house he could get because he knew that would be like maximize his money and his budget and his quality of life forever because he wouldn't be burdened by a house cost. So it's like the exact opposite of the strategy you were just laying out.

22:49Does anyone do that these days? I don't know.

22:52Felix Salmon: Did you do that, Elizabeth? Sort of. I think we budgeted a little bit less than we probably could have paid. Also, because I think we weren't really desperate to own something as soon as we did. I'm 49 now, and we bought our place three years ago. And I think if you'd asked me 10 years ago, I would have thought I'm never going to be a homeowner. I'm going to rent for the rest of my life. Would you have been sad about that? Would that have been like something that disappointed you? I wouldn't have, but I'm a weirdo. It also, I kind of like moving and living in different places. So I'm one of those people who likes novelty.

23:24And I think whenever we committed to doing this house, that was a change for me. So as long-term slate money listeners will know, I am a big fan of renting over owning. I think it absolutely gives you a bunch of labor market flexibility. It gives you just options. When you buy something, sometimes it works out really well, and sometimes it works out really badly. And the cost of it working out badly is huge. And that's a big risk that is kind of uninsurable in a lot of different ways, even if you have home insurance. I think that a country like the United States, which has a 65 % home ownership rate, that number is way too high.

24:06And I do think that for a very stable nuclear family type situation like Emily has, it does make sense a lot of the time to buy a house. But the proportion of households who fall into that bucket of predictable income, we're not going to want to move for over a decade, yada, yada, yada, is much lower than 65%. And the optimal home ownership rate is probably closer to maybe 35 or 40 percent. And the difference is just a whole bunch of societal pressure and sort of non-economic factors where people are like, I just want to feel safe. I feel precarious if I'm renting. And there's a sort of psychological safety to owning.

24:50And that's like, yeah. It's also stigma, though. We stigmatize renters kind of as a matter of policy. If you read the financial report in the aftermath of the credit crisis, the first couple of chapters of it are entirely about the extent to which U.S. encourages homeownership by a policy. And so I think if you're renting in Germany, nobody thinks like, oh, well, that's not a successful person. They don't own a house yet. You know, here, it's just very different. Orientation toward homeownership is almost like a moral thing. If you want to send your kids to school with Emily's kids, and frankly, you should, because Emily's kids are amazing, you basically need to own your home.

25:29The rental stock in Emily's school district is de minimis.

25:33Felix Salmon: Yeah, I was just going to say that the options for renters in the United States as a whole are pretty limited. We talked about that all the time when I briefly worked at the real estate fintech. And there's pushback too. There are these build-to-rent communities now where you can go and you can rent like a single family house that's like new and nice and all of this. But there's a lot of pushback around that as well. And it's hard to find good options for renters who are like more than one to two people. That's the kind of rental housing that's getting built. So I feel like it's not really, it's not just stigma.

26:06Felix Salmon: It's just like what's available. Yeah, I do think the conversation for people with families who need to think about school districts should be bracketed off. It is very distinct. But I experienced the stigma firsthand when I wrote about this and I got emailing you to my inbox. These baby boomers just being like, you ought to buy a house, period. Like you are 39. Like stop, stop writing your silly column and go buy a house. And like their generation was responsible for the credit crisis. Thank you for the feedback. What's their argument? It's not an it's not an argument. It's something they just believed in their soul for their entire lives.

26:43I will give them the sort of fair shake and say one argument is the last 30 years are not going to look like the next 30 years. Like you've done OK, you've done great in the stock market. And now I'm talking about myself, like I'm in a position to buy later if I want to, because I've invested and I have assets now. But I think the argument was you don't know that the next 30 years there's going to be no growth in the stock market and real estate is going to be great. So that's, listen, I'm just trying to give the benefit of the doubt. I think that's fair. Yeah, historically speaking, this is one huge part of the reason why homeownership is so tied up with the American dream is that for the middle classes, homeownership much more than the stock market has been the route to wealth.

