True Wealth Is Time, Not Money.
Erik Nero of First-Step Wealth is Paula and Jon's guest today, and he thinks people have many misconceptions about money. It's not about the quantity of money you have; it's about what that money allows you to do. What are you passionate about? In fact, some of this reminds Paula of online dating!
Sometimes mindsets around money can be chased back to childhood. Erik tells a story of his dad making him earn 25 cents to buy a squirt gun. It's a valuable lesson, as opposed to thinking money just appears.
Paula and Erik also spend some time discussing the importance of saving while you're young. Recent law changes have made that easier, but the younger you can start, the better. This is especially true because life often gets more complicated when you get older.
Erik often asks his clients, "What are your values and thoughts about the importance of money and how are those behaviors going to be matched to your overall purpose and outcome?"
Paula and Erik also muse over how hard it is to give advice as a parent; often, your kids will listen to the same exact advice, as long as it's coming from someone else!
Find Erik Nero at https://first-stepwealth.com - via email at Erik@First-Stepwealth.com or by phone at 518-893-1592.
Email Paula Christine at Paula@PaulaChristine.com. You can also learn more online at www.PaulaChristine.com.
Paula Christine: Hi, welcome to Beyond the Paycheck. I'm Paula Christine. Today, I've asked Erik Nero with First Step Wealth Planning to join us today. Welcome, Erik.
Erik Nero: Thank you, Paula. Appreciate you having me on.
Paula: My pleasure. "The importance of money is not what you think," what does that mean?
Erik: The importance of money, I think, is misperceived by many to just focus on numbers or how much money you have. It's really the emotional aspect of money, and its importance is really going to be unique to everyone, how they learned about it, how they value it, what money means to them personally. I tend to find that that's an overlooked first step when people are seeking guidance with respect to their finances. Focusing on that is really, I think, the most important thing that people can do before they start digging into their financial numbers.
Paula: What questions do you ask?
Erik: The first question, really, aside from getting to know them is, "What's important about money to you?"
Paula: Okay, so let me throw that at you. What's important about money to you?
Erik: Money to me is, first and foremost, security. It's taking care of the basic needs. It's being able to provide for those that I love and my family. Then it's also an opportunity for me to be able to participate in community, having time to be able to give back. To me, it's a mechanism to be able to buy or afford to myself more time to dedicate toward newer pursuits that give me a sense of fulfillment.
Paula: Hey, Jon, what does money mean to you?
Jon: It's funny because I've been sitting here listening to Erik for the first couple of minutes and thinking that, yes, it's very easy to quantify money. It's easy to think about money in terms of dollars and cents, but I think what Erik is getting at is it's those intangibles. It's those things that aren't easily quantifiable. It's a means to do something, but what do you want it for? For me, it's a way to travel. It's a way to visit friends in different parts of the country. Travel has always been a big thing for me.
Paula: I think mine is freedom.
Jon: Yes, I like that.
Paula: Money would give me the freedom to do all that I want to do and to be able to give back to the community. Sounds like my dating profile.
Jon: [laughs] You're very altruistic in your dating profile, Paula.
Paula: No, it does remind me of that.
Jon: "Money gives me the opportunity to take long walks on the beach with that special someone. Will it be you?"
Erik: It's funny because the industry has, for so long, put this marketing package together where a retired couple's walking hand in hand on a beach for the sunset. I know. That's really just not anybody's true vision of retirement. I think a lot of reflexive answers are some of the bucket list things, but, really, what it comes down to is-- and I tend to find it just articulated maybe in different ways by different people, but it really just comes down to time. How much time do I want to spend doing the things I want to do or exploring the things that I want to do? Money does give us that.
Paula, you had said freedom. It gives that freedom to be able to spend the time because really, true wealth is not numbers on a piece of paper. It's time and you can't buy any more of it. It's a depreciating resource and none of us know how much of it we really have because nobody's guaranteed tomorrow, so how do you use your money? How do you make decisions today, based on where you are in your life cycle or journey, to give yourself the opportunity to have that freedom or time?
Jon: Erik, it's funny. You hear the old cliche about "Time is money." You have just taken that to the nth degree with that explanation where, yes, time is money and you use your money to afford you time.
