5 Signs You’re Richer Than You Think

Plan With The Tax Man

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Most people don’t feel wealthy. But what if your day-to-day habits are quietly building serious financial strength? A recent article from Kiplinger outlined five surprising signs that you might be richer than you think. And none of them involve yachts or private jets… Let’s analyze the habits that signal real, lasting wealth and what to do if you are (or aren’t) on the right track.

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Transcript:

Marc:

Most people don't feel wealthy. But what if your day-to-day habits are quietly building serious financial strength? Well, a recent article from Kiplinger outlined five surprising signs you might be in better shape than you realize. So let's talk about that this week, here on Plan with the Tax Man.

Welcome into the podcast, folks, as we break things down with Tony Mauro from Tax Doctor Inc., and this week, five signs that you're richer than you think, or at least, I don't know, that's the term it used in this article. I'm going to call it better off, Tony, than we maybe think. I've been talking to advisors like yourself for years, and more times than not, I'd say most advisors say usually about seven out of 10 times, and I'm going to give, maybe not so super specific, but people come in looking at that initial consultation wondering, am I okay? Right? That's the big question. And more times than not, advisors say people are in better shape than they realize. Is that what you see as well in your practice?

Tony Mauro:

I'd say generally that, yes. They're not, I believe, where they want to be.

Marc:

Sure.

Tony Mauro:

Because obviously, they wouldn't be in there, but they're better off than they think. We seldom see somebody that's so far behind that it's impossible to...

Marc:

Right, right. And I think that's the catch, right? It's kind of like going to the dentist. We all kind of go... Not to equate your stuff to the dentist, but unfortunately, it's a good analogy. People go, "I need to go, but I don't want to go, because I really don't like it." And then you wait until you've got a real problem and then it's a bigger pain. And so I think a lot of times people think, "Ah, I need to go see a financial professional, but I don't want to because going to give me bad news." And more times than not, again, people are in better shape than they realize.

So, let's run through this report. We'll put a link in the show description here for folks if they want to check it out. And we'll just do a real simple of these five signs. Where are you at? How are you guys doing with this stuff? So number one, Tony, is emergency fund. Have you prepared one? And I think COVID certainly highlighted the need for this for many people, when you were losing jobs, or not being allowed to come in, and weren't getting paid, or reduced pay, maybe put a squeeze on you if you didn't have that emergency fund.

Tony Mauro:

Yeah, and this is the first question we ask clients when we're data gathering and whatnot, is to, if they have this. And most don't. Most don't. Most have heard about it, they've never done it, or they've tried it and just basically robbed it and never went back to it. But obviously, most of this types of advice, most planners are going to give you the same thing. You've got to get something like this in place before you can start investing for the future, because of things like job losses, everything that related with COVID, somebody's sick, that kind of thing. So, once you get that kind of stability, then we can kind of move on. Now, we don't have to make you wait to start doing planning until you have six months of expenses saved up.

Marc:

Right. Great point. Yeah. Yeah.

Tony Mauro:

It can take several years. But we got to get you at least working on it, even if it's $50, $100 bucks a month, to get money in there. And then the other thing is, I ask them, I said, "Do you even know what a month or two of expenses are?" Or do you just look at that checkbook and say, "Oh, well, we've got a little more money this month, we can spend it, and then we got to quit spending." And that goes to just personal finance there. But you've got to know those two things, and you got to get along that path.

Marc:

I think the article goes on to say that the average American has about $1000 saved.

Tony Mauro:

$1000 bucks.

Marc:

Yeah. That's probably not going to get it done. So you got to work your way, like you said, into some sort of a groove there. And I know there's some debate back and forth about once you're retired, do you really need emergency fund? Because you are not working, so therefore you're 401 and all your different nest egg is really the emergency fund, I suppose. But while you're building up to retirement, you certainly want to have that emergency fund there.

Tony Mauro:

Yes.

Marc:

All right, number two on the list was, you live below your means. I'll throw in, you live within your means. I think below or within, especially in today's environment. If you can do within your means, I think again, these are steps, signs that you're doing pretty good.