27:32If you look at the bottom 80 % of the wealth spectrum, nearly all of that wealth, or nearly all of the net worth of people in the bottom 80 % is in the form of real estate, not in the form of securities. But that suddenly used to be the case that's changed a little bit in more recent years. And the idea that homeownership is a route to wealth for people who otherwise would find it difficult to accumulate assets might not make a huge amount of sort of theoretical sense, but makes an enormous amount of empirical sense. Like it is just empirically true. That is how it has happened, especially for families of color.

28:09The way that they have accumulated wealth has been through real estate. And that part of the mechanism there is this incredibly important thing that I think people don't talk about enough, which is the mortgage is a forced savings vehicle. If you, we were just talking about budgeting, we are talking about budgeting, there is always things to spend money on. You're always going to, if you have the money, you will spend it. This is human nature. If you don't have the money, you won't spend it. One way of not having the money and being forced to save it rather than spend it is to have a mortgage.

28:40And when you make your mortgage payment, a lot of that is just interest that goes to the bank. But a lot of it is also you're paying down your principal at the same time as the, if all the stars align, the value of your home is going up. And so you're getting capital appreciation in the home, you're paying down the mortgage. And these things together, if you do it year in and year out, wind up causing you to have real estate equity, which is greater than the amount that you would hypothetically have had, had you had the discipline to put things in the stock market, just because people don't have the discipline to put things in the stock market.

29:15Maybe.

29:19Maybe. Maybe.

29:21Felix Salmon: I mean, you could set up auto withdrawals and things like that, right? You can. I guess that's easier to monkey with than your mortgage payment. The other factor, if we're looking historically, is that it is now easier than it has ever been to invest in the broad market very cheaply. These options haven't been around forever. We take it for granted now that we can buy dirt cheap index funds at 0 % expense ratios and get really great gains. That hasn't always been the case. But also, if you look at the current fee-free investment accounts, your Schwab's and your Robinhood's and all of that, like, number one, they are always in big and small ways kind of encouraging you to trade rather than just invest and put it away forever.

30:03And number two, the flip side of it being really easy to put money into index funds is it's equally easy to take money out of index funds. And when the index goes up, you're like, hey, I'm rich. I can spend that money. When your house goes up, you might be rich, but you can't spend that money.

30:20Felix Salmon: Yeah, well, that always leads me to like, so you're house rich, but who cares? Why does that matter? Well, it gives you a natural hedge against your housing short that you're born with, right? Like, even if the price of housing is going up, if the price of houses is going up, if you own a house, you don't need to worry about that too much. And you can even move. You can be like, I can sell my house and buy a house somewhere else. I have that kind of ability. I don't need to worry about the houses somewhere else going up in value because probably my house will go up in value too. So there is a sort of natural housing hedge thing there going on.

30:53But you're right that if you're not selling your house, it does generally behave more like a liability than an asset. You could refi. I mean, it's not a great time to refi, but there are times when you can do a cash out refi. and not that I'm recommending that, but yeah, it's very illiquid. I obviously, as a retail investor, treat my index fund portfolio as illiquid. It is not there for me to take money out of. And I think the folks who read my newsletter and basically subscribe to this advice would feel the same. So I understand your point, but I don't think a lot of index fund investors are that tempted to just pull out and spend their money.

31:31They know what it's there for.

31:32Felix Salmon: So is it better to rent or buy? I hate to say it. I hate to say it, but it depends. For me, it's better to rent. One of the things it depends on is the New York Times has a really, really good rent versus bike calculator. It was first put together by Jim Tankersley, I think, like a million years ago. Dave Leonhardt. Oh, Dave Leonhardt. Yes, Dave Leonhardt. That's right. It's magnificent and it just keeps on getting better. And one of the things, if you play around with it a bit, which is also intuitively just kind of obvious, is when mortgage rates are very low, that makes buying generally more attractive.

32:12And when mortgage rates are very high, that makes buying generally less attractive because you have to pay more in mortgage. This is kind of obvious, but it's worth spelling out. Right now, mortgage rates are at 30-year highs. House prices have not come down to make up for that. So it's a bad time. housing affordability is really terrible right now.