Erik: I tend to find, also, that in speaking with people who are primarily self-made, because that's where most of the wealth is here in the United States is first-generation self-made wealth, there was a lot of sacrifice that went into accomplishing that. I'm just thinking of the people that I work for right now that were business owners, it did come at quite a cost. That could be a marriage, could be relationship with family, children, all of the above.
The pursuit of wealth always comes at a cost, and that cost is both time and, in a lot of cases, it could be relationships that are important to those people. I think a certain amount of sensitivity given to the fact that whatever number's on a piece of paper represents far more than their ability to purchase things or experiences. It also is a sum total of what it is that they've had to sacrifice to get to that point.
Jon: Yes.
Paula: I love that. The question I want to have is, if you're young, how do you accumulate wealth but still have the time to do the things that you enjoy when you have limited dollars?
Erik: For younger folks, the job market is changing so rapidly where it's different than when I started 20-plus years ago in this profession. Now because of COVID and technology and work from home, things are looking a lot different when it comes to building a career. When it comes to, "All right, how do you set yourself up for the future?" I don't think it's any different now than what it always has been. Always pay yourself first. Make that behavior the habit. Make sure that when things do progress, as the career does continue to move forward, that you're using every one of those increases to increase your savings.
If you're working for a company, if a young person comes out of school and is working for a larger company, right off the bat, the industry is doing a very good job with more or less mandating contributions to 401K plans now, where it's a negative consent at this point, where a certain amount up to the match goes in. I think that's fantastic.
Jon: We've seen that with SECURE 2.0. Yes.
Erik: That's great. It's now legislatively mandated that people have to save into these things, but then take it one step further, and it goes back to developing maybe those money values. I can speak from experience. I remember, distinctly, when I was probably, I don't know, seven, eight years old, I remember I wanted a squirt gun. Where I lived was it's a small town in upstate New York, and it was a little five-and-dime shop, and it was just one of these very simple squirt guns. I wanted one. It was 25 cents. I asked my father for 25 cents so I could go and get it. He said, "You're going to have to earn that 25 cents." I had no idea what that meant, so he explained to me, he was like, "Money is something that you have to be able to earn by doing things that are helpful to other people."
What I ended up doing was just some chores around the house to help out, where I was able to earn a little bit of money, and I earned that quarter to get that. It taught me, at a very young age, that money isn't just something that appears, money is something that is earned. I think it comes down to, for younger people who are just starting, how has their experience been with money up to that point? Because I think there has to be a certain amount of learning to understand that money is earned. When you earn that money, setting it aside is like the first degree of safety when it comes to taking care of yourself. Just as you would take care of maybe your mind and your body and you wouldn't necessarily abuse it with substances or things that would be harmful, don't abuse yourself financially, either, and make sure that you are saving.
I've never met in my career anyone who's not financially on a very solid footing, who saved 10% or more from day one, they've all been, to their specifications, financially independent. It's all relative, but anybody that I've met that consistently has done that has set themselves up very, very well for a lot of options and choices later in life. I know that's hard for younger people, maybe, to see.
Paula: It is hard. I'm just looking back at my future. First, I have to say this, when I wanted that quarter when I was young, I just went in the couch cushions because change used to pop out of my dad's pocket.
Jon: To Erik's point, Paula, the money just appeared for you. That doesn't work.
Paula: It appeared out of the pocket, yes. It appeared. Okay, but my question is, though, when I was younger and just starting out in my career and then got married and had babies, I didn't do that because I didn't know how to pay myself first. I know a lot of people today don't know that, so let's say I'm starting out later, what if I haven't saved? How do I catch up?
Erik: Jon, you had mentioned that there's the SECURE Act, and it did increase some opportunities for people who are over the age of 50 to contribute more to their 401ks and retirement accounts. That's certainly the first thing to look at is, you've been afforded this opportunity. Let's say maybe children are raised out of the house, college is paid for, and some of that cash flow is back. That's what happens a lot, quite frankly, is, "Okay, I've got really, really big bills raising children, then when they're out of the house, I get some of that cash flow back. What do I do with it?" Saving that to a qualified retirement plan is step one. Use that situation, from a cash flow perspective, to say, "Okay, that money comes back, but it's got to go to my retirement plan" if you have one and/or participate in one. That's got to be able to catch up for those years. Now, money grows by compounding. If you had started just a little bit when you were 20 versus starting a lot when you're 45 or 50, there's a big difference there, as to what that potential value could look like.