Tony Mauro:

And this is right out of probably the Millionaire Next Door book, or a chapter of it, is you must know, in my mind, of course, what you got coming in for your income, and then of course, a good idea of what your monthly outflows, are or your expenses. That's what we're talking about here, is living within or below your means. You still have money left at the end of every month, or at least at zero, and you're not going into the negative.

And this assumes that nothing bad or unusual is happening, but if you're in a negative every month, that means you have a spending problem, and you are not living within your means. And that's something we got to curtail, because there's no way you're going to be able to save. You come into us and say, "Hey, I've got to start saving for retirement," and we look at that and you're in a negative pretty much every month, we've got to make some changes immediately before we can start saving, because you don't even have any money to pay your bills, let alone if you get behind, which we just talked about, lose a job. How are you going to invest for retirement?

But yeah, it is definitely something that if you are living within your means, or even better, below, then you are going to be in great... I don't want to say great shape, to automatically have a great retirement. You still got to save.

Marc:

Right. It's a big help, though. It's a big help.

Tony Mauro:

Yeah, it's a big, big help.

Marc:

Because lifestyle creep is a thing. I mean, as we make more money, we kind of want a few more things, and it's totally understandable. You work hard, blah, blah, blah, but you got to be careful not to get out of control. I was just reading something the other day, Tony, I'm not sure if you're a Gen X-er like me. I think you are. But it says Gen X-ers are most in debt right now, on an average of about $157,000, with vehicle debt being a big piece of it. That wasn't even including the house. So you got to get that stuff under control, and living within your means or below it, either way, is a good milestone there, a good marker for financial health.

Tony Mauro:

I agree. I think before we leave that topic, it amazes me how many clients that they'll shop around and really feel good about trying to find whatever they're buying at the lowest price, and then they'll put it on a credit card, and they don't pay the credit card off. And I say, "But let me ask you, if you went into that same thing, just going to buy it and you're going to pay three times what they're asking for, would you do it?" And they say, "Absolutely not."

Marc:

You wouldn't do it. Absolutely not.

Tony Mauro:

"Absolutely not. I'm not doing that. I shopped for deals." I said, "But you really aren't getting any deal, because who knows how long you're going to take?"

Marc:

You're just not paying the retail place or whatever the money because you got it cheaper, but you're paying the credit card company money.

Tony Mauro:

You're paying the credit card company. So we find a lot of people with a lot of debt because of that.

Marc:

That's a great point.

Tony Mauro:

It just kind of goes along about that. You got to pay cash for things if possible, except for the few big things in life, because otherwise, generally that's a problem.

Marc:

That's a fantastic point. It's very simple to overlook. You think, well, I kind of need to get this new... My computer's acting up for work, or whatever, and I got to get this new computer, and I need to finance it, but I'm going to shop around for the best deal. And maybe that's a higher dollar amount. Maybe you do need to finance it, but if you could save for it and just pay cash, you're just better off. You're just saving money. To your point, yeah, house, car, really big stuff makes sense, you may have to finance.

Tony Mauro:

Big stuff, yeah.

Marc:

Yeah. All right, number three, you invest strategically. Whether it's your workplace plan or whatever, you got a strategy, versus just, well, I threw it in the 2040 fund because my year to retire.

Tony Mauro:

And I think people that, they have a head start when they come in and they say, look, I've got... Even if they've got three or four 401Ks from different employers, they're constantly investing in their current employers, whatever they have. Some of them are doing a Roth on their own, which is fantastic. It doesn't even, to us, matter as much of what they have it invested in, unless it's just all cash and they're really young or something like that, obviously we're going to advise them. But if they're already doing that strategically, they're well ahead of the game because putting money away, and if we can solve those first two problems, if they have them, then great. But that's just a sign that, yeah, they've got a great start on things, and once they get a good plan in place and can see the end goal, then they start feeling, you know what, this is achievable.

Marc:

Yeah, right, exactly. It's like, hmm, I like that. Yeah, good stuff indeed. All right, well we're running through, again, these signs that you are in better shape than you realize. So we've got a couple more here to go. And again, check the link if you'd like to kind of read this article from Kiplinger.

