Let’s talk about money! This week, Ali and JoDee chat with returning guest, Erik Garcia. Erik is a certified financial planner, a behavioral financial advisor, and the co-host of Stuff About Money They Didn't Teach You In School podcast. Together they will tackle things you need to know about both financial advisors and financially planning for your future.
You’ll hear more about:
Connect with Erik:
Stuff About Money They Didn’t Teach You In School: https://podcasts.apple.com/us/podcast/stuff-about-money-they-didnt-teach-you-in-school/id1592736506
Connect with Ali and JoDee:
Teacher Shift LinkedIn: https://www.linkedin.com/company/teacher-shift
Ali’s LinkedIn: https://www.linkedin.com/in/alisimon/
JoDee’s LinkedIn: https://www.linkedin.com/in/jodeescissors/
All teachers are natural innovators, entertainers and problem solvers. They dream of growing old into the profession, teaching their kids kids. But sometimes career goals shift or change, and that makes opportunities outside of the classroom seem intangible questioning who am I? If I'm not a teacher, I'm your host, Alexandra Simon.
And I'm your co host, JoDee Scissors.
This is The Great Teacher Resignation.
You may recall our next guest, Erik Garcia, from episode five, Leaving the Salary and Benefits. Eric is a certified financial planner, a behavioral financial advisor, and the co host of The Stuff About Money They Didn't Teach You In School Podcast, as we mentioned before he is married to a teacher. Welcome back to the show, Erik.
Hey, it's great to be back. When someone asks you to come back to talk about money. I guess that's a good thing, right?
It totally is. Well, Ali, and I've been doing a lot of reflection on this past year, we've been looking at our analytics. And aside from our first episode, we found something really surprising. Your episode is actually performing the best among all of our episodes. It's performing at about 20% higher than all the other ones. So there's a couple of things about that; one, thank you. Obviously teachers wanted to hear about this topic, they wanted to hear what you had to say. And I think that they're still continuing to find it an interesting topic, and they want to learn from you. And the other thing that's interesting is that the other four that follow your episode, are very different themes, very contrasting themes to money. It's teacher expectations, grief, grief again, and under appreciation. And so your topic, when we brought you on was talking about teacher compensation, which is on a schedule, it is very explicit and benefits as well. The others that fall I think are really deeply rooted in systemic issues and career anguish. So what do you think of those stats and your episode leading in that way?
I think that that should be number one, it doesn't surprise me that an episode on money, especially that we didn't, we didn't get too technical. We ended up talking more about like the emotional side of the behavioral side of money. And I know is on benefits and salaries, but I don't even think that we got really too deep into salary and benefits. So it doesn't surprise me that that would be one of your top episodes. I mean, I'm talking about money all the time. So maybe I'm biased. But I find that when people actually start to have a conversation about money, it tends to be a pretty intimate conversation, like they're talking about things that are incredibly personal. And those other four topics that you mentioned, grief twice, expectations, and under appreciation. Money somehow touches those as well, like from the idea of under appreciation. I didn't listen to those episodes. But I would imagine if you're a teacher, and you're getting paid 100,000, you're probably willing to put up with some of the stuff that you have to put up with. But the fact that teachers make so much less there's this sense of like being under appreciated. Grief, again, I don't know what the specific context of that. But you can kind of go through grief a little bit differently, if you know, you have some, you know, a stash of money on the side. So let me tell this story. I spoke recently at my wife school to her high school students about money. And it was basically it was real high level in terms of, you know, spend, save that type of stuff. And at the end, we're doing q&a. One kid says, hey, you know, I hear a lot about like money and happiness, can money buy happiness? And I'm like, Oh, I love this question. I love the fact that a high school person is asking that question. So there's a lot of really interesting research on this topic. And there's one really interesting study that says that money doesn't necessarily buy you happiness, that there's a certain level of income where happiness kind of drops off, but certainly money makes it easier to go through life. Her comment was, you know, I'd rather cry in a mansion than on the side of the road. I said, Okay, that's that's pretty deep. So this idea of grief, you know, money can maybe make grief more palatable to some degree. So I do you think money touches everything that we do and impacts every thing. That we don't think about it. We don't consciously make that connection, like money is making me make this decision this way or that way. But it's running in the background. You know, where do you, where do you grocery shop? Where do your kids go to school? Where do they going to camp? Do I leave my job? Do I not leave my job? So money, the fact that it was a popular person, it doesn't surprise me for those reasons.
