Bouncing Back: Overcoming Investment Setbacks - a podcast by Tony Mauro

Almost everyone has made investment mistakes at some point. In this episode, we’ll talk about how to bounce back from mistakes and avoid making them again in the future.

 

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Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript: 

Speaker 1:

... Back here for another edition of Plan With The Tax Man, into the month of August here in 2023. And it's time to talk about overcoming investment setbacks, bouncing back really if we've had some issues in our financial lives. And that's what we're going to get into this episode and how to, hopefully, avoid some of these again in the future. Things happen, we all make missteps and mistakes, but there's no reason we can't try to correct those and course correct and keep ourselves on the right path to get to and through retirement. So we're going to have that chat with Tony this week here on the podcast. What is going on, my friend? How are you?

Tony:

I am good. Just still enjoying the summer. It's going to be over before we know it here.

Speaker 1:

Well, we're into August, so yes.

Tony:

It'll be state fair time.

Speaker 1:

There you go. Now I got a little weakness for the funnel cakes there, the elephant ears.

Tony:

For the [inaudible 00:00:48].

Speaker 1:

Yes, whatever you want to call them. Some places they call them elephant ears, someplace they call them funnel cakes. It's the same thing, but at least I think it is anyway. Now I'll tell you something though, I've never had one of these before and I didn't even realize it was a thing until I tried it. Have you ever had what they call the walking taco? I believe that's what they call it, where it's basically all the taco stuff inside a like Doritos bag or a Frito bag.

Tony:

A chip bag.

Speaker 1:

Yes, a chip bag.

Tony:

I have had it. I haven't had it at the fair, but I have had them. That's what they are.

Speaker 1:

I never saw one before until I saw one at the fair and I was like, "Ooh, this is calling my name. This is incredibly not good for me, but I don't care. I'm going to eat it ..." And it was fantastic.

Tony:

It is good, yes. Our fair is so big. It's a big highlight around here. And every year they put out what's new at the fair for the food list because everybody goes for the junk food.

Speaker 1:

Sure.

Tony:

And it's just incredible what we have. Just weird stuff, like everything's on a stick here.

Speaker 1:

All right.

Tony:

And it's fried and it's just crazy, the foods. But I don't know if you guys have a big state fair or not?-

Speaker 1:

Yes.

Tony:

... but ours is big and-

Speaker 1:

Interesting stuff.

Tony:

... I'm actually looking online here. I don't even know what some of this stuff is.

Speaker 1:

Like snicker bar on a stick?

Tony:

Yes, deep-fried sweet corn nugget. Sweet corn fried?-

Speaker 1:

The sweet corn and you deep-fry it. We'll-

Tony:

Deep-fry it.

Speaker 1:

Humans will deep-fry anything, I think

Tony:

I know it. We're Americans. Yes, we do a lot.

Speaker 1:

That's for sure. But anyway, well, hopefully you guys will enjoy and you don't get too crazy, make yourself sick to your stomach, but-

Tony:

We'll be bouncing back from fair.

Speaker 1:

You'll be bouncing back. There you go. Nice segue. I like it. I like that.

Tony:

That'd be a mistake.

Speaker 1:

That's right. Well, let's get into some of these financial bounce backs we might need to do. First thing you need to do, if you do have a financial misstep, Tony, is just obviously determine the cause, right?

Tony:

Yes.

Speaker 1:

So what's some bullet points here to think about how you got there in the first place?

Tony:

Well, most people are going to look at this and say, "Well, I mistimed some stock or some investment."

Speaker 1:

True.

Tony:

And most of the time what we see is the mistakes themselves are really not starting soon enough. And that means saving, and that's the biggest one of all. Yes, you can miss time and do that, but you shouldn't be trying to time anyway. But really what you got to do is, whatever the mistake is, whether it's that or just not starting soon enough or something else, is-

Speaker 1:

Bad luck, whatever.

Tony:

... Just figure out, say what caused it, what kind of spot I was in my life when it happened, what kind of information did I have available to me? Maybe you're one of those people that listened to everybody but the right people about everything.

Speaker 1:

I always refer to that as the cousin Eddie, if anybody who's ever-

Tony:

Cousin Eddie.

Speaker 1:

... Watched any of the vacation movies, right?

Tony:

Yes.

Speaker 1:

The cousin Eddie moments because he's always doing something goofy or wrong or whatever. He tells you advise and it's usually not good.

Tony:

It's usually not good. No. And we get that out on the tax side. Clients will call and say, "Well, I heard from such and such." And my first question is, "What does such and such do for a living?" And they'll say, "Well, he's a barber." And I say, "Well, I don't know that's really his realm to be giving that kind of advice."

Speaker 1:

To give you tax advice, right?

Tony:

Yes. So you get a lot of that and it's proliferated with the internet. You got to watch you listen to.

Speaker 1:

Oh, of course, yes. And that's usually the number one source of bad advice any more is the internet. Because it's-

Tony:

It is.

Speaker 1:

... Just so much on there.