32:32Felix Salmon: Yeah, that's the other thing. Housing prices are so sticky, with the big exception, of course, being the financial crisis, of course. But we've been living through that. Just like you said, mortgage rates are at these crazy highs and home prices aren't budging. You would think that with rates would go up, the prices would come down like the bond market. It would just be math. But homeowners do not accept, They're not willing to accept lower prices for those homes. One of the interesting things is the way in which home prices do not move in the way you would expect given mortgage rates. And there's a bunch of different reasons for that.

33:10But part of it is what Adam was talking about in this insane run that the stock market has had, which means that some enormous proportion of home sales are for cash these days. The people that don't even need to take out a mortgage to buy a house because they have that much cash lying around. It's also been really hard to ramp supply up in the current environment because the construction industry is really suffering because there's labor shortage. And interest rates.

33:36Felix Salmon: Yeah. I have this like hot take. It's brewing in the back of my head. Bring it. It's not a hot take. Bring it. It's not anything. Bring it, Emily. For the past two, three years, I've been covering or reading these policy experts talking about the supply shortage of housing. And if we could just get rid of the regulation that's really holding back the market, we could have abundance or whatever. I didn't read the book. No, but it's definitely abundance, what you're saying. But like you look at the chart we just had reporting on like government data on data center construction. It's up like 60 % year over year.

34:08Felix Salmon: Why? Because there's a big incentive for people to build data centers. There's like a metric fuckton of money being spent on AI expansion and on data centers, as we've talked about on Slate Money. So guess what? People are building data centers. It's like, problem solved. Doesn't matter what the regulations are. In fact, people hate these things. They are protesting them. They're trying to pass laws to stop it, and they can't do it. The only difference— If there were price-insensitive home developers in the same way that there are price-insensitive data center developers, we would have homes everywhere.

34:41Felix Salmon: So many homes. That's it. That's all you need. You don't need to, like, tinker at the margins. That's my hot take on it. I don't know. Well, people who want affordable housing don't have the giant lobby that real estate developers do. There's nobody on the side of people who need affordable housing really fighting for it except for policymakers. Or any kind of housing. No, the real estate developers have a decent amount of clout. They have lobbies. Well, I'm talking about affordable housing, though, specifically. All housing is affordable housing. If you build expensive housing, then the rich people move into that and they move out of other houses.

35:15and then poorer people can move into the house as they move out. I'm a great believer in like the price of housing is ultimately a supply and demand problem. And if we build supply, then the price will come down. It doesn't even matter whether you're building affordable supply in particular. I am abundance coded in that respect.

35:32Felix Salmon: But I think the abundance has to be the money. You just have to throw a lot, a lot of money to get builders to build stuff and they'll build it. It's fine. That's it. That's the solution. Which is why we need more expensive homes because that's the only one they're going to build. But it's fine. Yeah.

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37:06but adam i want to talk to you about this idea of yours that your index fund investments are even though the you know you've put it all in these index funds that have that are some of the most liquid instruments in the world and they trade it like sub penny bid office spreads every minute of every millisecond of every day notwithstanding that you feel as though it's like completely untouchable and deliquid and you can never do anything with it which is a good sort of delusion to have it's a sort of it's like a financially sensible delusion but once you have decided that that is just a kind of what would al gore call it a lock box that you just put it into and you never see that money again until you're retired then the next question is should you never actually look inside the box how often should you look inside the box oh this is a pandora Forest blocks of a question.

38:03So wait, I'll start with what I do. And actually, like a month or two ago, I set out to write what I thought would be a lovely little column in wherein I describe what I call my money date, which is once a month, around the beginning of the month, I set aside time, and I pull up every single account that I have, every investment account, credit card, checking, savings, and I check the balances, and I transfer them over to this spreadsheet with their totals, and I tally my net worth and I compare it to the month before and I see how everything's doing. And I really enjoy this time as a money nerd.

