Episode 27: Emergency Life Management Tactics For Investors

ABOUT THIS EPISODE

On this episode of the Build Your Life Podcast with Financial Expert John Browning, we're discussing how to deal with emergencies in life when it comes to your investments.

 

Emergencies can and will happen to all of us. So, how can we better prepare ourselves for these times? Tune in and listen to financial planning expert John Browning as he shares his top tips for staying flexible, reducing stress, and coping with these times. 

 

For more information, visit www.GuardianRockWealth.com to learn more about what John can do for you. Or, give us a call at (312) 372-5000.

 

 

Welcome to the build your life podcast with John Browning. Build your life as a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth, with offices in Hawaii, Colorado and Illinois. John's also the author of the book build a life, not a portfolio, a guide to your financial future based on your personal values. Would you can purchase on Amazon, or stay around to the end of today's show and I'll tell you how to get a free copy meld right to your door. I'm Michael De Lan, your host for the next few minutes as we chat with financial expert, business owner and author John Browning. Well, John Browning, how are you doing today, sir? I'm doing fine. How about you? Tremendous. It's a it's a good day and it's one of those days where I've had to be what I call infinitely flexible, meaning, you know, you go one way, then you have to go to the other way to serve a lot of people. But that's okay, infinitely flexible. I have had one of those days Canada this morning and I have I know exactly what you're talking about. Yeah, I thinks I'm going always go as playing right. So much for your schedules. Right, exactly. Yeah, yes, who wants for schedules? I think other people have my schedule, but that's okay. It's a lot like I forget what the guy's named, the little rubber guy from her childhood that you poll and you know, go, don't be guy. He was like my one of my favorites. Yeah, and Split Your Armstrong. Yeah, stretched Armstrom. That's right. That's what I feel like some days. And we give away our age, but we probably probably did. They were going to wonder how out to old guys like us can even figure out technology like this to podcast, but hey, we do it. So, Hey, I want to talk about what what gum they may have felt like when he was getting stretched, because that would be what I would call a catastrophic event in your life, right, and that happens to all of us. In fact, a lot of us have been through some...

...type of a catastrophic event recently with the whole covid nineteen and coronavirus that that hit really harden is still prevalent. And we want to talk about what I'm titling emergency life management tactics. So we know that events like this in life are going to happen. You know, pastor friend of mine one time said, you know, if you're not in a crisis right now, you're either heading towards one or you're coming out of one more than likely, and and I think probably the same could be true about catastrophic events in life, and there are some things that we can do to prepare for them from a financial perspective as well as an emotional perspective, John. So let's let's talk about that. You know what what happens if you do suffer a catastrophic loss? What happens mentally? What just happens financially as well? Yeah, that's you're right. It is something that we've been helping some of our clients through, especially some very younger clients. Frankly, most of our our older clients that are in retirement did not get impacted financially because they were invested correctly, but some of our younger clients who are still working and still in the accumulation phase had, you know, they got furloughed, some, I got completely laid off and we're getting this whole new second wave of people who are very successful and suddenly their companies are realizing they're one of the easier, bigger targets to eliminate their salary, and so we're seeing another kind of wave of actual layoffs for companies to save some money. It's unfortunate, but one of the things away from the portfolio management side, you know, I always like to talk about the other side of it as well, because it's so important when you building your life, not just your portfolio but it's take take time to process things. It's a it's a grieving process. Something happens, you lose something,...

