Resolving Financial Tension Between Couples
by SGL Financial
Our 2 Cents – Episode #145
Resolving Financial Tension Between Couples
On the show for you today, Steve and Gabriel are discussing sources of financial stress that couples face throughout their lives and, more specifically, in retirement. They’ll share ways they’ve helped clients better communicate and get back on the same wavelength. Then they tackle two questions from our listeners.
- Resolving Financial Tension Between Couples:
- Budgeting – agreeing on how much to spend
- Risk tolerance – how aggressive or conservative to be with investing
- Retirement age – when each spouse can or should retire
- Housing – where to live in retirement
- Lifestyle – how you plan to spend your time in retirement
- Inheritances – if you will leave money to your kids
- Listener Questions:
- “I am afraid of a recession happening, so I might stop contributing to my 401(k) for a while. Is that a good or a bad idea?” – Vicki
- “I’ve always heard I should have a mortgage when I retire because that will be the only tax deduction I’ll have at that point. I’ve been paying extra on my house to have it paid off by the time I retire, but maybe I should slow down on that plan. What do you think?” – Rick
Request Your Free Consultation Today
847.499.3330
Podcast Transcript
Announcer: You are listening to Our 2 Cents with the team from SGL Financial, building wealth for life. Steve Lewit is the president of SGL Financial and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Welcome to Our 2 Cents. This is Gabriel Lewit here and Steven Lewit. We are live, at least for us, on the show today with you.
Steve Lewit: We are live. Yes.
Gabriel Lewit: I will say it’s-
Steve Lewit: Thank goodness.
Gabriel Lewit: I like saying that. I hope you’re doing great today. We’ve got a good show lined up for you, and before we get too deep into the topics for today, I thought or we thought it would be very important to remind you, well, you may not hear this till afterwards, but the Powerball is up to $1 billion.
Steve Lewit: Yep. Hey, I bought five tickets yesterday for what was it? Mega Millions? Katie? Mega Millions. 678 million. Guess what?
Gabriel Lewit: You didn’t win.
Steve Lewit: Nothing.
Gabriel Lewit: Nothing. Not a nickel.
Steve Lewit: And guess what? I bought-
Gabriel Lewit: You’re $5 poorer. $10 poorer.
Steve Lewit: I am and I bought five tickets for the Powerball.
Gabriel Lewit: So folks, if nobody’s won by the time you listen to this, it’ll probably be up to 1.2 billion or 1.3 billion or whatever, go out there and get your ticket. Cross those fingers.
Steve Lewit: I may not come to work on Monday.
Gabriel Lewit: Do your happy dance or your lucky dance.
Steve Lewit: Would it be okay if I took a day off?
Gabriel Lewit: Only if you win.
Steve Lewit: Okay.
Gabriel Lewit: And only if you share half.
Steve Lewit: Have you ever won?
Gabriel Lewit: I am your business partner. I deserve half.
Steve Lewit: Definitely.
Gabriel Lewit: For moral support.
Steve Lewit: I’ll share it with the whole team. So have you ever won anything?
Gabriel Lewit: On the Powerball type ones or the scratch-offs or anything?
Steve Lewit: Powerball.
Gabriel Lewit: I’ve won $2.
Steve Lewit: Yep, me too. You know what? I do it over the internet. So you go in, but then they send you a message. “You have won.” So I got this message, “You have won.” And I’m really, really excited. I think it was $18.
Gabriel Lewit: Oh, that’s so bad.
Steve Lewit: Which wasn’t bad, you know?
Gabriel Lewit: Yeah. Probably on tickets like Mega Millions and Powerballs lifetime, I’m probably $200 in the hole and I’ve maybe made winnings on over that timeframe of $30.
Steve Lewit: Probably more than that because I’m older than you are. Maybe 1500.
Gabriel Lewit: In your lifetime? That’s not bad.
Steve Lewit: Probably. It’s not bad.
Gabriel Lewit: Not bad for a chance of being a billionaire or multi-millionaire.
Steve Lewit: Well, you know the story. If you don’t play, you can’t win, so why not?
Gabriel Lewit: I don’t know if I ever said this once before on the show. It would’ve been a long time ago if I did, but I used to live in the city and commuted back and forth on I90 every day and they had a big billboard. They may or may not still have it there. I’m not sure. That always said what the value of the current jackpot was for the Mega Millions, and it would just be so frustrating. Every two weeks, it’d be like 20 million, then back down to two or four, whatever the starting number was. I’m like, “Someone else is a millionaire.”
