Mailbag: FIRE, Family Finances, and Finding Freedom
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You're listening to an Airwave Media Podcast. You may be coming from a scarce background, which gives you so much fear around the risk that's involved in investing your money. And that you need to dive into. Where did it come from? When did it start? When does it rear its head? How is it impacting your money behavior? And what can you do to lessen the impact of that money trauma from your past onto your future and your future choices?

Hey, everyone. I'm Jean Chatzky. Thank you so much for joining me today on Her Money. Today, we are bringing you an extra special mailbag with Shang Saavedra. If you listened to our Wednesday episode this week, you know that she is one of the modern day leaders of the FIRE movement. She achieved financial independence.

At just 32 years old, she laid out how she did that on Wednesday's show. Fascinating journey. And I really appreciate the fact that that Sean was so honest about how difficult it was because doing hard things. Yes, of course, we can do hard things, but it doesn't mean that they are not hard.

hard. Anyway, I couldn't think of anyone better than Shung to answer some questions, some of your questions on saving and investing strategies, whether or not you want to fire as well as getting out of the workforce and into retirement as early as you can. Before we get into it, we're going to take a very quick break.

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I am back with Sheng Saavedra, author of the book, Wealth is a Mindset. Sheng, thanks again for being here. Thank you, Jean. So excited for this episode. Are you ready for our first question? I am. Okay. It's from Michelle and she says, "I was able to retire two years ago at age 58. Although I'm far from rich, I'd like some simple advice.

to those looking to retire early or at a reasonable age. If you're retired, what's the one piece of advice you would give someone to get where you are? Love that question. It is so great and congratulations on retiring, Michelle. That's such a huge achievement.

And I think that with your experience and your wisdom, you have a lot to share with other people who might be asking you that same question. And from my perspective, I think the biggest mind shift that people need to take when it comes to retirement is that it's not an age. Instead, it's a number and it's also a state of mind. So a question or a piece of advice that I would give people thinking about retirement is,

Let's flip that question around and ask, if money was no longer a worry, what would you like to be doing with your life? That is the state of retirement for me. And I think that if you can envision that future, then it's a lot easier for you to work backwards from that future to figure out what you need to do to get there. I love that answer. I also think that

And I'm not retired. I've been very open about the fact that I'm terrified of retiring, not because of the financial aspect of it, but because I really like work. I like what I do and I don't necessarily want to stop doing it. But I think sometimes we think that when we're retired, we shouldn't pursue opportunities that pay us. And getting paid feels pretty good.

And if those opportunities come your way, Michelle, I wouldn't necessarily turn them away. I would remember that if you make a little bit of money, maybe you can travel more extensively. Maybe you can give more.

more extensively. Maybe you can help other family members with their challenges. Money is just a tool that we use to accomplish different things that we want to accomplish, whether we need it or not. And having more of it is not a bad thing. It just opens the door to additional opportunities. So when I heard your question, that's what it made me think of.

And I know, Shung, that a lot of FIRE proponents who I've talked to over the years actually dip in and out of the workforce. They take opportunities that come their way that they want to take. I mean, that's the thing about FIRE. When you have enough money that you don't need to work, you can choose when you want to work.

Absolutely. And there's a lot to be said too for the mental health component of keeping your mind active and engaged in some form of activity, whether it be work or volunteering or caregiving, because I did try out a quote unquote mini retirement by taking a one year unpaid maternity leave after my first child. And that taught me a lot too about my relationship to work and also my mental health. And I recognize that with

almost no work on my plate. That also wasn't very, not a good thing at that time from my mental health. And so that's also why I continue to work in my capacity as a personal finance coach. It brings meaning and also keeps my mind engaged. Yeah, people who are engaged are happier and healthier, right? There's a lot of a lot of data on that. Our next question is from an anonymous listener. Anonymous is always fine with us, guys. You know that she writes,

I've always been a good saver, maybe too good. I have six figures in a regular savings account. I've maxed out my retirement contributions, paid off my house, and opened an IRA. I know I could be investing or earning more on my savings, but there's some money trauma that makes me keep my savings liquidated.

I also have a kid starting college and know I have done a disservice by not sheltering enough from the family contribution calculation. We have a 529, but I've never been sure how much we should be actually contributing to it. I feel overwhelmed by these mistakes. How can I turn it around? You have a paid off house? How many people can talk about that? That's a huge accomplishment.