Tony:

There is so much on there. It is. And so you got to watch what you're getting. That could be a whole conversation on its own. You Google a topic and you think it's right, and it may or may not be. There are probably elements that are correct.

Speaker 1:

Exactly.

Tony:

But it might not be all of that.

Speaker 1:

There's actually a whole industry, Tony sorry, wrapped around internet ads that are designed to look like news articles or news stories so that you feel like it has a bit more realism to it. "Oh, this is news related or newsworthy." But it really is just an ad. It's just a solicitation or a sales piece. So definitely easy. So determining the cause, I think, great place. You've got to figure that out. Did you get the right information? Did you get enough information? Was it just bad timing? It's okay, you've made the mistake. You mentioned savings, so now we need to make up that difference we've lost. So what are some things to do as far as increasing our savings rates?

Tony:

Well, once you've identified the mistake, and if you have lost some money, the easy thing is to increase the savings. That's really not really all that complex on how to do that, but it's easy to be able to increase it. Especially as you progress in life, some of your expenses start to decrease, and so you're going to have more disposable income that you can then take and increase the savings rate.

Speaker 1:

The government gives us some catch up contribution provisions in various different things. So there's some of that, right?

Tony:

Yes, you can do that. You pay off a car, continue making the payment, but make it to yourself and put it in your retirement account or your savings account.

Speaker 1:

As my dad used to call us, maybe get the little ankle biters off of your payroll. He used to call us ankle biters.

Tony:

When you were kids. Yes, you do. You get the kids out of the house and then all of a sudden you've got an instant raise. And so there's a lot of ways to increase the savings rate. I've seen people go get a second job and say they just want to save more [inaudible 00:06:09].

Speaker 1:

Depending on the kind of damage that you've had to the setback. And I think most of the time, if we've just made a mistake, Tony, it's usually not super detrimental, but you do want to recalibrate your goals or recalibrate your plan because maybe you did make a bad investment. Well, let's do something recent, maybe you got on the crypto train or something, and you were a crypto millionaire one week and you were crypto broke the next, whatever it might be. But that's when you say, "So now I've identified the problem. I know what I did wrong. Now we're working towards making that shortfall back up by increasing our savings contributions to paying our future self, AKA retirement fund. So now let's recalibrate that plan or recalibrate the goals." Right?

Tony:

Yes. And it's easy to do because, again, it doesn't take a lot, especially if you're talking through it with somebody who, well, and say, in my case, we visit with this clients all the time. It could be as easy as maybe delaying retirement for a year, could mean, hey, we just change our lifestyle a little bit and reduce our expenses. It's not going to be something drastic, and maybe you're in a giant home that you need to downsize and you could save some money there.

Speaker 1:

Sure.

Tony:

Maybe it's just watching things a little bit more until you feel more comfortable. I think-

Speaker 1:

You don't get the muscle car you've been wanting, or you don't get the-

Tony:

No.

Speaker 1:

Maybe you get the muscle car, but you just don't do all the remodel on it just yet. You don't do all the-

Tony:

Repairs.

Speaker 1:

... Repairs just yet, or... Little ways you can do stuff, right?

Tony:

Yes. I have a retiree client and she calls me, and really a lot of our conversations are based around, for lack of a better word, me talking her off the ledge because she likes to put money in her home, and she really likes to keep it spruced up and remodeled. And I'm there really more for the sounding board of, well... She's got plenty of money and she could do it, but it's like, "Well, do you really need it right now? Maybe you take it a little slower so it doesn't affect the other fun stuff you like to do." And many times listen to that and follow along on those lines. But I think if she was out on her own, she would probably be dipping into and probably taking much more than she needs.

Speaker 1:

A little more often.

Tony:

More often. And then I think she would be not happy with that because she does like to balance it and do other things in life. And-

Speaker 1:

That's a great point.

Tony:

Again, balance is the key because-

Speaker 1:

Well, to me, I don't know, Tony, with all the technology we have at our fingertips now, I think a big portion of what you guys do as financial professionals is what they call behavioral management, right?

Tony:

It is.

Speaker 1:

Because-

Tony:

And much more so than investment management, yes.

Speaker 1:

It can be, right? Because just about everybody's got the same software, just about everybody's got the same access to the various different things out there, depending on what kind of license that you have as a financial professional, but really it's relationship building and that behavioral management. To your point to that story you just told this client's comfortable calling you up and saying, "All right, I'm thinking about doing something silly. What do you think?" And then you talk through it and you go, "Based on where we're at, go ahead and go for it." Or "If you do, maybe we're going to make a change to that vacation that was planned for next year." Or something like that.

Tony:

Yes. And then that's all it comes down to is just some simple discussion.

Speaker 1:

And then rework the plan.

Tony:

And you got to rework the plan a little bit. It's funny because from our standpoint, we take a lot of notes so we can remind the clients like, "Well, last time we talked you said this, but you can change your mind. But that is what you said last time." It's a fun conversation. You can have fun with it. But it is interesting because I think clients, you could survive it, of course, yourself, but you may make bigger mistakes and take longer to recover-

Speaker 1:

Sure.

Tony:

... Without some advice of some kind.