Steve Lewit: Somebody-
Gabriel Lewit: Two weeks later, “Someone else, another millionaire.”
Steve Lewit: Somebody does win.
Gabriel Lewit: Yeah. Every couple weeks, someone else is a millionaire on the jackpots here.
Steve Lewit: And guess what? They thought they had no chance of winning either.
Gabriel Lewit: But that’s the world we live in.
Steve Lewit: It’s true.
Gabriel Lewit: You can get very lucky in this world and strike it rich.
Steve Lewit: So, is that a new retirement plan we’re offering to people?
Gabriel Lewit: It is the opposite of good financial advice to go out there and buy lots of lottery tickets.
Steve Lewit: I think I mentioned this in a previous broadcast that they interviewed a lot of young people, 25, 30 years old, and said, “What kind of retirement plan do you have?” And in their list was winning the lottery. That’s a-
Gabriel Lewit: Yeah, I remember that. It was a higher than expected percentage thought that they would win the lottery and that was a key component of their retirement strategy.
Steve Lewit: Yes. That’s called positive thinking or dreaming thinking.
Gabriel Lewit: Very optimistic.
Steve Lewit: Very optimistic.
Gabriel Lewit: Very, very optimistic.
Steve Lewit: So what have you got for us today?
Gabriel Lewit: Well, other than thinking of all the ways I’m going to spend my millions when I win the lottery.
Steve Lewit: Billions, please. Well, you wouldn’t get billions. You’d get millions.
Gabriel Lewit: Yes. We have got, well, unrelated to the lottery, although it would impact this probably, resolving financial sources of tension and stress between couples.
Steve Lewit: Oh.
Gabriel Lewit: And we actually have a very long list of things to talk about here, so we might turn this into a part one and a part two. We’ll see how things go here depending on how much time we spend on these different items that we’ve got planned for here, but-
Steve Lewit: That’s a big deal.
Gabriel Lewit: I know you and I were talking about a client that had come in for you a few weeks back that was having some challenges financially with their spouse.
Steve Lewit: Yes.
Gabriel Lewit: And it got us thinking about the clients we see and the challenges that they have and it’s again possible we’ve covered this maybe a few ago on the show, but it’s coming to mind here to the forefront, and we thought we would spend a little bit of time dissecting this a bit more for you.
Steve Lewit: Plus, I don’t know about you, but we are not exempt from challenges with spouses about money.
Gabriel Lewit: Well, I don’t know about you.
Steve Lewit: [Inaudible 00:05:21].
Gabriel Lewit: My wife and I, we never fight ever.
Steve Lewit: Ever about-
Gabriel Lewit: Entire history of marriage.
Steve Lewit: Folks, folks, my son is blessed with the perfect woman and the perfect marriage.
Gabriel Lewit: I’m just kidding though.
Steve Lewit: They never fight. They never argue.
Gabriel Lewit: Of course, everyone’s argued before with their spouse.
Steve Lewit: They live in peace and they’re always hugging-
Gabriel Lewit: Of course.
Steve Lewit: … and kissing each other. Kids are never the problem.
Gabriel Lewit: Nobody ever fights.
Steve Lewit: No.
Gabriel Lewit: Everyone gets all the sleep they need.
Steve Lewit: So, you should all be very jealous of Gabriel.
Gabriel Lewit: Kids are never running around screeching, “Mommy, Daddy,” nonstop.
Steve Lewit: Never. Never demanding anything.
Gabriel Lewit: So, stress is real. Life can be challenging. Money can be difficult. It’s still one of the top reasons why people eventually get divorced, unfortunately is over money miscommunications or differences or challenges, whatever you want to call it there.
Steve Lewit: Number one reason for divorce.
Gabriel Lewit: So, let’s see about what we can talk about here, and if you then are in a relationship, married or otherwise, and you are thinking, “Hey, we are having some of these same difficulties,” then perhaps we’ll share with you a tidbit or two that you can use to help to alleviate those.
Steve Lewit: What’s number one on your list? What do you think is the number one-
Gabriel Lewit: On this entire list?
Steve Lewit: … that you’ve met? Because you gave me this list and it’s a pretty good list.