So we know that teacher salaries vary by state and even and more by district within their state, the benefits packages always seem a little more attractive. But sometimes it's not enough to keep people in the profession. Perhaps they have other career aspirations or they just need to change. But where does the teacher start? And so my question for you, Erik, is, how do I know when to reach out to a financial advisor if I'm considering leaving the teaching profession?
Oh, that's a, that's a good question. How do you know when to reach out to a financial advisor? So a financial advisor myself, so take this first part of the answer with a grain of salt. I think that just the same way that most people benefit by having a relationship with a doctor. Or if you have a car, you benefit, you know, having a relationship with some like mechanic shop. If you have money, you probably would benefit by having a relationship with someone who's in the money space, who can help you make money decisions. So all too often what happens people will engage a financial advisor when there's a crisis. But sometimes it's better to engage a financial advisor as you prepare just in general in life, right? We're making money decisions constantly. So sometimes engaging a financial advisor, when you're not necessarily faced with the decision is not a bad thing. Now, I get it, you're not going to engage a plumber unless your toilets clogged. Right? You're not going to call the plumber to hey, you know, I'm just interviewing plumbers, just in case my my toilet gets clogged, I totally get that. That's kind of how we interact as, as humans with different professions. But if you're making a decision, where it could have not just a decision where it can have a positive impact, but a decision that could have a negative impact financially, it's probably a good idea to have a thought partner. Now I tell my clients, sometimes one of the benefits that I bring to the table, particularly my business owner clients is this idea of thought partnership, right? We have friends, we share ideas, hey I'm thinking about this, what do you think? I'm thinking about making this decision, what do you think? And what happens is they're looking at it from a different lens. They're uninterested people, other than the fact that they care about us, but they're uninterested in what ultimately happens one way or the other. So they're kind of looking at it with a different lens. So financial advisor, what they're going to be able to do is they're going to look at it from a lens of a money person asking realistic questions about, you know, the money side of it that you might not be thinking as a teacher, because you're not trained. I mean, we have a whole podcast stuff about money they didn't teach you in school. They don't teach you about this stuff. Right? So a financial adviser should have the training to be able to ask those hard, critical questions to help you make a better decision or to confirm a decision that you're already making.
Yeah, I agree with you wholeheartedly that having that counsel from someone, like a financial adviser was so helpful on my journey to leaving the classroom. And I think what I really heard was that engaging with a financial adviser earlier, sooner, can actually be really helpful for someone who might make a career change, who might really make any change in their lives. Because you have a thought partner that you've been in relationship with for a while. They probably know you very well, I'd hope at that point. Versus like going to someone and saying, Hey, I'm thinking about leaving my really stable profession that I've been in for 12 years, what do you think? And it's like, well, that person might not, might not really be able to give you the best advice. Versus, you know, there's other times in our lives where we might seek that kind of counselor, that thought partner, maybe when we are newly married, maybe when we, when we're going to buy a house, you start building a relationship with a financial advisor. And personally, my husband and I have had a financial advisor, almost the whole time we've been married. He had his own and then when we got married, we wanted to find someone together based on our new location. And I will say, personally, peace of mind that I have had, by knowing that I've had a professional that I can ask those questions that I don't know the answers to, has been super helpful, and really helped me feel prepared when we got to the point where I wasn't going to be working for one reason or another.