Speaker 1:

Well, and I think that's when getting a real plan in place certainly comes into play. So maybe if you're in a situation, Tony, where you've made a financial mistake and you haven't started working with a professional yet, now is the time to really do it. And often, it's like going to the dentist, I hate to equate what you do with going to the dentist, but it's the same kind of feeling sometimes where we're like, I just know he's going to say or she's going to tell me something bad and it's going to cost me pain.

In this case, the dentist analogy, and then maybe you wind up going and it's not nearly as bad as you thought. And I think that's what happens with advisors a lot. People are like, "Oh no, I'm going to go in there and I'm going to have to tell them what I did, or I have to show them my stuff and it's going to be painful and they're going to tell me I can never retire." All those kinds of things.

Tony:

Oh, I know it.

Speaker 1:

And often it's not nearly as bad as we think that it is. I think as humans, we just do that naturally.

Tony:

We do. I've actually got a client, as you were saying, that in fact we're emailing back and forth this week, he's an accounting client, not a financial planning client. He's got an advisor. And I don't think the advisor's giving him bad advice, but what the client wants to do, and get this, he's about, I don't know 63, 64, he wants to pull a million dollars out of his retirement account because him and his wife found a little place and a little acreage, and they want to build a house on it. It's just south of where we're at. And he's a big outdoors guy. And so he's trying to rationalize this with me and his advisor as his tax account. And I'm saying, "Well, boy, you're going to owe a lot of tax on that. Maybe you want to split it up." The advisor's telling him, "Well, maybe you want to just go borrow because you're going to pull all this out, and then when you start to need this for income, it's tied up in your house." Which she's got a point too.

Speaker 1:

Well, she does have a point there, but borrowing right now, it is not a borrower's market.

Tony:

That's what the client's saying is, it's not a borrower's market. So we're trying to put some numbers together and say, well, if you borrowed, here's how much it's going to cost you, if you spread the tax out. And try to get the best scenario for him, and then he'll have to make that decision. But-

Speaker 1:

Exactly.

Tony:

And he's got me on the tax side, his advisor on the advisory side, both trying to help him make the right decision and whatnot.

Speaker 1:

And that's interesting.

Tony:

But that goes back to really maybe if he didn't have us, he would probably... Because what he wanted to do is just pull out all the money in one year and pay the taxes. And he thought that would be a better deal than spreading it out. And I said, "No. Here, here's the exact numbers because I've got them right off your tax check."

Speaker 1:

Going to kick you up a tax bracket and all sorts of stuff.

Tony:

It would've cost him like $75,000. And I said, at least spread it out to save 75,000. But it's just one of those things though, where even though he has a plan in place, he's changing his plan because he wants something in his life and hey, there's nothing wrong with it. But-

Speaker 1:

Exactly. They're modifying the plan, that's part of the process because they think life's going to happen, we're going to do different things. And me personally, I think kudos to you and him as well for doing that. But oftentimes many advisors, they struggle with that whole split thing where you're the tax person, the CPA, but you're also not doing the financial side because it is hard when you have two different people giving you, maybe, conflicting advice. So as the person in the middle, sometimes you wind up being in a tough spot, but at the same time, at least he does have those sounding boards. So I think-

Tony:

He's got that. And for me, if we have an accounting or tax relationship, if they've got an advisor-

Speaker 1:

Sure.

Tony:

... Of course that they like, I like to think we're on the same team. Unless the person was completely crazed and-

Speaker 1:

Bad advice.

Tony:

... Offering horrible advice, but try to be on the same team because-

Speaker 1:

Sure.

Tony:

... I don't want to interfere with that relationship and you just don't know. But some accountants don't like it, some advisors don't like it.

Speaker 1:

I was going to say, it just depends on the relationship and again, kudos to everybody from making that work. But that's a great illustration though of why even if you make a mistake or have a looming mistake, having a financial team to help you out can go a long way towards hopefully staving off a financial mistake or bouncing back from one. So that was a topic this week. Hopefully that helps out a little bit. And if you have made a mistake and you're worried about going and seeing a finance professional, don't. The longer you procrastinate, just like that tooth, that dentist analogy I was going with, it's only going to hurt worse. It's only going to get worse if you ignore it. And when you finally do go to the dentist and then you maybe have to have a root canal and then it's all more expensive and more painful.

So go find out what you need. Go get a plan together for where you're at in life, whether you've made any mistakes or not. And that way, even if the news is not great, at least you know what you now need to start doing in order to get yourself into that better spot. Sooner is always better than later.

So get yourself onto the calendar. Reach out to Tony and his team at yourplanningpros.com. That's your planningpros.com. He is a CPA, a CFP, an EA of 27 plus years experience. So get onto the calendar today at yourplanningpros.com

Tony, thanks for hanging out, buddy.

Tony:

We'll see you next time.

Speaker 1:

See you later on this month, in August, we'll be getting closer to football season for all you football bands. So we will catch you next time here on Plan With The Tax Man with Tony Mauro from Tax Doctor Inc. Don't forget to subscribe on Apple, Google, and Spotify.

 

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

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