Gabriel Lewit: Yeah. Like I said, there’s a lot on here. You’re going to start to see that, folks. But I think number one is, honestly, budget. We’re not going to talk about budgeting today, but being able to agree upon how much to spend, I think, is much harder with two people than it is with one person. When it’s just yourself, you decide for yourself whether or not you want to spend that extra money or not spend the extra money. And if you’ve decided it, you feel pretty okay with it. But when you have a spouse and then you decide to buy X and your spouse thinks that you shouldn’t have, she decides to buy Y and you think that she shouldn’t have, whatever the case may be, that tends to be where I think some of the biggest challenges start to come into play. “What size house should we buy?” “Should we downsize? Not downsize?” Some of these are budget related.
Steve Lewit: I was dealing with this yesterday. One person wanted to buy a boat and the other person wanted to travel and their finances weren’t big enough to do both. It’s like, “Do you buy the boat?”
Gabriel Lewit: You buy a canoe in Sweden.
Steve Lewit: Right. A canoe in Sweden. “Let’s fly to the canoe, Honey.”
Gabriel Lewit: I’m not sure the answer to that. Maybe we’ll get into that there in a second or two.
Steve Lewit: Yeah, that’s a big one because couples rarely… I don’t want to say, “Rarely,” but a lot. I guess that’s the right word. A lot don’t agree on what expenses should be. I had another couple that was talking about fixing up their house and one person wanted to spend a lot more money than the other person and it’s like, “How we get them out of that?”
Gabriel Lewit: Well, a lot of the topics we’ll get into, the particular ones in some way, shape or form reference, I think, the budget, how much we’re spending versus not spending. They’re just some nuanced detailed versions of that. But I think as a whole, you asked, “What’s the number one thing that I see people disagreeing about?” It’s what they’re spending on different items.
Steve Lewit: Yeah. I have a different number one.
Gabriel Lewit: You do?
Steve Lewit: Yes, I do.
Gabriel Lewit: I would love to hear it.
Steve Lewit: Oh, I think I will tell you.
Gabriel Lewit: That would be great, Steve.
Steve Lewit: We are on a broadcast, right? That would be great. Number one, I think couples often have different risk tolerances. In other words, the husband wants to be aggressive or conservative, or wife or the partner wants to be different.
Gabriel Lewit: “Honey, how could you have lost 50% on that stock last year?”
Steve Lewit: Yeah. Well, a lot of husbands don’t tell their wives when they lose money. You know that. They’ll say to me, “Well, she really is not interested in this stuff.” I say, “Well, aren’t you going to tell her your portfolio lost 35%?” “No.”
Gabriel Lewit: We’ll wait for it to come back to minus 20%.
Steve Lewit: I’m not going to say anything right now.
Gabriel Lewit: Right. Well, I’ve had a few conversations with a couple when we’re in the early stages and, “Hey, tell me about your different accounts and what they’re invested in,” and I have more than I can count examples of where… It’s usually the male. I’m not saying it’s always the male, but it would go, “Oh, yeah. I’ve got this individual brokerage account.” And I’m like, “Oh, great. Where’s it at?” “It was at Fidelity,” because we’re going to transfer it over. And, “What’s the current balance of the account?” “It’s 30,000.” The wife, there’s a pause and the wife looks at the husband and says, “What do you mean it’s only 30,000?” “Well…” “I thought it was at 50.”
Steve Lewit: That’s called the financial scramble.
Gabriel Lewit: And, again, many, many examples of those that I can share. That’s just kind of… It’s not funny, funny. Obviously, I know it’s not funny that they’ve lost money, but it’s-
Steve Lewit: So, we’ve got two issues here. We’ve got a budget issue.
Gabriel Lewit: There’s communication challenges.
Steve Lewit: Communication, budget. How do we come to a compromise on budget? How do we come to a compromise on investment, aggressiveness or conservative, and, well, how do we help?
Gabriel Lewit: I’ll tease a few others here and then we’ll go back into them. So in case you’re wondering, “What are some of the other items on the list?”, to stay tuned in here to Gabe and Steve’s 2 Cents.
Steve Lewit: 2 Cents.
Gabriel Lewit: We’ve got, “When should we retire?” My goodness. The number of clients that have, not arguments, but conversations in front of me about, “Well, Honey, I think I thought you were going to retire this year?” “No. Well, I was, but maybe it’s going to be next year.”
Steve Lewit: Well, how about the one where, I’m just making this up, the wife says, “Yeah, I’m going to retire at 60, and Honey, you can work till 65 because we need the money.”
