Welcome to Ditch the Suits podcast where we share insights nobody in the financial services industry wants you to know about.

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So buckle up and welcome to Ditch the Suits.

Well, welcome to Ditch the Suits.

Steve Campbell here with Travis Moss.

If you are new to Ditch the Suits, I serve as the chief brand officer at Seed Planning Group.

Travis serves as our chief Executive officer.

Seed is a fee only financial planning firm and we have a fiduciary obligation to the clients we work with.

And this show is all about us bringing our professional and collective experiences of things we talk about every day with people just like you so that you're here so you can get the most from your money in life.

And today we're going to be kicking off a brand new series.

So if you're new to Ditch the Suits, Travis is going to tee us up what the series is about so that we can jump right into it and give you an expectation of what you're going to hear about today.

So, Travis, why don't you give us what, what we're going to be talking about over the next few episodes.

Trying to get it right with our finances and when we're at the end of the year and we're trying to think about what we did well this year and we're trying to think about where we're going next year, maybe I think it's a little bit easy to dwell on some of the stuff that maybe you didn't get done.

It's like you open your eyes and all of a sudden it's the end of the year and you think, where did the time go?

And oh my gosh, I didn't get those things done and I need to do all these things.

And it's really just, it's just so easy to get overwhelmed.

But rather than like getting frozen in either regret or indecision, we wanted to help people with some things that can maybe keep them moving forward.

So we've got 11 things on our list to talk about.

So 11 best practices or ideas or strategies, however you want to term.

I think we're going to term them as best practices today, but we've got 11 things that we think can help people as they're wrapping up the year and getting ready for next year to take a step forward.

One of the things we always talk about a seed is that, you know, it's not about being perfect all the time.

It's just about keeping that ball rolling forward so you don't have to be Perfect at this.

You don't have to do all 11 of these things, but if you can do one or two of these things, maybe you weren't doing them before, you are going to get incrementally better, and that's going to have a compounding effect.

So every year, if you could pick one or two of these things and get a little bit better at them, it is going to make a big, big difference.

So we're going to cover three of them today.

We've got three episodes.

We're going to split it up into three pieces, three, four, and four.

And the first three, we're going to kind of start out with what experts say you should be doing, which is looking at your budget every year and maybe revisiting that and making some changes.

But I think it's always interesting because I've worked with people of all different ages and Steve, you've had people call in at all different ages.

And I think one of the interesting things about budgets is what does budget actually mean?

Yep.

And how do you effectively kind of assess your budget and adjust your budget so that it's not like a weight loss plan in January or, you know, your commitment to go to the gym and then you're paying for a membership like I do, but you don't actually go.

It's like, how do you actually.

What does it mean?

And how do you actually do it?

Yeah.

So we're going to talk about simple methodology on how to make real and immediate changes and to maybe just look at something that everybody says you should do, but so few people actually do it.

And then it's a little bit in the eye of the beholder, like, how's it actually work for you?

And then those who are retiring, we're going to talk about how to set up an income sourcing plan.

So a lot of people that we talk to who are in retirement or getting ready retirement, especially the first time they're calling us up, they may say something like, I don't know what accounts to take money out of, or I always take all my money out of this account.

I like to tell a story about somebody who had an ira, a Roth, and after tax money, and they were convinced that they should pay off their mortgage with their Roth money.

And it's like, why?

And it's.

And it comes down to personal biases and things that maybe you were preconceived years ago and you just kind of.

It's a motivating factor, so you hold on to it.

But then when it comes to the Real life, like, okay, now we got to put the plan in action.

It doesn't make any sense anymore.

And so we'll talk about income sourcing plan and how you can actually use one effectively.

And then if you're not sure what that is, we will definitely walk you through.

So just keep listening.

And then if, let's say you're not sure that you need one, or if you're like, yeah, you know, I've got it all figured out.

You know, I just kind of look at my accounts, whichever one's doing the best to take the money out.

Well, you definitely need a plan, and that's definitely not the right way to do it.

So we'll talk a lot more about that.

And then for those who are still working.

So that part's kind of for the retiree, but those that are working.

Did you know if you get paid every two weeks, every year you get two extra paychecks?

Believe it or not, a lot of people don't realize that.

So if you get paid every Wednesday, that means you get paid every two weeks.

There's two months out of the course of the year where you get an extra paycheck.