38:39And I thought I would share that with my audience and sort of humbly recommend that they do the same thing. And then I thought, let me call one of my sort of certified financial planner friends and let them praise me for this and add some more sort of heft to my argument. So I called Jill Schlesinger, who has the Money Moves podcast. She's a CBS News business analyst. And I told her about my money date. And she said, She kind of paused and she said, I think that sounds pretty crazy. I am totally with Jill on this one, I have to say. You are. Well, I got to tell you, I have an army of folks who are with me.

39:14Well, listen, Jill's argument is that the reason this is crazy is that looking will convince you to do something. You see numbers go down or maybe they're not going up as fast as you like or maybe you're reading headlines and you're in a way to do something. Whereas the reality is that most of the time, you don't need to do anything. Like your investing strategy changes when your life changes for the most part, not when anything happens in the market. And so why look if there's no point? The truth is, as someone who's interested in money, I enjoy looking. It actually motivates me. Again, I've been living in a long bull market.

39:49I love to see the numbers go up. And many of my readers, dozens and dozens, said I do the same thing. I look every day. I live multiple times a day. I'm not doing anything. It's just fun for me. So, of course, I called Jill back and she said, OK, I still think that sounds crazy. But if it doesn't hurt, I guess if it's a hobby for you, go ahead and do it. But I feel like in your specific case, it is sort of your job to do that. Yeah, a little bit. And for people like me who just, I don't know, we're interested in it, whether we cover it or not. But yes, the typical advice will tell you, check it a couple of times a year.

40:27Maybe it'll help you with the yearly tax planning. Maybe you want to check it near the end of the year, your portfolio, to make sure that you're hitting your Roth IRA contribution limit or your other goals. Maybe check it again when your taxes come back. See if you have to adjust anything, but otherwise don't look. Now, I think, you know, you can look as much as you want as long as you, it doesn't upset you and you're not making decisions off of it. My rule of thumb is the, and I did actually get this from an SSR in paper, which I've since tried to find a couple of times and totally failed. So maybe I was just imagining it.

41:01But my idea is that empirically speaking, if you look at the behavior of people who check a lot and the behavior of people who check almost never, the outcomes are better for the people who check almost never. And they are more likely to do nothing than someone who is checking frequently. and I think the optimal frequency to check is actually every other year but that's hard but yeah I like the idea of doing it every other year in my case I think I for various reasons I've had to be aware of what's going on for like moving accounts around and stuff but the only time I really actually did anything recently was really just like the first time in 10 years which was entirely a function of, you know, I've had these investments for 10 years.

41:48As you say, there's been a big bull market in stocks. And my asset allocation was just way out of whack at that point. I was way too overweight at equities. And I was like, I really need to start rebalancing a bit because after 10 years of being overweight equities, you know, you're super overweight equities. Plus, I'm getting older and I need to sort of start ratcheting down my equity exposure. But like that.

42:09Felix Salmon: Yeah, don't you need to don't you need to start checking more as you get older and you're approaching retirement. I remember just my father would be like every three months, like checking and talking about rejiggering things and the date is coming or what he was young. You have what you have, like at that point, it's too late. Rejiggering does not help you. Or you've been rejiggering, like many folks are in target date funds that are doing this glide path automatically, which is nice. I mean, I don't know, I don't, I wouldn't want to go more than a year without checking. I think there's some value, but I get the point.

42:40I think in general, The folks like me who have all this personal finance energy would be better served at channeling that into budgeting. How can I make more money or spend less money and get a few hundred extra bucks into my accounts every month? That's a much more useful use. use.

42:58Felix Salmon: You should check your credit card statement, things like that. We're talking specifically about like your 401k balance. Adam, do you go line by line down your credit card statement, make sure everything is legit? I do. And I think that's, I don't think anyone would argue with that. I am 100%. Jill would approve. I am totally in favor of that. Elizabeth, do you do that? Yeah, I do. Emily, do you do that? What? What's that? Is someone calling me? I have lately, yes. Things have gotten bad. I mean, and even that, like that's time well spent too. But like, there's also a danger of getting, as Emily mentioned early, getting really caught up in like the little subscriptions of it all and not tackling your big picture money questions.