Gabriel Lewit: The health insurance.
Steve Lewit: The health insurance.
Gabriel Lewit: And that’s a fun one too. So some differences there on when to retire, retirement age. Another big one very often is, “Where should we live in retirement?” I know you mentioned that. I’m just going to explicitly state it. One spouse’s family’s here. The kids are over there. One has a dream of retiring in South Carolina. The other wants to retire in California. Can’t afford five houses.
Steve Lewit: One person loves their house here, but it’s big, but they don’t want to sell it even though the taxes are $18,000 a year. And the other one says, “Let’s get out of here, man.”
Gabriel Lewit: Yep, yep, yep. So there there’s more here. Retirement lifestyle, you mentioned it. One wants to travel, the other wants a boat and likes to sit in their backyard with a beer and hang out for the weekends. The other wants to go, go, go. So there’s so many different examples of challenges in communication and getting on the same wavelength or having a game plan to tackle these between couples so that there isn’t financial tension, there isn’t stress, there isn’t disagreements on these items. In fact, I read a thing once, an article, that was talking about how they thought it should be… I don’t know how you’d do this, but mandatory that couples, before they get married, go through financial counseling to try to get some of these things out on the table before they tie the knot and then realize how vastly different they might be on various financial topics that can be a source of challenge and distress later on.
Steve Lewit: So, we could have a financial counseling pre-marriage division. Kate, you want a job?
Gabriel Lewit: You could.
Steve Lewit: Kate would be great at this.
Gabriel Lewit: I don’t know how many people would really pay for it, because they-
Steve Lewit: That’s true.
Gabriel Lewit: … usually when you’re in that honeymoon, “We’re going to get married,” phase, you’re kind of like, “Ah, we’ll figure out all.”
Steve Lewit: We’ll figure it out.
Gabriel Lewit: “How could we ever not love each other for a lifetime?”
Steve Lewit: And we’ll agree.
Gabriel Lewit: And then the kids come and it’s like, “Oh.” So I’ll give you a current example, even between me and my wife. Of course, we never argue, right?
Steve Lewit: Yes. I know.
Gabriel Lewit: She wants to sign our kids up for, I’ll just say, more extracurricular activities than I would like to and all these extracurricular-
Steve Lewit: Because you have to drive them.
Gabriel Lewit: Well, no. Technically, she would have to drive them to more of than me.
Steve Lewit: That’s true. That’s true.
Gabriel Lewit: So, it’s more onerous on her. But no, I just have a personal opinion. I think it’s really hard, actually, this one because of course I want my kids to have as many possible experiences doing whatever different things that they can, but where do you draw the line? You can’t sign a kid up for 18 classes and have them going to two different things every single day. So like when I was a kid, I had a spring activity, a summer activity, a fall one. And other than that, we went to the pool and hung out with friends and play dates and that kind of stuff.
Steve Lewit: When I was a kid, we had fire hydrants and sewers.
Gabriel Lewit: And kicked the can, was it?
Steve Lewit: And kicked the can and-
Gabriel Lewit: My goodness.
Steve Lewit: … Johnny on the [inaudible 00:14:42].
Gabriel Lewit: Times have changed.
Steve Lewit: Yeah, they have.
Gabriel Lewit: So that’s yet another example when we get into kids. So, where-
Steve Lewit: I just had this, a couple arguing whether the kids should go to private school or public school.
Gabriel Lewit: Daycare. No daycare.
Steve Lewit: Daycare. No daycare.
Gabriel Lewit: Can we handle this ourselves? Should we get a nanny or an au pair? Kids is a whole other category.
Steve Lewit: Yeah. There’s one more I want to add on here from your list, sir, is the one on handling inheritances. Because this, I find when one person wants to leave money to their kids and the other person is like, “Nobody gave me anything and I don’t care. I don’t care if I die with my last nickel being spent,” that’s a very-
Gabriel Lewit: Maybe even penny.
Steve Lewit: Or penny. That’s a hard one because often in these conflicts, these are very strong feelings for people and they don’t want to budge on them.
Gabriel Lewit: That last one’s an easy one.
Steve Lewit: That’s an easy one?
Gabriel Lewit: You just cut it in half.
Steve Lewit: Cut it in half.
Gabriel Lewit: Not that easy.
Steve Lewit: Not that easy.
Gabriel Lewit: No. If only were that easy, right?
Steve Lewit: Yeah.