You have multiple income streams, Tony. So it's not just, we all know diversification is the name of the game. We have that conversation all the time. But having more than one income stream, or even two. Some people will go, "Well, I've got my 401K, we're going to turn that into one, and then I've got social security, that's two. So I've got multiple." Well, yeah, okay. But what about some others?

Tony Mauro:

Yeah, some others, I mean, even during the working years could be either... Could be as simple as a part-time job. It could be you've got a little side gig going on your own, a little business selling whatever you're doing, whether it's a service or actual goods. Could be rentals. We've had rentals since I was 20 years old, and it's good passive income now. All of this stuff comes with issues, meaning that it's just not free income and you don't have to do anything for it. But if you've got multiple income streams, I think it's better.

Yeah, it causes a little more, maybe stress in your life, maybe a little more to-do's. But at the end of the day, one, you're going to hopefully be making more money, and two, if something goes bad with the main gig, I call it, well, you've got at least a little income coming in from something while you figure it out. So I think it's always good to take a look at, especially today, I tell my son a lot, with AI, the way it's going and whatnot, it's just changing so fast. You got to be prepared to make some changes and try to earn money from different sources.

Marc:

For sure. For sure. Yeah. Whether it's rental property or whatever else, but definitely just having those multiple income streams can go a long way towards, again, putting you in better shape than you might realize.

And then the final one, Tony, and you kind of touched on a little bit when we were talking about investing strategically, but just in general, the article talks about focusing on the long-term. How does your mindset and your behavior reflect with that? I think folks who are definitely thinking, especially sooner than later, 50-plus, you start really thinking long-term, that's going to help you out.

Tony Mauro:

Yeah, and I like the fact that when clients come to see us and we give them a little quiz right off the bat, and if they answer it, whether they're nonstop watching TV and listening to the news and reacting to this short-term stuff, or whatever it may be, it's usually negative. And so, if they panic every time they're doing that and they're not focused on the long-term, for us, that's kind of a landmine. We have to try to talk them out of that if they're going to work with us. Versus a person comes in and says, "I've been doing all these things for years. I really don't pay attention to the news and I just keep putting money in and it's done fairly well for me." That's kind of more of the focus you want. With some, especially with an advisor, if you're meeting with them once or more a year, they're going to be able to help you and tell you what you have been doing. But you definitely want to keep a long-term perspective on things.

Marc:

Yeah, and I think helping and having that long-term plan, again, sooner than later, gives you that runway that we need to plan out the stuff that we want to do. The new passing of the tax code and everything helped. Again, we talked about it the last couple of weeks, helped advisors. At least, if nothing else, whether you agree with it or don't agree with it, now you at least know what's ahead of you from a strategic planning standpoint for taxation and so on and so forth. And so, all of that kind of lends into just having a good cohesive strategy to get you to and through your retirement goal.

So, if you need some help, reach out to Tony. Hopefully, if you're doing some of these things, that makes you feel pretty good. You realize that maybe you're already on the right path. But find out, right? Run the numbers and see where you stand and what kind of work you need to do. Everybody can use a little bit of work, but sometimes people overreact, I think, and think, oh, if I go see an advisor, it's going to be some major overhaul to my life. And maybe it is, depending on what you've done, but a lot of times it's little tweaks, right? Little tweaks goes a long way.

So, get on the calendar, folks. YourPlanningPros.com. YourPlanningPros.com to schedule some time with Tony and his team at Tax Doctor Inc. And don't forget to subscribe to us on Apple or Spotify, whatever podcasting app you enjoy using, to catch future episodes when they come out. Tony, my friend, thanks for breaking it down and hanging out with us. Always appreciate your time.

Tony Mauro:

All right, we'll talk to you on the next show.

Marc:

We will see you next time here, we'll get into, as the year's winding down, we'll be almost into the fourth quarter on the next couple episodes coming up. So if you've got some questions, need some help, again, reach out to Tony, YourPlanningPros.com. We'll see you next time here on Plan with the Tax Man.

Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

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