43:43Okay, let's be honest. Is my rent too expensive? Do I need to move when my lease expires? What am I going to do about this credit card debt? Do I need to consolidate or like, so there's always kind of like where you should be directing your your energies into and i will admit that checking your investments is probably the the last spot people check your credit cards i just found a dumb company called uma has been charging me 18 a month for a year for nothing and i'm like come on people come on people yeah wait

44:13Felix Salmon: one more thing is what are you checking for when you check your 401k balance every month what so is it just like a matter of like just like oh that's nice or are you looking like oh i need to do xyz or like what's the what's the point no i just want to know how rich i am emily

44:32Felix Salmon: okay you're making me want to check right now like i'm itching to like check my 401k balance right now you put that on the apps and your like dating profile it'd be like hey look i suppose is that how you get onto raya sure my net worth has gone up eight percent in the last month hit me up yeah look at this guy he's like i'm in sweden right now i'm visiting my money

44:58nice so i think the place that we've arrived at here is that it kind of maybe doesn't matter just long as you don't do anything can we all agree that like trading is a terrible idea i can and so if i'm pulling up my fidelity account looking at my 401k that's better than pulling up a prediction market or something, you know? Here's my question for you. Let's say that I am reading Bloomberg.com and various other sources of reliable financial information and have been convinced by the world-class analysis thereon that the world is going to hell in the hand market and the level of the stock market is objectively insane and very high and everything in stock world seems extremely overvalued.

45:44And I'm like, what goes up must come down. At some point, these stocks are going to go down. It would make sense for me to sell my stock so that when the stock market goes down, I get to just feel very smug and sit on all of those gains, which I've made, rather than just looking at it evaporate. Again, I'm sure you're going to tell me this is a terrible instinct, and I shouldn't act on it. But like, the more I look at the market, and the more I read about the market, doesn't that all push me to try and sort of market time in that way? The question is on timing. So the first question is, when do you need this money?

46:22Like, when are you going to retire? When do you expect not to be earning money? If that is within a short amount of time, and this is the case for many people who are looking forward to retirement, like, yeah, you do have to think about moderating your risk level and your exposure as you get to the point where you're going to try to take some of this money off the table. So that's why one very common piece of advice for people approaching retirement is to build a serious cash buffer, like three years or so of cash. And you can sort of transfer that over a long period of time if you're planning ahead.

46:54The idea there is if you're in a place where you want to draw down on your money and the market is bad, you can pull from that cash so that you're not locking in those losses during that time. So that's one thing. I mean, if you're the other question that Felix is like, well, I understand that that's a concern. But like, when's the last time that that has happened? You know, like people who are in my investing school will tell you that like, you know, over the last 100 years, like stocks do go up over time, there are bad portions. I will answer like, yeah, 2000 is the last time. Right. And how the question is, like how long is that bad period of time and can you and that and that bad period of time lasted over a decade that basically stocks went nowhere between 2000 and 2011 it was just like a brutal decade of sideways slashed down and someone like you who's checking their 401k every day would be like this has gone nowhere this has gone nowhere this has gone nowhere probably wouldn't be checking in that scenario.

47:56Yeah, it's not nearly as fun. Yeah, you have to plan ahead. And there are tactics. There's switching to bonds, which your typical target date fund will sort of slide you into bonds, which are generally more stable. I mean, there are plenty of people, I don't know, I feel there's a Ray Dalio headline often when he's telling you to buy gold. And there are a lot of people who sincerely believe that you should be hedging some percentage of your portfolio into alternative assets like that. All those people are wrong, by the way. Well, I mean, I've already expressed, you know, how I feel about it. But like, if you don't agree, yeah, there are things you can talk about with a planner or there are ways that you can mitigate your exposure to stocks if that doesn't sit right with you.