Paula: There's a huge difference.
Erik: It's massive. You can't make it up, quite frankly. The compounding you've lost over 20 to 25 years, if you're starting late, you can't make it up, but you can throw a little bit more into these retirement accounts. I think more importantly, it just assessing what is your lifestyle at that point, and what do you want. What makes you happy, what brings you joy, how much money is that lifestyle going to necessitate to bring you that kind of joy and fulfillment? Then working backwards from there and saying, "All right. How do I need to be financially positioned? How much savings do I need to have, and, quite frankly, is it possible for me at this age in a reasonable timeframe, 10, 15, maybe 20 years, to save enough to hit that overall lifestyle?" There's adaptation, there's compromise, and then there's also looking at, if it's a couple partnership, what does each one of those two partners view as far as their optimal retirement? When do they want to retire? What are the things that they want to do?" because in any partnership, it's compromise.
It's just coming up with some way to get a level, clear, parallel understanding between the two as to what they want their life to look like and how money needs to support that vision. Catch-up number one, doing that first, right off the bat is very important. Use what's available to make sure that you can get as much money growing tax-deferred as you can. Then if you're fortunate enough to have more, there's other vehicles that you can throw that in. It could even be as simple as just putting it into a brokerage account with investments. There's certain benefits of having those types of investments grow and using them later for income.
It all comes down to where does it all fit in the context of a plan and what aspects do you prioritize over others and how do you change those priorities as your life circumstances change? Save as much as you can when you can. I think that's probably the only way to really look at that, given the fact that somebody may be starting later in life.
Paula: I think you missed one step, and I think that's meeting with someone like you. I think it's very important to sit down with someone who's educated and who specializes in retirement planning or even just financial planning, in general, to help you achieve those goals. It's very difficult, I think, to try to do that on your own.
Erik: I agree. I really think that if you even think about your own lives, has your life gotten more or less complex over the last five years?
Paula: I got divorced, so less. [laughs]
Jon: You're the exception. Paula
Erik: I would say, Paula, that you're the exception, but maybe, in other ways, it did get more complicated from a perspective of just what's out there.
Paula: It did. I'm all on my own now, so for me, it's even more important that I'm striving for that financial security, that financial freedom because I am on my own.
Erik: I think that probably even enhances getting a third-party perspective, a professional, who's practiced in being able to look at the various nuances and really explaining what those choices look like. It goes back to what I had said at the beginning. It's-- from a practitioner's standpoint, understanding you, or the person, and how they make decisions, how they value money, and then being able to come up with some potential alternatives and choices as to what to do, to say, "Okay, you want to accomplish this so that you can think and feel this way."
If you're visualizing yourself to say, like, Jon, in your case, "Okay, I want to travel and spend time with family. Well, I need to have a savings and investment program in place so that I can do that at this time. I need to have things in place that are going to meet my now, my soon, and my later. They need to be differentiated, and there's a lot of different choices with each of those three. What are those choices, what are the potential outcomes by making those choices, and which ones are going to give you the greatest level of confidence? Having somebody that can walk with you, a Sherpa, if you will, along that path, and say, "Things are going to change, the weather's going to change, goals are going to change, their lives are going to change."
If you just think about it, Paula, you said it, life has changed in the last five years. That happens. That's human existence. It's always changing. Being able to manage that change and have enough flexibility with those choices, it does a couple of different things. It's like today's information is. There's so much data bombarding all of us. How do you decipher what's relevant and take that relevant information, craft it into something that is meaningful, use that meaning to apply toward a purpose, and then using that purpose to come up with behaviors as to what to do and action steps to take to intentionally get yourself to where you want to be.
Otherwise-- it's like time. If you take control of time, great, but time can take control of you. It's the same thing when looking at what you want to do, financially, with your life, taking control, having purpose, but it all rests on, "What are your values and thoughts about the importance of money and how are those behaviors going to be matched to your overall purpose and outcome.
Paula: Erik, I just love your answers. They're all spot on.