There's an aspect to the financial planning profession, that we're really starting to see it take more and more traction. The financial space is moving away from like, just delivering investment advice. The more traditional sense to this idea of planning. You know, the planning versus the plan, like here's your financial plan, you know, Ali, JoDee, go go execute it now, as opposed to the decision making that's going into the process. And along with that is, if I'm giving you financial advice on a topic that we already discussed, is fairly intimate, right? What you do with your money is incredibly personal. And my dad would always say, I can tell you the condition of someone's heart by what they do with their money. There's some truth to that. Right. So there's a values aspect to money management. So if you come to me cold, and I'm meeting you for the first time, and you're, you're making this like life changing decision as you just contextualize it, I'm thinking about leaving my very stable job, you know, and risking it. And I'm gonna be like, wait a minute, I don't know anything about you. Probably my default is to advise you based off of my value system and not yours. And the challenge in financial planning, this is like if you've ever talked to any counselors, that did a lot of collaboration with with a couples counselor in the past, and I learned from him is that you never counseled based off of your values, you need to understand the value of the other person. So that's something that I brought into financial planning is I need to understand your value. Like, do you value stability? And if you value stability, that I might caution you to take a big risk. Now, if you're someone who's more of a, you're more risk tolerant, you like adventure, you know, and that kind of gives you life and you have maybe some, you know, the safety to be able to take more risk, I'm probably going to advise you more towards that direction, because advising you to do something that is unrisky might be life robbing for you. It might steal your soul. So that that's really important. And if you're not in relationship with someone who understands your value to some degree, then you might need a different financial adviser, a different financial planner.
Yeah, that kind of takes me into the next question I wanted to ask you, which is how to select a financial advisor. I mean, we think about picking people that we work with on a regular basis, like other professionals. Like I was very calculated when I went to a new hairdresser, right? Like who's going to do my hair to be done and we've got a relationship. You know, mechanic, I always get referrals. Same thing with an accountant, personal fitness. So I want to know, like, how do I find the right financial advisor? And how can I go about doing that?
That's a good question. I would say interview several people. Like, don't just say, Oh, this is the guy down the street on the corner, I'm just going to pick him or her or whoever it may be. Interview people. And one of the main questions I would ask is about compensation. How do you get compensated? Now, there's no wrong or right answer here. It's just what is best for you. There are some financial advisors, in fact that the regulatory space is pretty interesting right now. You're starting to see less people call themselves financial advisors, and it's financial professionals. It's interesting. And that's, that's a regulatory thing. And there's a lot of stuff happening right now in the space. Financial Planners technically have to have their CFP designation if you're a planner. So it's an interesting space right now, but always ask, "How are you compensated." That'll tell you a lot. If they're only compensated by selling you a product. And again, there's nothing wrong with this, okay. But they're only compensated by selling you a product or investing money for you, it's probably not the right fit for you when you're trying to make a decision. Okay if you have to rollover money. If you're you're leaving, and you have a 401 K you want to rollover, and this financial advisor makes money by managing your money. Well, that makes sense. But if you're sitting down, and you're trying to help, you want someone who's going to help guide you to make a decision. There's no transaction. There's no, let me manage your money. Let me sell you insurance. Let me do this. It's just I'm giving you advice. You want to make sure that they're compensated to do that. You know, if they're only going to make money if you roll your retirement over to them, we call that a conflict of interest. Now, conflicts of interest aren't bad, like, yeah, Ali, I think you should leave your job and you should roll your half million dollar 401k over to me. Well, they're conflicted. I'm not saying that's a bad piece of advice. But that's going to tell you a lot about their ability to give you unbiased information. So you're looking for someone who's going to charge you a, like a consulting fee or a planning fee. Typically, it's going to be a certified financial planner, a CFP professional, who is set up to do that. CFP sometimes will work hourly, sometimes they'll work on a project based. We have a unique setup to where we engage our clients on a regular basis. So we don't have a very high upfront, we have an ongoing, much smaller fee that's ongoing that keeps us engaged on an ongoing basis. You know, for my clients, I like their financial Google, right? You can ask a question. I know your your financial data, I know your values. So I'm able to hop in and sit next to you so to speak, and help you make a decision. So ask how they're compensated. That's like the most important thing, and that'll tell you a lot about whether they might be a good fit or not.
Yeah, and I think there really are those two different compensation models, because in our search for financial advisor, financial planner. We came across that. That it's either like, you know, consulting planning fee, or it might be based on the transactions. Right, by investing or selling. I think both models are good. It just depends on really what you're looking for at the time. So if you know, you want a financial advisor, regardless of whether you need like an immediate consult. Maybe you are moving to a new state, I move a lot because I'm a military spouse, you know, you want to work with someone in person because then you're just looking for a new advisor and so maybe having The first option would be fine for you. You can build a relationship with them as they take over all of your investments. And they continue doing that. And you can probably still have that thought partner there. But I agree that if you're going to someone specifically to seek this type of guidance, I could see it potentially be more beneficial to make sure that they do like a consulting fee or a planning fee, if it's a like a situation like this, and maybe you don't want the pressure of having to move all of your investments. Now, do most advisors do one model or the other? Or do they offer both sometimes, and you get to pick?