...whether that's a job or or something else. You know, something happens in your life and you lose something that you've worked hard for, that was very special to you, or whatever it is. Take a little time, don't make any what I call knee jerk reactions and processed that chunk of your life that is no longer there or might not be there for a while, may come back later. Just don't make any sudden moves on that. That's that's probably one of the most important things to do, aside from from anything on the portfolio management side. The you might do. Yeah, and that that's Great, council John, because that that applies in in lots of areas of life and too many times we want to rebound really quickly and go I just shake that off and here we go, and you're probably not in the right state totally to do that. So that's Great, council, just to take some time and into process, and I tell people a lot of times just even journal, even if you're not a big journal just get a no pad and a pen and just jot things down that come to mine and there there's great. I'm an auditorial, auditory processor, right, so I walk around the House and my wife's lock, would you say? I'm like now, if I if I need you, honey, I'll call your name because I just talk. But it helps me think through things right and I normally have the right answer. So, you know what, I love that. That's good. Well, least that I think I have the right answers. It's interesting. I'm a doer. Yeah, I like to do things. You know something's broken, I want to go fix it right now. And I think a lot of we're going to stereotype here for a minute. I think a lot of men are like that in general. Yeah, and I really have to work on this. That the whole idea of process things. Yes, and and you know it's a little touchy feeling, but the reality is we're emotional beings. It's the way God made it and and if we don't take that time we're more likely to make a mistake. Yeah, yeah,...

...and that's good, and and on that. I mean you mentioned how God made us in thanks. I've right through the Psalms a few times and you look at David and some of those Palmas. They not just process things, they had some really hot conversations with God, and I think that's okay. Right, we need to get it off of our chest. I think God's big enough to take it right. Yeah, there's a there's a purging of what's going on, the Ansi and saying all right, what's going on. And then at the end of those psalms, he would they would always turn it back up and praise God for, you know, his sovereign and all that. But I'm taking time like that away and and really just thinking through life, because the other aspect of that, John, is you and I realize that most of the time what has happened is not really catastrophic. It may have caught us by BYS for surprise and it may, it may draw us and make us rethink some things, the most of the time, once we get our head screwed on straight, we're like, you know, want, okay, how do? How? Now? Do I make good out of this situation? Right, that's that's right. Yeah, I think we all think things are catastrophic. But define catastrophic, right, let's let's think about what is catastrophic. And catastrophic is something that you absolutely cannot recover from, and there are very few, not that there are none, that they're very few things that you cannot recover from at all. So that's good perspective, right, and it will absolutely everything's perspective because, I've been telling my family is a you know you there's always somebody who has it better than you, but there's always somebody who hasn't, not so good as you. So it depends on which way you're looking. A lot of times depends on how catastrophic something really is, because you're probably better off than ninety five percent of the people in the world and as long as you have your health, in your mental ability, you can go out and recreate yourself. Yep, exactly. So let's talk. But catastrophic. One place. This really hits people. John is is is finances, because a a lot of people don't...

...follow the Accouncil that you would give and in many other advisers. Is having an emergency fund set away with what maybe three six months of living expenses in case you would lose your job or get downsized. What do you think about those emergency fund situations? Should we have them and are there different types? How, I guess, how liquid should that money be in things? Well, I always say that you know, your Emergency Fund for three months should be somewhere that you can get access to it, not three days from now, but right now, because it's in emergency. You need those funds now and even if they're not earning you very much in terms of interests and and that type of things, which that type of fund is not going to be earning you very much money, it's still important that you maintain that financial flexibility for I always say three months and if three and that's three months of take home pay. So I don't get crazy about it and say it's got to be your girls pay and three months and six months and twelve months. I don't want to be unrealistic, especially with the younger folks. Who might be listening. That's a real tough not to swallow. And Year that's a lot of money for people who are a little bit younger as they get started. And some people listening this may want to come tar and feather me when I say this, but, as as almost said, kids, they're not kids, they're adults. As people begin their careers and are just getting started, you tell them you need three months to liquid cash just laying around, they're like yeah, you know, there's laughing at you. That's this is literally not possible. Are you kidding me? And this is where they'll those some folks will tire in feather me. I actually suggest that these younger folks get...