Gabriel Lewit: Whatever your differences are, just cut it in half. Wife wants five activities. I want one. It’s going to be three. Wife wants five kids. I want one. It’s going to be two and a half? No. I don’t think you do that.
Steve Lewit: So Gabriel, how do you get a compromise? Because this is all about compromise.
Gabriel Lewit: Yes. Everybody’s really good at compromising.
Steve Lewit: Yeah. Nobody digs in and wants it their way. I noticed that too. Everybody’s flexible and appreciative of the other person’s perspective.
Gabriel Lewit: Well, not to get too much into the psychology of things, as part of this, before we even get into some of these particulars, this is why it’s going to be a two-parter, folks, because there’s a lot we could unpack here, but what kind of personality are you? I know someone. I won’t say who it is or how I know them, but she’s in a relationship and she is very, very, very, very passive, and she will just do whatever her husband wants. And I know her friend that tells me about this, and she really isn’t happy with those things, but she’s super non-confrontational and super passive and will just never bring anything up.
Steve Lewit: She’d rather go along with it, then say-
Gabriel Lewit: Rock the boat.
Steve Lewit: … “Hey, I don’t want to do that.”
Gabriel Lewit: But that’s also unhealthy in a deep-down way because she’s not feeling heard and she’s not feeling like she’s getting what she wants and there’s going to be resentment that builds up there. So that’s not a healthy thing either just to say, “Yeah, whatever you want, Honey. Whatever you want, Honey. Whatever you want, Honey,” either way.
Steve Lewit: Well, that wouldn’t be compromise. That would be like sacrifice.
Gabriel Lewit: But for some people, they, I think, feel like they’re compromising for the sake of their marriage or for the sake of not having arguments or fight. They just go along with things, but I think ultimately that could be problematic too.
Steve Lewit: So, in all of these, what I like to do, Gabriel, is get into the facts rather than the dream. In other words, the more factual I can get with a couple about what they can spend and where they can spend it and how to get both of them what they need with the facts, I think that really helps ground this. All these emotions grounds them.
Gabriel Lewit: So, would it be safe to say, Dad, not to toot our own horns, that many of these challenges, not all of them, but many of them can help be addressed or even solved through having a very well-crafted holistic plan?
Steve Lewit: Well, yeah. No, I don’t think that’s being self-serving. I think that’s the reality of it is that if you sit down with your partner and we’re talking about expenses and a partner wants to buy a boat and you want to travel and you can’t afford both. So that’s a matter of working out numbers of, “Okay, where do you want to travel? What kind of boat do you want to buy? Well, the numbers say that you can’t afford a $60,000 boat. You can afford a $30,000 boat, and if you get the $30,000 boat, we can get half the travel in. So both of you are…” But it’s in the numbers. In other words, it’s not me telling you. It’s not-
Gabriel Lewit: Well, without the numbers, these often turn into people’s opinions and, “I just don’t think we can afford it,” and Honey’s like, “Well, we have $3 million. I think we can afford it.” So the numbers turn into facts, turn into projections, turn into stress testing those, helps turn into, “Yes, definitively you can do X, Y, and Z. The money’s not the problem here.” Where a lot of times, people get into arguments or disagreements because they think that money will be a problem or they’re not going to get what they want, but the plan will help to, I think, answer that in many ways.
Steve Lewit: So, I was working with a couple yesterday or the day before. No, maybe Friday. What’s today? Wednesday.
Gabriel Lewit: Today’s Wednesday.
Steve Lewit: I’m losing track of time, folks. Don’t mind me. But this month-
Gabriel Lewit: I actually asked the same thing this morning. “Is today Thursday?”
Steve Lewit: This month is flying by. It’s almost football season. 50 days.
Gabriel Lewit: I was going to say… I just thought of this yesterday. We were out with our neighbors and playing in the cul-de-sac that I live on, and one of them brought up, “It’s almost preseason.” I’m like, “God, that’s always at the end of summer when preseason starts.”
Steve Lewit: 50 days to the first game. Anyway, so I’m working with-
Gabriel Lewit: First regular season game.
Steve Lewit: Regular season game. So I’m working with this couple and they both want to retire at 62, and guess what? We run the numbers and it’s like, “No, that’s not going to work,” and of course they were very unhappy. Then it was a question of she said, “Well, Honey. Looks like you’ll have to work an extra five years.”
Gabriel Lewit: You said they were the same age?