I did not know this till this year that about every 11 years, the way that the math works out with calendar is that you actually get three months of extra paychecks.

So you're going to get an extra paycheck, potentially, depending on how your payroll is, three times this year instead of just twice.

So we're going to talk about that and actually what you could do with that.

So all of a sudden you get this little windfall, and we're going to talk a lot about building versus spending and, you know, maybe how you can kind of achieve both at one time.

I guess if you really want to think about, um, if you can build a better foundation, it's going to free you up to spend more.

So we're going to talk about that dichotomy today.

Yeah, and I'm, I'm, I'm excited for this episode because this show is about your money in your life.

And 2024 has probably, for a lot of people, taken the precedence about the life component.

It's been a.

It's been a lot this year, going through an election, everything on the news, and you've been trying to digest all of that.

This is going to be kind of a nice, like, reset, and let's get back to what we actually can control.

And so you've maybe been riding an emotional roller coaster all year, but I was really excited when you kind of shared these notes and we talked through it because again, 11 practical things that you can actually go do.

So many podcasts and money shows give you these big ideas, but people don't know how do I do it?

So some of these might seem so elementary at its core, but again, because we get call ins all the time, these are the things that people just don't really understand how to make it work for them.

And so I think it's going to be a great conversation and I think it's, I think it kind of.

Travis leads right into the first one.

You say that word budget, and I think we sometimes assume budgets for people just getting started out, but to really kind of break down when we say budget, the importance of it and what it means.

So, so when you say budget, what are the things we want to consider?

Hey guys, Steve Campbell with Digital Suits.

Want to take one quick moment to make a big ask.

If you haven't already, Travis and I would love for you to subscribe to this podcast.

But if you haven't, also, we would love for you to leave a five star rating and review.

Your rating and review will let other podcasters know the show is worth their time.

So let's get right back to the episode and thanks for listening to Ditch.

The Suits podcast and this right to your point.

Sometimes simple is better for 99% of the people out there.

You don't need sophisticated or sexy budget talk.

You need simple budget talk.

You need a way that it doesn't become a heavy lift so that you can get at it, you can work at it, you can see improvement on it, but it's not so much work that you need spreadsheets and all kinds of other stuff going on.

And I think that there's three types of budgets.

I think that there's a detailed budget and that's most of the time our engineers have those.

They come in with spreadsheets and every single nickel they've got an idea of where it's going, where it's coming from, what they're doing with it.

And that's good if that's your personality type, but that's the personality of maybe 25% of the people out there.

So then there's a 75% of the people who look at a spreadsheet and start to yawn and fall asleep and they start to struggle with that.

Then there's also there's benefits and there's drawbacks.

A detailed budget, obviously you could be more accountable because you know where Red dollar is drawback to that is it can create a type of rigidity.

And we're going to talk about how life changes.

And you've got to be a little bit fluid when you're talking about budgeting.

Then you have the vague budget.

And I actually prefer the vague budget.

And the vague budget is here's broad categories of spending.

And I, I kind of need to focus on these broad categories, but I don't need to define every dollar within the category.

I think sometimes people are so strict on defining every, every detail that, you know, life just kind of passes them by and they have to miss it because the number is going to be out of order.

And it's like, don't let the numbers run your life.

Yes, you need to be disciplined, but you need to control the budget, not the budget controls you.

And then there's pretend budgets.

And these are for the people who say they have a budget, but they never, they always blow by their budget.

Just never.

You know, and I've worked with people like this too.

I think that there's two types of people and we were having a fun conversation today with somebody about this.

There are savers and there are spenders.

Savers are almost always going to kind of go more towards the detailed side or they'll be in the vague area, but they just, they are over conservative with their spending.

And then you have spenders and they're normally in the vague to the pretend side.

They think they have a budget, but they're just, it's like lip service.

They know they're supposed to, but, you know, hey, these were just great deals or I had to do this right now or this came up and I just have to, you know, somebody had to buy that for the kids.

So I did it.

And the happy medium is someplace in the middle.

And that's kind of why I said the vague area, which is I want enough detail so that I can understand what I'm doing, but I don't want so much detail that, you know, I'm like, again, it's like being constricted.

I don't want to be constricted by my budget.

Yeah.

And I think in our experience of working with people, as long as we have, it's very rare that you meet two people that are both savers or two people that are both spiders.