And I think the first thing I would encourage you to do is not to beat yourself up, not to live in regret and not to let regret get to you because we got to celebrate all the goodness that you've done financially. You got to feel good about it because if you feel bad about your situation, you continue going forward. What you're more likely to do that I discuss in my book is make decisions out of scarcity. And I think that you can make a lot of decisions out of abundance.

at this point. Talking specifically about your child starting college, 529 accounts are designed for parents who want to save and invest for supporting their children's education and get a bit of a tax break on the end. What the 529 does is that when you decide to take the money from the 529 at the end and spend it towards education, it's tax-free growth. And let's say that you had been doing this for

the 18 years that your kid's been alive, that can be significant. Since your child is already in college, the 529 probably isn't going to be that beneficial for you. But I think what can actually be a much better service is, well, you probably have some money set aside for them. So that's great. But I also want you to communicate and talk to your child about personal finance, about relating to money. And probably at this time would be great thing to ask them about,

Have they ever thought about what budgeting might look like and what does it mean to save money and what are thoughts about investing? They're of the best age. That's the best age to learn and get started because they're going to go into the workforce in a couple of years. And if you can equip them with a little bit more financial literacy, they'll be very much prepared going into the workforce and saving for their own retirement.

I also think it sounds like, and that's amazing advice, I think talking to our kids about money throughout their lives is so, so important. I also think when she talks about not sheltering enough from the family contribution, it makes me think that there's some student debt here, that some borrowing for college has happened.

And one of the things that you might want to consider doing as long as you're on track for your own retirement, and it sounds like you are,

is helping repay those loans, helping your child get a start on their adult life by knocking out that debt so that they have a clearer runway to being able to afford to live independently and to start saving for their own future.

We don't want to do this if we are having trouble funding our own retirement, right? There's a reason that there is financial aid for college and there's no financial aid for retirement. Retirement comes first. But if you can help your children escape or avoid or pay down their student loans, that can be a really...

amazing thing to do. So I would suggest taking a look at that as well. And I want to talk about her money trauma too, because the money trauma is at the root of a lot of her feelings around her

her money, you may be coming from a scarce background, which gives you so much fear around the risk that's involved in investing your money. And that you need to dive into. Where did it come from? When did it start? When does it rear its head? How is it impacting your money behavior? And what can you do to lessen the impact of that money trauma from your past onto your future and your future choices? And not pass it along to your kids. Yeah.

Absolutely. We've got two more questions, Shanga. I'm going to take a very quick break and we'll be right back in TM Up.

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We are back. I'm talking with Shung Saavedra, author of the book, Wealth is a Mindset. Our next question comes from Ginny and Ginny says,

If or when you get to the point that you have a million in savings to use in retirement, what should you do? Should you stop adding to retirement savings, retire early, or work less? Those are three pretty distinct choices. I know. Well, I love the fact that you gave us a solid number. So let's use the 4% rule here.

If you had a million dollars, according to the 4% rule, this would support an annual expense of $40,000. Now that's a great time to ask yourself, is that something that you could live off of? You would be able to do that by comparing it to your expenses today. If not, then I would continue investing and working to say more.

You know, and that's the really interesting thing about retirement calculations. The most recent number, and I know this because I was doing some research yesterday for a story that I was writing for my AARP column. Northwestern Mutual does a survey every year where they ask people how much they think they're going to need to retire. And the most recent number was 1.46 million, which was a big bump.

15% bump from 2023 to 2024 and it was huge

huge from five years ago. Five years ago, the number was under a million dollars was what people thought they needed in order to retire. But we pull these numbers out of thin air, and not enough of us run the calculation on what it actually costs us to live today, and what it might cost us to live in the future to do the things that we want to do. And so

When you're doing a pre-retirement checkup, and this is the exercise that we go through in the pre-retirement version of our Finance Fix coaching program,

We take you through all of these questions. How much does it cost you to live today? When is your mortgage going to be paid off? What debts are we expecting in the future? We look at all of those things and also how much you're earning on your investments, how quickly you're adding to those investments. It's a very robust system.

calculation. And without doing it, you may be able to figure out if the average person can afford to retire, but you cannot figure out if you can afford to retire. Because you went through fire in your own life, Shung, how did you look at what you needed for sustenance? Yeah, basically, I looked at my expenses at that time, and then asked myself,

would I sustain similar expenses in retirement? A lot of answers actually, no, I would spend less because I wasn't envisioning a retirement in the heart of Manhattan. But a thing that I needed to add was healthcare because I knew that was something that I hadn't thought of before. And also the question is, is it retirement with children at home or with children out at home? That's a huge part too, because kids are very hungry all the time. Yeah.