Steve Lewit: Same age. They were exactly the same age. And he’s like, “Well, is that fair?” So we played with different numbers and maybe he only has to work two years or three years but the numbers really grounded… It took the emotion out of the conversation because it’s the emotions that drive us and dig us in and say, “I’ve got to have my way because I’m so attached to that. It’s what I really, really want,” and the numbers might say differently. And that’s how you get people to move off of their stuckiness.
Gabriel Lewit: Yeah. Well, I think we have to… Maybe we’ll pick one of these here today and talk just a little bit about it in detail. And then the rest, it’s really all teasers for next show because we wanted to talk about some listener questions here today and just break things up here a little bit.
Steve Lewit: Let’s do risk tolerance, if you would.
Gabriel Lewit: Yeah, let’s do risk tolerance. That was your number one pick on the list. You listeners, folks out there listening to the show, you get a sense of what we’ll talk about next time if you want to get some greater meat on to solve those.
Steve Lewit: Meat on the bone.
Gabriel Lewit: But with risk-
Steve Lewit: So, explain what risk tolerance is.
Gabriel Lewit: Risk tolerance. This is how you, as an individual, are comfortable with risk. It’s how you perceive what to do with your investments or how to actually take those and buy different investment products based on what you’re comfortable with potentially earning or how much you might potentially lose if the market were to take a dive. So we call that your risk tolerance. So somebody might have a zero risk tolerance. They just want to put all their money in a CD.
Steve Lewit: Well, they just don’t want to lose money.
Gabriel Lewit: They just do not want to lose money. They want to have no risk, because they just want to always see their money grow, even if it’s small. And then there’s someone else that might go out there and buy all Facebook or Meta stock that lost 75% last year and is now up 300% this year, and they’re comfortable losing-
Steve Lewit: And they’re okay with that.
Gabriel Lewit: And they’re comfortable losing 75% out of the pop and for the potential of earning bigger returns.
Steve Lewit: Right.
Gabriel Lewit: Now, let’s say in our extreme example here, let’s say those two people are married together.
Steve Lewit: Yes. Well, it’s hard to be married separate.
Gabriel Lewit: Yes. Sorry. Married. Just married or together, I think.
Steve Lewit: Or together.
Gabriel Lewit: Married together. What do they do with their investments?
Steve Lewit: Yes.
Gabriel Lewit: Is it just he invests his money his way? She invests her money her way. That could work if they were both equal earners, but what if he’s the-
Steve Lewit: And if they had separate budgets.
Gabriel Lewit: Yeah. But what if he’s the high income earner and the aggressive one, but she’s not the high income earner or vice versa? So that’s where this risk tolerance can really become a sticking point for couples that are together.
Steve Lewit: So, what do you do?
Gabriel Lewit: I was going to ask you that. You stole my transition. So what do you do?
Steve Lewit: You’re giving it to me. Do you know? Are you asking? You do know, right? Just teasing.
Gabriel Lewit: Please, please.
Steve Lewit: I’m just teasing. Mr. CFP. So I teach how money works and where to be safe and where to take risk. So if you need income, if you need money two years from now, three years, five, 10 years from now, that is shorter term money. It needs to be safe. If you are longer term, you have time to recoup risk. So in some way, I give both couples… I give the, “Why does a person want their money safe?” That’s a real question. “Why are you afraid of losing money?” And it always turns out, “Well, if I lose money, I won’t be able to live the rest of my life.” That that’s the fear behind it. A lot of women, this is across the nation, have what we call Bag Lady Syndrome. They think they’re going to wind up on the streets like bag lady. They might have millions of dollars, but that’s something in the back of their head.
Gabriel Lewit: Is that the official name?
Steve Lewit: Yeah, that’s what it’s called.
Gabriel Lewit: I don’t think I’ve heard that.
Steve Lewit: Yeah. Look it up. Katie, look up Bag Lady Syndrome. It is an official name. I read it in a research report. That’s why I’m using it. What I find is if I show both-
Gabriel Lewit: There’s even a book. Katie pulled it up. Sorry. There’s even a book on it. A book by Lance Drucker, How to Avoid Bag Lady Syndrome.
Steve Lewit: Yeah, man.
Gabriel Lewit: I hadn’t heard of that before.
Steve Lewit: He told the truth.
Gabriel Lewit: I don’t love the name of it, but I get it. I get what he’s saying.