It's usually two people that look at money differently or how to do it.

And so getting people on the same page, I know, you know, one of the big questions when people call in and they speak with me is just, are we doing the right things and are we okay?

And I think when it comes to a budget, maybe the question that people have is it seems like we're making good salaries, but where is all of our money going?

It seems like maybe we don't.

We're not always in position to use the money the way that we want to.

And so I think this conversation.

And you're going to kind of get into this a little bit about knowing if you have a healthy budget or things to look at.

So again, looking at, you know, budgets and pointing back to it, bringing awareness to it, what are some areas is along these three lines that would be good for people to think about?

Yeah, and so it sounds like I kind of said it.

You know, you don't need to be worried about the details, so just go out and do what you want.

That's not really what I'm saying.

You know, the whole point of the budget is to be able to revisit or bring awareness to where your money's going.

So I think that that addresses what you're talking about or where you might be spending it in the future.

Budgets, a lot of times are based in the past.

Well, this is what we spent last year.

Yeah, but is that what you're going to spend next year?

You know, when you look forward, does forward look exactly like what it looked like going backwards?

And that gets us to that whole effectiveness component of it.

And, you know, you're.

You're going to have life changes throughout the year.

You're going to have situations where you have to be flexible and you, you have to not just beat the heck out of yourself.

You know, if something happens.

Let's say you have a bunch of pets.

I have a bunch of pets, and one of my dogs gets sick, and I have to take them to, you know, a specialty hospital and have surgery, and it costs $4,000.

There's things like that that are just budget busters.

You're just gonna have to deal with them.

Or let's say it was one of your kids or your spouse or somebody got sick and you had to do that or you had a roof leak or something.

Does that mean that you failed financially?

No.

Does that mean that your budget was wrong?

No, it just means that life has happened and you need to look at that and kind of say, okay, how do I account for this and how do I adjust going forward now?

So budget's got a lot of give and take.

It's a little bit elastic.

It's, you know, this is what's happening in life now.

At the same time, though, you have to be disciplined.

You can't like every little thing.

Well, I had a chance to go to Starbucks with my best friend today, so I went to Starbucks even though I can't pay off my credit card.

Like, you know, there's got to be some discipline there.

But for those that are, that have the discipline, don't be so over disciplined that you don't let life happen.

And then, you know, that just stresses you out.

It's like, oh, I didn't budget 4000, now I'm 4000 behind.

Oh my gosh, look at, you know, I've really screwed this up.

You haven't.

You have to kind of look at this more as a fluid situation.

And you really, you know, you have to look at it one of the reason, part of the reason why I like the vague part because you start with just simply looking at.

At the end of every month, are you plus or minus?

And that's really easy.

If you normally have, let's say at the end of every month, you normally have $2,000 in your checking account and you finish a month and you have $2,500, you're positive.

If you finish the month and you have 1,500, you're negative.

If you run all your bills through a credit card, you pay everything on credit card, and at the end of the month you pay off the credit card with whatever cash you have.

Right.

That's an even better way because every month you got to pay the credit card off to zero.

So if you get to the end of the month and you look at it go, holy cow, we owe $7,000 on our credit card and we were figuring we'd owe 5, that means you overspent by 2, you know, or if you get to the end of month and you owe four, that means you underspent by one.

That's not the end of the conversation.

Is the next reason why is, well, why did that happen?

Did something not happen?

If you underspent, was it an expense you didn't pay that you normally would pay or that you expected to pay?

If you're overspending, is that, was there a one off thing?

Did that furnace break or something like that?

Was there an emergency?

If there's an emergency every month and every month you're spending an extra thousand dollars, it's not an emergency.

That's, that's your operational expenses of your household, right?

See, that's where you have to be flexible with this.

People will come in and say, here's my budget I look at it and go, that's not possible.

And they're like, what do you mean?

I'm like, I know that you don't eat for $150 a month.

I know it costs you more than $150 a month to eat.

And I know that you don't never go out to dinner and you don't never do anything, you know, for yourself.

I know you do something right.

Or if you don't, you should so, you know, stop blocking it.

Or you have nothing in here for maintenance in the house.

Well, we just did the roof and we did the furnace.

Yeah, okay.