...credit cards. Okay, let that sink in and people get angry with me. No, credit cards are evil, but it's a very important part of the growing process as younger people come up in the world is to number one, it builds their credit as long as they treat it correctly and with good discipline. Number two, it acts as their emergency fund, but before they can build their own. So you really have that conversation with the younger folks that I talked to and it's really important to have a somewhere where you can access cash if you need to, and if that has to be a credit card so that you can eat, then that's what it has to be. Right it's the solution for the time that you're in right now. So wow, that's that. That's yeah, no, I like that. I mean I like that idea. Joe And I use credit cards all the time. We pay them off at the end of the month, so I'm a big fan of that. But that goes to that discipline aspect that you talked about and we have had times in our life when we had a credit card that we just kept in a drawer for those emergency times and and I never really thought about it in those terms. My wife probably did, but to have it that we could go to if we needed it. And you're right, because if I need groceries or if I need gas in my card because I've got to drive eight hours to go see my mom who just fell or whatever, that that might be the solution right now, as long as I don't get crazy and rack up credit card bits that are not paying right. Right. There's all kinds of tips and tricks. Just you know, if you're not as discipline, how do you make yourself discipline some kinds of ticks something. I put it in a Ziploc bag, fill it with water and put it in the freezer. Yeah, literally had people do that just so they have to think about it for a while before they can get that thing followed out right. So there's all sorts of things like that. But but generally speaking, I say it's three months of your take home pay and then another...

...three months to have in something that you can access in a reasonable amount of time. So that's a total of six months. But I don't see the point in having a full six months of very liquid returning next to nothing, or maybe negative after inflation. You might as well have that additional three months and something that you can access within a few weeks or a few months as the second part of Your Emergency Fund. So kind of a two tiered type of process. Yeah, now I like that and that that allows you to at the same time put that second six months or that a second three months, I guess it is in something that's going to grow a little bit, but you have more access to it, is not locked away for life. That's right and that's very cool and that gives you more flexibility that's good. What about? So let's talk about a preparation, you know, because everybody talks about, you know, preparation before things and so water some things people can do to start preparing for catastrophe in their life if they're not in one right now. Besides, you know, getting this three months in liquid, I guess super liquid or ice right now, really good, and then three months more where they can acts as it within the next month or two months. So it's in my liquid. And how soon should I start this? When I'm when I'm really young? Is that the day? When I'm at young and have young kids, because the bill are really high and I don't have a whole lot of money, it's probably the time to do it. What do you think? They're exactly the time to do it. And then, frankly, it's when you're in many times more likely to have a catastrophic or as we define a catastrophic and emergency happen, is when you're younger. Your kids, you know, they they fall and they break their arm and you have a deductible, you know, to pay or or something like that happens. Or you know, younger people tend to be the first people that...

...they look to to furlough, layoff while whatever. The time to start is now and everybody can take look at this systematically. I look at everything that I do. I try and look at it and as a systematic process. So if you get paid weekly, Bi weekly, monthly, whatever. Most people get paid bi weekly. So every two weeks with that check, whatever it is that you can legitimately afford, until you get up to that three months, it's a hundred bucks every two weeks. Put It away and put it away the next two weeks, in the next two weeks, and then you'll be surprised how quickly you can get that cushion built up. And when you have it. I also recommend that at the end of each month you you have a goal written down. I don't care if it's on your refrigerator, in your journal, in your wallet, whatever, you have it. By May thirty one, I'm going to have two hundred dollars in my emergency fun by June thirty I'm going to have four hundred dollars to and you put a check mark. There's something tremendously therapeutic and doing that. And if you're further out on your career, here's the crazy thing, Michael, is when they have the government shutdown, they found that like eighty someome percent, we're living paycheck to paycheck. Yeah, and what are these people supposed to do? Right? So, and they didn't have that Emergency Fund. It became a major issue. So don't be like that. Have that Emergency Fund. And that's good because if you dig into those statistics, that eighty percent are not the poor of the poor of the poor. These are there. They are the well off. They are the ones in your neighborhood driving all those fancy cars and having the extra houses and they says they're just living paycheck to paycheck. They don't have that retirement. And what happens, John, as you know, is what does I do? When you have that emergency fun built up, it reduces stress in life and absolutely and it makes a catastrophe not really as bad because you know you have the cushion built in and you're...