48:41Okay, so let me ask you one last question, which is planners. I have never lived in that country. I haven't lived in that many countries, but I am familiar with people who live in many countries around the world. And one of the ways in which Americans are truly exceptional is they are way more likely to have a financial advisor than anyone on anyone anywhere else on the planet. Even if you adjust for wealth and income and all the rest of it, Americans like, oh, yeah, I have this great financial advisor and everyone's like, everyone who isn't American looks at them like they have three heads. You have a what?

49:22So financial advisors, very popular. There's a strong sort of revealed preference in this country for financial advisors. Are they a good idea? Are they worth it? I would say I would make a distinction between financial advisors and financial planners. We've used both of the words. But let me just like suggest this distinction. A planner is someone who charges you a fee for their time and their services, and they help you think about and project and plan for your money. I think it's hard not to recommend that. Why wouldn't you want to get time? But the fee is just a flat fee. It's not a percentage fee.

49:58Yes. And I think there's a real movement lately of that becoming more available and more strongly recommended. There's a great company called Nectarine, which I did an interview with their founder, and I really like the way he sets up people with fee-only planners. Now, an advisor, someone who gives you financial advice surely, but also manages your money and charges you a percentage of those assets, that's a very serious relationship. And I see Emily shaking your head like there's lots of reasons to be skeptical about that. So the first question you have to ask if you're encountering an advisor or thinking about one is how is this person getting paid?

50:34If they're getting paid as a percentage of your assets, or even worse, if they're getting paid some sort of commission, they make a small amount of money every time they trade or they buy a product for you. That should be a red flag. A planner, I think more people should embrace the idea of meeting with financial planners and just helping them understand their money. And AI can get you some of the way, but just sit down with someone over an hour. Or for a really complex situation, you might want to pay for five or six hours with someone. get the info download. They can run some numbers for you.

51:07You can come away with a plan and they're not making money off of what you decide to do or not do.

51:12Felix Salmon: How do you know? How do you find a good one? I don't know. I mean, I mentioned nectarine. They seem good. I would just search for fee only. I'm not sure. I can remind Slate Money listeners that back in a previous episode, I brought on my own financial planner. How'd it go? That must have been a long time ago. Well, this is a Slate Plus. It wasn't a main show, as we call it. And, yeah, she works for a company called Domain Money, which was set up by Adam Dell, which is also a good one of these. There are a few, but they are not that easy to find. And the overwhelming majority of people's financial advisors are taking 1 % a year.

51:52And I think, can we all agree that's just a terrible idea? I don't think that's good. That's just not good.

51:57Felix Salmon: But really rich people, they need that. Well, really rich people. There's a whole industry, you know. Once you're like in the nine-figure club, then all of that calculus changes. Then you start needing sort of extremely bespoke tax advice. And suddenly that 1%, if it saves you millions of dollars in taxes, can start being worth it. But yeah. Also, they get to negotiate lower than 1 % because they're that rich. Yeah, it's probably worth it. I think for most people, investing is not as complex or intimidating as advisory firms would want you to believe until you get to a certain point when you're trying to think about retiring and decumulation and RMDs.

52:39And I understand things do get complex. You do want to tap in a human at times. Which tax slots am I going? Yeah, it's true. The one thing I will definitely say is that one thing you hear a lot from financial advisors and big companies is this word, which is like fingernails down a blackboard to me, which is personalized. We will give you personalized advice. And there was even this company, which I won't even name because it annoys me so much, which was like, we're going to do advice for women because women need different financial advice to men. And Emily is just shaking her head here. We'll charge you higher fees for the privilege.

53:18Felix Salmon: Because women make less than men and also we'll charge you higher fees. Never made sense to me. We'll make the website pink. The fact is that not only is the advice not personalized, but it shouldn't be personalized. Adam's basic thing of just put it all in a target fund and forget about it. That really works for almost everyone, pretty much. But I think that is really all we have time for on the main show. But we are going to have a Slate Plus segment on annuities because annuities are the hotness right now. And Adam's going to explain what we need to worry about with them. Other than that, thank you to Justman Molly for producing.

53:54Thank you to all of you guys for listening and sending in your emails on SlateMoneyAtSlate.com. And we will be back next week with more Slate Money.

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