Start saving for the next roof because you know something's going to happen, whether it's the roof, the foundation, you know, a rock goes through a window, something's going to happen, and you're going to have maintenance on that house year in and year out.

People who pay cash for their car, I don't have a car payment.

Right, but you pay cash for a car.

So guess what?

You need to save for your next car so that you have cash to buy the next car.

So there's things like that that you kind of plus or minus into that budget that kind of go around what you're doing.

But it all comes back down to, you know, I'm plus 500 for the month.

I know I'm supposed to save $500 a month for my next car.

So I'm actually right on target.

I'm right where I'm supposed to be, right?

Or I roll to the end of the month.

Every month, my checking account goes, you know, I take that 500, I put it in my investment account from my future car, but yet my checking account keeps going up by $1,500.

Okay, you're running out of surplus.

You can figure out what to do with that $1,500.

And then that gets you to, okay, well, what do you do with that $1,500?

And the answer there is, do you want to build or do you want to spend?

Build means you look at the foundation and you say, look, I'm going to make it so that I have more money in the future.

I'm going to work on accumulating assets.

That's investing in real estate and those types of things, right?

Or I might pay off high interest debt, that type of stuff.

Spend means, oh, look at all this extra money.

Let's, you know, go on more vacations.

Or let's go and let's.

Let's spend this money in some way that doesn't create any kind of foundational value.

Which experiences are important.

If you've deprived yourself in your budget from good experiences that some of that money does need to get a good experiences, you need to have those in your life.

Because if, if you get to in your 60s or 70s or 80s and you've never had good, you know, you for went all those experience so that you would have the money.

You will have the money, but you will be alone and bored.

You have to live a bit while you go along too.

But if you're already having a good time and doing the family vacations, all that kind of stuff, and you have some extra, then you ought to really probably be looking at building.

When I think too with Travis, with budgets, it's also really good for people to remember because again, you talk with people from all over the country that call in your life in.

The people in your life are unique to your situation.

What budget is right for you, Travis might be very different for me depending upon who's dependent upon you.

Feeding a family of six versus a family of three is very different.

And so I think adopting and adapting that budget throughout things like inflation and cost of goods, don't let a budget be restrictive.

Like we can't do all these things as much as creating maybe guardrails that can help.

You know, are we building or you know, are we spending having that?

So many people call in and say, should we do this or should we do that?

Well, we can't possibly tell you what to do if we don't first understand every single month how much do you have that will help you build a baseline for achieving those goals.

Well, and if you're struggling with the budget, there's two things I think that you can work on.

And I.

And I.

This works for just about anybody.

Very rarely do we find people who are interested in financial planning who don't have some room to change the things that they're doing.

Sure, sometimes you do.

Sometimes you get the person on the fixed income that just they're out of time, they can't work anymore and they don't have enough.

But most people have some flexibility.

And the first thing that you do is you look at installing discipline around your wants.

Because what throws most people's budget off is they don't have any control over the wants.

They do a want every single day.

I want to go out to lunch, I want to get coffee, I want to go out to dinner, I want to buy extra shoes.

I want to do this, I want to do that, I want a Bigger car, nicer car.

You know, it's.

And there's no pacing on the wants.

And we see this a lot of times actually with early retirees that they're like, all of a sudden they have access to their money and they're like, well, I'm sending a home.

I have nothing to do.

Might as well spend that 401k because I want a new kitchen or I want a new bathroom.

It's like, whoa, whoa, whoa, whoa.

Pace yourself.

The same thing you would have done if you were working.

Pace yourself a little bit here.

So the first thing is put some discipline around those wants.

Are you rewarding yourself a little bit too often?

Are you spoiling yourself?

Like, if you were your kid, would you be like, yeah, that's, you know, like, we just gave you ice cream.

You don't need another ice cream, you know?

And then if you get that under control, then you need to look at your needs.

So let's say that you've taken care of all your wants and you're like, look, you know, it's a nice balance.

I feel pretty good about it.

Once a week I do something fun for myself, like go out to dinner or something.

Okay, the next one is, have you become lazy with your needs?

And I say lazy with your needs because people will say, I need my cable.

You don't need to spend $180 on cable.

You want to spend $180 on cable.

You can look at other ways to watch TV.

Probably give you even more options for less than $180 a month.

So you don't.

Even though, yes, you need your at home entertainment or whatever.

And that's porter or car payment.