...like okay. I mean we've got some friends out in California. He lost his job in this whole thing, and they're like, you know what, we're okay, our house is paid off, we don't have any dat, we've got some money in the bank. We're okay, and I know guy's going to Pry, and I thought that is a really good position for a young couple to be in. Yeah, young couple especially have their house paid off. That's really great. This is another idea. I mean, well, I did. Yeah, they're they're like us. You know, we, Jill and I, have, and don't take this wrong, we've been blessed with a bunch of dead relatives. So we've got a bunch of people die in our families who have given US money and so we've been able to do some things. Our House hasn't paid off, but that's what happened to this couple. They had some people died and had some money. So they were smart. They didn't buy houses and Garden Your cars and think they paid off their mortgage because that's what they chose to do. But it's really paid off. So yeah, that's that's actually in a whole nother topic. Do you, if you have the money, do you pay off your mortgage, which is generally a very low interest rate, but now you don't have the same tax benefits of having that mortgage interest anymore. Okay, okay, okay, well, we're going to talk about that on the next episode, because that is an entire episode, John, and you're probably going to make some people mad on that because I'm sure the way you're going to approach that might not be what everybody else is but it's a great conversation that I want to dig into because I've had great people on both sides of that fans, and I sit here sometimes going yeah, but well, okay, how about so let's see if we can knock that out in the next couple of weeks. So I'd love that. That's a great one. That's a great topic and you're right, kind of gets away from from this, as you talked about young people don't want to. Want to mention this real quick to young people that have had to use that credit card. One of the things that I also mentioned to them and its value add for anybody listening out there who has credit card debt, I can very rarely see this word, but there's a way to get a guaranteed, specific return right you start paying off the credit...

...card. That credit card is probably changing you twenty percent on any balance that you're carrying. So rather than invested, I can't guarantee anything in any kind of investment that's going to give you twenty percent. So every time you pay that credit card off you're making twenty percent or whatever they're charging you on that. That's awesome and I want to go we may do it a whole episode on that, because there are strategies. A lot of people, as you know, John, are really in debt up to the next they have credit card bail after credit card bail after, student loone after, and there's a strategy that people can employ to help pay those off systematically that I want to talk with you about on an upcoming episodes we're going to talk about should upaup my mortgage and how can I? What's the best way to pay off? I'm going to say credit card debt. It's really consumer debt right in a variety of ways. Yes, they're okay, good. I'm looking forward to that. I hope our listeners are too. That wraps us up for today. John, you've done a great job talking about catastrophes and and helping us really understand emergency funds. And if I understood you correctly, you you're a proponent of three months of really liquid cash and get to now and then three more months. That might take you a week, two weeks, three weeks to be able to access that money. A total of six months, but three months that I can get to you now, and you even talked about that. Could be a credit card in some cases. Right, in some very specific cases it could be done, and that's take home pay. That's not your gross pig three months of take home pick. That's a great disclaimer or differentiated because those are different numbers, aren't they? And we should do an entire episode on that because not a lot of people understand that. Right. So, anyway, that's great intimidating and frustutrate people through trying to get to that bigger gross pay number. It's something more attainable and they're just realize...

...that it really just has to be your take home pay. Yeah, yeah, you got to keep the lights on and the frigerator full. Someone so you keep those mouth fed. John thanks again for a great episode helping US understand dealing with cust the catastrophes in life, things that hit us, how we prepare for them and how do we navigate those and really, going all the way back to the beginning of this episode, take a bre either. Don't make rash decisions and make sure you get your head about you. Before you take that next step, process it and make sure you're talking to people like John. So reach out to John if you have any questions about what he's talked about today. I know he's happy to talk with you. John, have a great day of my friend. All right, Youtube. So thanks for listening to the building your life podcast with John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it is released. Have a terrific day.

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