Steve Lewit: He told the truth. So if you show one person, “Look, this is where the money meets safe. That fits you. It gives you the security of income for the rest of your life. And sir, this is where your long-term money, you can take more risk,” and then talk about how to handle the discomfort when the person that is safe sees her husband losing money, for example, how to handle that conversation and say, “Look, this is the agreement. That long-term money is going to run up and down even though you don’t like it, and vice versa. This money is going to be safe not making a lot of money even though you don’t like it because that works well for both of you.”
Gabriel Lewit: Well, I can tell you’re getting really into this topic, and it reminds me, because I have a lot I’d like to say about risk tolerance here, but I’m going to circle this. Maybe it’s a topic we dive into in detail on its own, not even necessarily related to differences between couples, because I think there’s a lot there that we could discuss further. But I do want to get to these listener questions because we missed them last time, so I don’t want to cut you off, Mr. Lew-
Steve Lewit: But you just did, and that’s okay.
Gabriel Lewit: I had to. I had to. That’s-
Steve Lewit: But I think, folks, you get the point. This is all about communication. It’s about figuring out how to make it a win for both of you, and I’m not saying this is easier to do, but that’s what we strive to do.
Gabriel Lewit: Well, isn’t there a phrase that says, “Compromise is when neither person is happy”?
Steve Lewit: It’s like a diversified portfolio. There’s always winners and losers.
Gabriel Lewit: But where a deal is a good deal when-
Steve Lewit: Nobody’s happy.
Gabriel Lewit: … neither side is happy, because everybody has to give a little bit.
Steve Lewit: Exactly.
Gabriel Lewit: Nobody really got what they want.
Steve Lewit: Exactly.
Gabriel Lewit: There’s something to that there we could talk more about.
Steve Lewit: All right. Now you can have it your way.
Gabriel Lewit: It’s not my way.
Steve Lewit: My partner.
Gabriel Lewit: It’s our listeners’ way.
Steve Lewit: I’ve compromised for you.
Gabriel Lewit: Oh, that was well done.
Steve Lewit: Thank you.
Gabriel Lewit: Okay, well, see, I’m not completely happy because I wanted to jump into this two minutes ago.
Steve Lewit: Well, we’d better jump.
Gabriel Lewit: Just kidding. Vicky emailed us, said she’s a bit worried about, I’m paraphrasing here, a recession, and she thinks that she should stop her contributions to her investments for a while-
Steve Lewit: No.
Gabriel Lewit: … to wait out the recession-
Steve Lewit: No.
Gabriel Lewit: … and wants to know-
Steve Lewit: No, Vicky,
Gabriel Lewit: … should she do that?
Steve Lewit: No. No. Vicky, no, no, and no, and affirmatively no, and positively no.
Gabriel Lewit: Well, you and I both have heard this question from more than one person in the course of meetings and conversations. So what’s the mindset here behind why someone’s thinking of doing this, Dad, and also why your answer is, “No”?
Steve Lewit: Well, the fear is, “I’m going to lose money, so I’d rather not lose money. I’ll just wait for the market to go down and then when it goes up, I’ll resume my contributions,” which is exactly the opposite, Vicky, of what you should be doing. When the market is going down and you’re contributing to your 401(k), you’re doing something called dollar cost averaging because we don’t know when it’s going to come up.
Gabriel Lewit: And it may not go down.
Steve Lewit: And it may not go down, or it may not go down very far or might come back really quickly. So you want to keep those steady contributions through the good and the bad and the good and the bad, because that’s how you win long run in the stock market.
Gabriel Lewit: Yeah. I’ll just echo what you said. It’s easy to get sucked into that trap because you hear so much on the news about potential recession, about, “The end of the bear market is over, but will the bull market last?” headlines. So there’s a lot of fear out there. We talk a lot about that, which might make you think the market’s going to come back down. And so you’re going to wait for that perfect time to then start to invest your money.
Steve Lewit: And there are so-called gurus that say, “You should be in cash now because there’s going to be recession and then you should buy here, and I’ve got the signals and the logarithms and all of that.” Except-
Gabriel Lewit: Oh, gosh. Well, there was a guy six months ago back before the market started recovering here, nobody knows if this is the start of a longer term recovery or not yet, because the market’s been doing pretty good this year, that was saying that last year was going to be the start of the worst bear market crash in history.
Steve Lewit: Ever.
Gabriel Lewit: Worse than the great recession.
Steve Lewit: Ever.