I need to have my car payment.

Right, but you don't need a $800 payment.

You could get a lesser vehicle and have a 600 payment.

Right.

That's not the only vehicle that you could buy.

It's the only vehicle that you want to buy.

So we get, we get lazy with the need term a lot of times.

And if you're struggling with your budget, look at it.

If you're being lazy.

When was the last time you shopped your insurances?

You know, if you have homeowners insurance, a car insurance, and you're like, yeah, you know, I need to pay my insurance.

That's right.

But have you checked to see if you could get that cheaper?

Any place in the last two or three years, right?

So if you're struggling with your budget, maybe you could save a hundred dollars a month by shopping your insurance well, again, people get lazy.

Well, you know, it's my buddy who's the insurance agent and stuff.

Okay, you're just getting lazy with it to your buddy who's the insurance agent.

Business is business, right?

You're making business and friendship.

You're co mingling them and you're being lazy with the fact that you need to have insurance, but you also need to have a affordable insurance that lets you still live the rest of your life.

Let's take a break to hear a word from our sponsor.

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Yeah, and I think how many just people, because of life demands, kind of live their life on automatic.

They automatically pay their bills online.

And when you do that, you stop asking questions or shopping around for all kinds of things, which is really where savings can come.

So you've laid the groundwork for the importance of a budget.

Right.

You got three ways you can look at it.

I think the idea is have a sense of what's going on with your money so that you know what you have every month.

And I think that segues really into practical point number two, which is when people are in retirement or approaching retirement now, when they're no longer receiving a paycheck, they're trying to figure out how do I get money when I'm in retirement, when my prior employer is no longer sending me a check in the mail.

And this is what we would call income return retirement sourcing.

So, Travis, talk to us about this second area in really the importance of understanding income sourcing.

Yes.

So income sourcing plan, we promised we'd explain it first and foremost and then kind of, you know, if you need this and everything.

So what income sourcing is, is you're retired, you're not going to have a paycheck anymore.

Maybe you'll have a pension, maybe a Social Security, but you still need additional money.

So you go, okay, I'm going to take some money out of some place.

Or let's say you Retire and you have an option to take your pension and you also have an option to defer your pension.

Pension and you go, but if I defer my pension, how would I possibly live?

Yet you've got a 401k with a million dollars in it.

So income sourcing is okay, I need $5,000 a month or $10,000 a month or whatever your number is.

Where does it come from?

That's, that's a fancy term for how do I pay myself.

And the reason why you need a plan is look at it like this.

Let's, let's pretend that you could take your pension and you could get $50,000 a year from your pension.

But let's pretend that you have, let's say a quarter of million dollars in cash and you have an option when your pension, take the cash value, which is pretty equivalent to the dollar amount, maybe it's $1 million pension, and you could take that and roll over like your 401k could.

And you're 55 years old.

Let's just, I'm just making stuff up now just to give us a time period.

You want the $50,000, a pension will give you the $50,000.

You also have cash.

You could, instead of taking the pension, you could live off of 50 grand in cash.

No income tax is due on that.

I mean, you'd pay income taxes on any dividends or interest if you're in those tax brackets.

But the 50 grand, probably no, you know, if it's in cash, there's no tax on that.

You take the pension you rolled over to an Iraq and well, that's wonderful.

That'll be your future pension.

Right?

You could use it in the future and you could say, well, I could have also deferred the pension.

But there's one more other thing you could do instead of taking the $50,000 and spending the $50,000 every year, which would trigger the income taxes and then you would spend that, which is essentially what you're doing with the money out of the savings.

You do a Roth conversion on that 50 grand, so you pay the same amount of income taxes you otherwise would have paid.

The only difference is you take money from a taxable bucket and put it in a tax free bucket forever.

And you cannot do that with that 250 grand in cash that you have.

Super powerful strategy that you can do.

That's an income sourcing plan.

That's a simple example.

There's infinite examples that we could do on ways to more effectively use cash.

I mentioned that I had Somebody who wanted to use their Roth to pay off their mortgage when they retired, they had $350,000 in after tax investments.

Once you're retired, you can't put money in Roth anymore unless you have earned income.

So the only way it gets in there is a Roth conversion.

So why would you, if you have money that you're paying income taxes on and you have a pool of money that you don't pay any income taxes on, why wouldn't you use the pool of money?