Kids are hungry. Kids' feet grow. They're just expensive. All right. Our last question is related. This one comes from another anonymous listener. She writes, hello, ladies. My question is, when, if ever, do you have enough money to retire? My husband is 62. He's had some health issues. I'm 50. We have the following. A million in retirement accounts. $50,000 in various stocks. $35,000 in cash. $35,000 in cash.

Our home is valued at $450,000 and we owe $110,000 at 2.25%.

We own two rental properties with a combined income of $3,000 a month. One is paid off. The other has less than $20,000 on it. They are collectively valued at around $400,000. I will have TRICARE, that's health insurance, if he passes as my husband is retired military, and I'll also get a portion of his military retirement pay.

I will get a pension starting at 60. Besides that, we have very little other debt. Our monthly income is around $7,000 to $8,000. That doesn't include my pay. We live pretty quietly and we take one or two modest vacations a year.

The problem is I would like to go and quit working. I've been at my job for 20 years. It's making me miserable. I am the senior employee in the office, and while I could transfer to part-time, I would lose weekends off and work erratically. So here's the pickle.

My financial advisor said I need to keep working for at least five more years and that we do not have enough for me to quit right now. However, I worry that something will happen to my husband and those years we could have had together will be gone. My husband and I would like for me to retire."

Well, first of all, can I just say that these are the sorts of questions and the sorts of numbers that you need to run in order to decide if and when you're able to retire. You also need to look at Social Security and when to tap Social Security once you get into your 60s. And

I don't exactly understand why your financial advisor is saying what your financial advisor is saying, but that's because I don't have the insight into your spending that your financial advisor has. You told us what you earn and you told us that you live modestly.

But without the numbers associated with those answers, it's really, really difficult to answer the question. Yeah. Here's my approach to it without having those numbers, because I agree not having their expenses is actually a very missing critical point. But I divide it basically into three sets of numbers. The first set is what is your net worth? It sounds like it's a million in retirement accounts plus another almost a million of real estate accounts.

with some debt against them, but not significantly. You can practically pay off your debt today if you wanted to. So I'm just rounding it to $2 million. Their net worth is around $2 million. Then the second bucket is what's their retirement income. Sounds like there is a military pension of some sort. Sounds like she's going to have a pension. Sounds like there will be Social Security and rental income. I'm not sure if the numbers they gave us was

combined or separate. So it sounds like we're talking about anywhere between seven to $10,000 a month without her even working, which is actually a lot of money, to be honest. It is. Yeah, it is a lot of money. And then the third bucket is how much are you spending a month? If you're spending less than what you're making right now, not inclusive of the woman working, you're pretty much retired because not only can your current non working income cover your expenses, you still have $2 million.

in assets. But that's where the question is, are they spending more than that non-working income? And how much is that? And how much would that eat into their assets? Because half of their assets are homes that you would need to reverse mortgage just to get the money out of it or sell the home to get that value out. I would sit down with another financial advisor

and run a different set of numbers, run another scenario. It's not necessarily going to cost you a ton of money in order to go through that exercise. I think this is one of those occasions when it's worth it to get another perspective. And I would go back and I would challenge your current financial advisor and ask, why? Why do you think, if indeed you are spending less than you would be bringing in,

Why are they saying that you wouldn't be able to retire? Is it money that they think you need to spend on long-term care insurance? Is it money that is going to some other need that hasn't been defined here? Make them answer the question so that at least you have a clear sense of why you're working and

for as long as you're working. Yeah, because time with your spouse matters a lot, especially when you mentioned that he has health issues and you don't want to be stuck in a toxic place forever. So definitely, I think a second or even a third opinion would be very valuable here. The other and final point, because you bring up a really, really good point there, Shang, is that you're a young woman. It may...

be possible for you to take some time out of the workforce and to know that you have an on-ramp

back on or to transition to part-time to give yourself more time with your husband while continuing to bring in a smaller but meaningful income that can tide you through to a secure retirement. But let us know what you decide to do. I'm very interested. And Shang, once again, thank you so much for spending the time with me. Of course, Jean. These are fantastic questions and I'm glad we got the opportunity to answer them together.

Me too. We have an amazing, amazing community here at Her Money. Thank you very much for listening, everyone. We'll see you next time. Thanks so much for joining me today on Her Money. If you loved this episode, please give us a five-star review on Apple Podcasts. We always value your feedback. And if you want to keep the financial conversations going, join me for a deeper dive.

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