Gabriel Lewit: And it’s like, “Come on, man. Not looking so likely at the moment.” But so Vicky, if that helps, hopefully-
Steve Lewit: I hope I wasn’t too abrupt, Vicky.
Gabriel Lewit: But no, we don’t think that’s a good idea.
Steve Lewit: The answer is, “No.”
Gabriel Lewit: Yeah, don’t think that’s a good idea. We might have time for one more here. Rick is asking us, “Should he keep a mortgage in retirement?,” I’m paraphrasing again for brevity, “so he can gain the tax deduction on the interest that he’s paying on the mortgage?”
Steve Lewit: If he itemizes. Does he have enough to itemize? We don’t know.
Gabriel Lewit: We don’t know the answer to that question, but you bring up a good point. A lot of people still have in their minds this… Because it used to be a really smart thing to have… Well, no, in some cases, smart thing to have interest on your mortgage because you were able to itemize a lot easier. This was prior to some recent tax law changes where you have a much higher standard deduction. So a lot of people don’t realize this is more than just interest on mortgages too. It has to do with charitable deduct… Sometimes people come in because we do taxes and they say, “Hey, I made my charitable contributions last year. Can I get that deduction on my tax return?” And then they learn that there’s something called the standard deduction that if it’s higher than all your individual itemized deductions, then all those things that you contributed to, the mortgage interest you have, all those things just go unused.
Steve Lewit: That’s about right. And most-
Gabriel Lewit: They have no impact on your taxes.
Steve Lewit: Most people will take the standard deduction now.
Gabriel Lewit: They will. They will.
Steve Lewit: But having said that, I think part of the question is not only the deduction, but what interest are you paying on your mortgage? In other words, if you have a mortgage at 2% or 2.5%, well, that’s cheap money. You’re better off having… Instead of taking money and putting it into the house, into the bricks of the house where it’s hardly going to grow or might grow a little bit, do not give it to the mortgage. Invest it somewhere safe. You can get, today, a guaranteed 5% short term. So why give that money to the bank when you can invest it yourself and make a net 2.5%. That’s called arbitrage.
Gabriel Lewit: So, there’s a lot more to that maybe than just the question around interest deduction, Rick, but hopefully that answers your question. Generally, unless you’re itemizing, which you’ll probably know if you are or aren’t because you would likely need a lot more potential deductions than just your mortgage interest. But if not, then as far as tax savings goes, then you could pay off your house and it’s not going to have a big impact.
Steve Lewit: Yeah, and I would add to that, Rick, is that some folks we meet just do not like paying a mortgage. They don’t want to have any debt. Even though, business wise, it would be a great decision, emotionally, they don’t want to have a mortgage. They don’t want to know they owe something. They don’t want to write a check every month.
Gabriel Lewit: Well, it’s also the amount gained via that arbitrage that you mentioned. I’ve done some analyses here for clients and it came out ahead by a few thousand dollars and so financially, it would’ve made them more money. But-
Steve Lewit: Emotionally-
Gabriel Lewit: … emotionally, it wouldn’t have been worth that.
Steve Lewit: It doesn’t work.
Gabriel Lewit: So you got to factor all those in, Rick. Well, folks, that’s our show for today. Thank you for tuning in. We really appreciate having you. We love-
Steve Lewit: We do.
Gabriel Lewit: We got some nice feedback from our last show from a few of you just emailing us.
Steve Lewit: Thank you.
Gabriel Lewit: We thank you. It really makes us feel good. Gives us some juice to come back and create another great show for you. If you have questions, you can call us anytime, 847-499-3330, email us, info@sglfinancial.com or go to our website, sglfinancial.com. If you’re not currently a client, keep in mind we are more than happy to have a complimentary initial review together with you to see what your concerns are, how we might be able to help in any numbers of ways with whatever is top of mind for you. But otherwise, thank you so much for tuning in and we will see you back here for part two of couple of-
Steve Lewit: Marriage counseling.
Gabriel Lewit: … discussions next week.
Steve Lewit: We will. Stay well, everybody.
Gabriel Lewit: Stay well. Have a great one. Talk to you then.
Steve Lewit: See ya.
Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at 847-499-3330 or visit us on the web at sglfinancial.com and be sure to subscribe to join us on next week’s episode.
Prerecorded Voice: Investment Advisory Services are offered through SGL Financial LLC, an SEC Registered Investment Advisor. Insurance and other financial products are offered separately through individually licensed and appointed agents.