If you can access them both equally, why wouldn't you use the taxable pool of money, reduce that and let that tax free money build up over time?

Well, we end up with these biases, I think, because that was, oh, this is, this is my account putting money away so that I can pay off my mortgage early.

Right.

And, but then when we get to the practical point, it's like, what's the best way to pay off the mortgage?

Should you pay off the mortgage in that case too?

If your mortgage, if you were one of those people who were fortunate to get a mortgage a couple of years ago, 20, 20, 20, 21, 20, 22, you have a mortgage, people may never see those rates again for the next 30 years.

Yeah, you've got a two and a half percent mortgage, a three and a quarter percent mortgage, something like that, why would you be in a hurry to pay that off?

You could go.

If you had, let's say you have a half million dollar mortgage and you get a half million dollars in cash to pay off that mortgage, or a half million dollars in your, in your Roth account and you were going to take that out and pay that, you can buy a money market, they're paying like 5% or so right now.

You can buy a money market that pays you more than the interest you're paying on the mortgage.

So this is how wealthy people get more wealthy.

When people pick on and they get frustrated that people are doing well and how did they get so much money?

It's these little things that they do that, you know, if you saved $5,000 a year since the time you were 20, you'd be a multimillionaire by the time you're in your 60s.

Assuming that you invest in.

Yeah, yeah, you know, we could talk about what the investments are, but that's how you get to be a millionaire without ever making a million dollars.

Well, imagine if you found four or five different ways to do that, just by understanding better ways to use your income, when to use certain types of accounts for certain types of things.

So sometimes it's convenience, it's accessible, sometimes it's biased.

Well, that account's doing the worst.

I'm going to cash it out first.

Well, that's because it's the most aggressive and we're in a recession.

You should cash out the CDs, leave the stocks, let them recover type of thing.

Well, I think it's those kind of freebies you just gave, I don't know, three minutes ago with that depiction of how you would take a pension and Roth conversion.

I mean, that's the stuff that gets me fired up.

Because, again, if you've already made decisions that are locked in place, you can't go back and undo them.

But if you can get out in front of people that maybe came in thinking that they were going to do one thing, I mean, that's the value of planning.

And that's when being in the room with a couple or an individual, in having what you just said happen in real time, which is, hey, I know you came in today and wanted to take your pension because it feels good and it's guaranteed, but if I show you how you could do this, look at what this can do from a tax planning standpoint.

And Roth conversions, people go, whoa, like, that's our money.

We can do that.

It's not like you got an inheritance.

You're just rethinking how you did it.

That's the stuff that.

Again, why I love ditch the suits.

We give you a lot of free information because it has the power to set you up in a very meaningful way.

So if you kind of missed the last four minutes, reverse this podcast just a little bit.

Go back and understand the depth of what Travis just shared with you, because I think it's a very cool financial planning tool that most people aren't aware of.

And one quick, one more quick example before we move on to our last point, here's another income sourcing plan.

Let's say that you needed to take out $20,000 out of your retirement account because that's what you need to pay the bills this year.

And you're right on the threshold between 12 and 22% federal bracket.

And if you took the 20 grand out, 10,000 would be in the 12%, 22,000 would be.

Or 10,000 would be in the 22%.

So about 50.

50, right.

So 50% of your money, you're going to pay 22% taxes on, 50%, you're going to pay 12% taxes on instead of paying.

If you have a Roth instead of.

And this is where good financial planning and projections come in.

Because you have to understand where your future tax brackets are likely to lay.

Right?

So you've got to do a forward looking projection.

But assuming you've done the forward looking projection and you go, look, you know, I'm pretty much going to be right around this range actually, or lower in the future or something like that, you might say, look, I'm going to take $10,000 out of my IRA and pay the 12% taxes.

And instead of paying 22% on the other 10 grand, I'm going to take the other 10 grand out of my Roth or out of that CD in the bank.

Or let's say that that 10 grand was to pay your income taxes.

They actually pay the income tax bill that you owe.

Right.

Maybe you're paying quarterlies or something.

You're using that ten grand to pay the quarterlies, kick it into January, get it into the next tax year, maybe you have more room the following year.

If you have more room the following year, you kick it into that year, you save the 10%.

You might say, well, maybe I'll get a penalty and some interest charges.