Jon: Paula, I think Erik is hitting on a lot of things we've hit on in previous podcast episodes.
Paula: Agreed.
Jon: Having those three buckets of money, investing early when you're younger, but he definitely has a way of explaining it that I think is really resonating today.
Paula: It is. So glad you joined us today, Erik.
Erik: Glad to be here and glad that you're having me.
Paula: One last question for you then I'm going to let you go. What would you tell your 20-year-old self about money?
Erik: That's a great question. If I was to go back in time and tell that young person, "Just take advantage of the time because it goes by so fast. The days are long but the years are short. The only way that you can really know that is by going through it and being where I am now with my children. You just can't really see it when you're going through it that way. What I would say to myself is "Enjoy more of the journey, take more risks," and I think more importantly when it comes to my career and what I've done, I've always been within this industry, but "just be more you, and don't necessarily worry about the financial aspect of things."
When I had first started out, this is a tough business, you got to get clients and there's a lot of stresses and pressures and all of these types of things. I think I would tell myself, "That's all part and parcel of this whole gig. Don't necessarily worry about the financial outcome. Learn more, listen more to what's being told to you in these meetings by these people whom you're interacting with, and understand them more as people." I would've gotten to this realization that I'm at now and talked these things that are near and dear to me that I've shared with you in our conversation here, but the aha moment didn't happen for me, until much later in my career.
If I had had that aha moment earlier in my career, because maybe it's some different behaviors and said "Okay, I'm not necessarily worried about what the end result, the money, the earnings would be," I probably would have been able to help more people at a higher level of impact over the amount of years. I'm not sure if I answered your question directly there, but I think I would just tell myself to listen more, enjoy the journey, and not worry about the end result as far as the earnings are concerned.
Paula: I love that answer. That could be a poster. I think people forget that we get all tied up in the money, no matter what you do for a living because we got bills to pay and we want to do other things than just pay bills. Sometimes, we forget to take time and breathe and just enjoy where we're at at the moment.
Erik: I think if somebody is open and willing to see it from a different perspective and truly slow down and be introspective. I also think it's just a stage of life, too. A lot of the clients I work with are in their retirement years. Their perspective on their life is different. A lot of it is reflective. A lot of it is "Okay, I've raised a family, I've had a career, I've had success, and I've got the scars to prove it." It didn't come all easy, there was a lot of sacrifice involved in being able to get to where they want to go, and that's true of anybody moving through life.
There is wisdom with experience, and experience sometimes, in a lot of cases, does equate to age. From that perspective, I think imparting wisdom onto people who are earlier in their careers is important. I think their ability to receive it. It's just like with my children too. I'll try to say many of these things that I've said to both of you here today, but I'm not so sure they're going to really truly know it until later on.
Paula: I think also it's because it's coming from you too.
Erik: Yes, that's too. It's, "Hey, dad--" I coach as well. When my son is performing on the team, if the assistant coach tells him the same thing that I just told him, well, then, yes, that's going to be acted upon versus me saying it, and I recognize and I understand that. There's a lot of that at play.
Paula: Yes. I raised five kids, so I understand that they don't listen when you really wish that they would, but you're right, if you were to sit down and tell my kids the same thing as you just said right now, they'll probably take it all in and go forward with it. It just can't come from Mom.
Erik: Right. That's just part of being a parent.
Paula: I will say that, now, as my kids aren't-- because they range from 23 to 34, the older ones now start coming back and asking for advice and actually listening. It does get better. If anybody would like to get ahold of you, how would they get ahold of you, Erik?
Erik: They can call me at the office, 518-893-1592. They can email me as well. It's Erik, and I spell my name E-R-I-K, Erik@first-stepwealth.com. I always am able to have a 30-minute introductory conversation to understand more about that person, what they're looking to accomplish. Even if it's something that I'm not able to help them with ongoing, I always strive to have at least one or two resources or pieces of information that that person can use to help them in their journey. That way, they're a bit wealthier as a result of having a 30-minute conversation with me than before they did.
Paula: I've learned a lot from you today. I appreciate you.
Erik: It's great to be here. Again, appreciate you having me on.
Paula: If anybody would like to get ahold of me, they can reach me at paula@paulachristine.com or you can check out my website at paulachristine.com.