And it's not going to be 10%, you know what I mean?

It's not going to be anywhere near the tax savings that you save.

It'll be, it'll be, you'll have a significant improvement in the overall situation.

So understanding where your tax brackets are and how each type of account works too is super important.

Because instead of saying, well, I always take my income out of my ira, you might want to split that up a little bit depending on kind of where you're going to hit tax wise.

And just because you owe the taxes, understanding how the taxes work, you may not actually have to make that payment, you know, immediately, especially depending on how it came up.

You know, if it's a Roth conversion at the end of the year, you know, you have, you have some time to make that before your final quarterly is done.

So income sourcing plan, super important.

Yeah.

And if anybody is new, to ditch the suits partner.

It's hard to believe we're almost coming up on four years of doing this.

What you just described is what financial planning really is.

And so if somebody has been working with a financial advisor for years and everything is about the investments, what you just laid out as the conversations you should be having with an individual to understand, are there things that we're not taking advantage of that we could or should.

That's what actual financial planning is.

So I love when you talk about.

That Stuff, it gets pretend financial planners out there.

Yeah, I don't think we're allowed to say that, but we're saying there's people who do planning, so called financial.

Yeah.

Well, hey, this is so fun.

We've talked about income sourcing, we've talked about budgeting.

And then when I saw this in the show notes, I was like, gosh, I didn't even know is this one's kind of fun.

This is the extra paycheck.

So you kind of alluded to it at the beginning.

Talk to us about this extra paycheck and a little bit extra cash coming in 20.

Okay, so if you get paid every two weeks, if you're getting paid, you know, every other Monday or every other Wednesday, every other Friday, you're getting paid every other week, which means you always have two extra paychecks in the course of a year.

Well, this year at least the way our payroll works, we have three.

Apparently because of the way that the math works, you get every 11 years, if you're a biweekly paycheck person, you get an extra, one extra paycheck.

So like you would actually get three extra paychecks in that particular year.

So this is important.

You know, I try to look out ahead of the next year and figure out where I'm going to be, what things I'm going to pay for, you know, when I'm going to do stuff, that type of stuff.

And understanding when you get these extra paychecks, they don't just happen.

It's not, oh, wow, I have an extra $4,000 in my account.

Back to budgeting, I must have done a great job.

No, you just got that extra paycheck.

Okay.

You know, you're so, so understanding where that's coming from.

But what you can do with it, I think is important.

And this goes back to spend or build or maybe a combination of the two, if you're thinking about, okay, let's use this as best as possible to make next year easier for us, make it more fun.

Wouldn't you rather pay for vacation out of cash than on a credit card?

Yeah, that would be so much better.

So the first thing is, do you have credit cards with high balances that extra paycheck comes in?

Let's say you get an extra $6,000 in your paycheck, or maybe it's $3,000.

Whatever it is, maybe you get only 2,000.

Take $500.

Then if you need to and do something fun and special, take the other 1500 and pay off that pay down that High rate credit card, you know, or if you can put it all towards it, you're now saving.

If you were paying 20% interest on $2,000, you just saved yourself $400 for the year if you put two grand down on it.

High rate mortgage payments.

And the reason why I say this high rate mortgage, a lot of people say I'm going to make those extra payments on the mortgage.

If you have a low rate on your mortgage, stop.

Your money is so much more powerful putting it in an IRA or a Roth than it is paying off a two and a quarter percent mortgage or a two and a half or three percent mortgage.

Again, that is the difference between people who become insanely wealthy and people who just, just maybe get comfortable.

Well, and I was just looking up on here, I might be wrong, but you did a lot more of this research on it, it looks like.

So it's not that you're going to get three extra paychecks, boom, boom, boom.

But it looks like it's going to hit in spread out months, maybe January, May, August, October.

So why I'm saying that and why that's important.

Well, that would be 4.

So you're only going to get 3.

I know you're only going to get 3.

Kind of this little thing that I was reading said it might depend on it.

But why I'm saying that is if you can plan ahead, right, then you know that these are going to hit incrementally throughout the year.

Making a game plan.

So then when it does hit you or your spouse, more Amazon boxes aren't just showing up that week.

Well, think about how much better you'll feel about stuff, Steve.

If you got stuff that you want to do for the family or things that you need to pay off or that new washer machine you need to get because, you know, the old ones wearing out, imagine how much less stress you'll have if you'll know when you can do it right.

I think that that's huge and I think so many people are just willfully, you know, oblivious to how their paychecks work.

And you know, this is empowering and is empowering for people.

Savings.

If you don't have savings.

Yep.

You know what I mean?

Put at least a big chunk of that paycheck into savings.

If you're the type of person that whenever you have savings, you spend it.

I've had to do this with clients before.

We set up a brokerage account, we put their money in a brokerage account.

We'll stick it in a money market just like you would do in savings.

You make, you know, your money, market rate of return, whatever it is, but you have to go through somebody to ask for the money back.

And normally that slows people spending down, right?

Because it's like, hey, Travis, can you send me back the money?

Okay, what's a go?

What's going on?

Oh, you know, I'm just not responsible in my spending.

You normally cut that.

It's like getting a trainer at the gym.

You walk into the gym and the trainer goes, how'd you put on £2 last week?

I don't know.

He's like, tell me how much pizza you had.

Yeah, you're right.

I had two pizzas last week.

You know, it's like, come on, you can't, you know, so having a trainer or having a coach or somebody that you have to go through to get your money a lot of times will help you change that behavior.

Fund your retirement account, whether it's a Roth or traditional, but don't just do either one.

Randomly look at your tax brackets.

If you're in a high tax bracket, that traditional is probably going to make a lot of sense.

If you're in a low bracket, that Roth's going to make a lot of sense.

You get that big tax return at the end of the year.

You, you know, I know this is outside of the payments, but you know that that's your own money coming back.

That's money that you overpaid into the system because you didn't properly calculate your withholdings.

And as much as that's fun, if you're not funding your retirement accounts and you're getting this massive check back, and you're like, well, I can't fund the retirement accounts because I can't afford to during the course of the year.

That's what that retirement or that's what that tax return is supposed to go to.

So.

And you could say, well, you know, that tax return, that's how I plan for my vacations and pay off the credit cards.

Fine.

Then these extra payments that you get, these extra paychecks, put those towards those things.

And then the last one we have is fund a 529 account.

Yep.

And I think we.

We're going to cover 529 accounts later on in some of these episodes.

But the earlier you fund a 529 account, the better.

If you fund a 529 account, the first one or two or three years of a child's life, that is far better than you funding it for, like, you know, from, from the time that they're 10 to the time that they're 18, you'll have way, way you'll be so far ahead, you'll never catch up.

Little 529 sneak peek.

That's supposed to be in the second one.

So see, folks, another freebie from Travis Moss.

And hey, two things I would encourage you with.

If you're married, if you make decisions with somebody else, if you know that you get paid every other week and you know this is coming, start having the conversation now.

Get it out on the table.

Hey, do we know this is going to happen?

What are we preparing for?

But also, I think if you work with a planner, I know we will work with our team to know that this is happening.

So if you deal with clients, get it on the agenda for the upcoming meetings and let them know, guys, what are we doing with this?

This is the importance of having accountability and working with somebody.

So some, some pretty exciting stuff that can seem so elementary, but given.

Yeah, go ahead.

One more real quick because I know that you're trying to wrap up.

So I didn't mean to interrupt, but if you're working on your budget and you get paid every other week and you don't know that, so you say, look, you know, I, I'm planning for retirement.

I get $3,000 after tax, every paycheck.

So it's $6,000 I need to replace when I retire.

Well, if you're getting paid every other week and you're getting those extra paychecks and you spend that over the course of the year, it's not going into extra savings.

You need to know that.

You need to know that you rely on those extra payments.

So you do need to be aware of this in order to figure out, like, your income sourcing plan or your budget.

I just appreciate that we've been apparently podcasting so long together that I must have a closing podcast voice that you're aware of.

So the fact that you knew I was bringing it to a close is absolutely true.

So, folks, thanks for stopping by.

Ditch the suits.

We know it's been a heavy lift this year.

There's been a lot going on in the world.

This whole series is about bringing you 11 practical things you can do.

We've covered three.

We're going to have a couple more in the next episode and three episodes total in this, so stick with us.

Remember, there's going to be 11 practical takeaways, and in the show notes, we will include each one of those so that you can start taking action on them.

So, as always, thank you for being our guest on Ditch the Suits.

And the next time, here's getting the most from your money in Life.