Yeah, so there's a lot that offer both. It's almost like talking politics sometimes with with advisors. How they bill. Like, oh, you bill that way? That's bad. You can't do that, you're conflicted. You know, you're, you're a bad person, or you do it this way. And there's some contingencies, like, if you don't do it this way, then you're conflicted and you're non transparent, which I don't agree with. Gets a little bit crazy. But those are still good advisors. They're still good planners. But yeah, they're certainly mixes, you know, we're a mix of the two. You know, I came up on the side to where it was more transactional. And about 10 years ago, I transitioned to more on the planning side, which that's the that's the fastest growing part of our practice. But we still do a lot of investment management. And we're very clear with our clients, like, Hey, this is consulting, if it deals anything with with product or service, you don't have to use us. In fact, we'll give you direction, wherever you are. So you do have hybrid models. That's the thing you got to ask, because there's, there's financial terms that are thrown around. There's commission based. There's fee based. And fee only. And you know, fee only tends to be we only charge a fee, we don't charge any investment costs. But that's not always the case. So you want to get real specific with your questions. How do you charge? Do I have to invest money with you? Do I have to buy something from you?
We use the word planning very broadly. But what is it?
I knew you're going to ask for that. Okay, so this is the easiest way that I can think about it. Planning is simply aligning your money decisions with your long term goals. Now, that sounds kind of like, Oh, that's so beautiful. It's so like aligning your money decisions with your long term goals. That's really what it is. Planning is not picking the right investment. Planning is not making sure you have the right life insurance. That's all part. It's a component of planning. But it's making a money decision. What's a money decision? How much do you spend? How much do you save? How much do you give? Do you make a Roth contribution to your 401 K or traditional contribution to a 401K? It's a money decision? Do I have a high deductible health insurance plan? Or do I do a PPO plan? That's like, you know, with with really small copay? That's a money decision. Right? We would all align those decisions with our long term goals. What's our long term goal? I want to be financially independent by 55. I want to be in a position to be able to give a lot of money to charity and philanthropic. Like that's, to me, that's a long term financial goal. So financial planning is is that process of making those decisions that's going to keep us going in that direction.
It almost seems like people need like when they're reflecting, when they're thinking about going to a financial advisor, they need to sit down and think about those core things. What do I want for my future? What, what do I envision for myself? For my family? For my children? For my retirement? What are some of those things that we, we can't grasp a hold up now that we wish for and hope for?
Yeah, and a financial planner, a good financial planner is going to help you clarify those things. So sometimes we don't know that. You know, I've my business partner, we kind of, we kind of offer that to each other. Because I'm biased. I have my own blind spots that I'm aware of that. I don't know what they are, but I'm aware that I have them. So I need other people telling me like, Dude, you're crazy. Oh, yeah, that decision does not align with, with what you're trying to do long term. And that's that thought partnership.
That's good to know, because everyone grows up with different financial literacy. And so they may not have the questions or vision in place. But to have that guide is really nice to have.
And this kind of goes back to what we were talking about earlier about hiring professionals, right. I don't know what I don't know. I need somebody who has seen it before. So I can go into this with eyes wide open, because I don't know what I don't know. And that's that's the challenge of anything you do you anything you do. When you when you first start something you don't know what you don't know. So you're always kind of, you're always self conscious and insecure, like oh my god, like, they've been doing this for 10 years. And they must know something that I don't know. I listen to one of your episodes recently. The title interested me because it's something that I've been hearing a lot about on the financial planning side, it's this imposter syndrome. And this kind of this idea that like, I don't belong here, I'm playing this role. Like I shouldn't be as successful as I am. Maybe there's a little bit of guilt involved with with this idea. Like, you know, like, I'm a successful financial planner, and I shouldn't be like, I don't feel like I belong here. Like I just don't know as much as I should know. Like, maybe I'm giving the wrong advice. And, and I feel that that's something that's very common when you're new to something. Like, you don't know what you don't know, you feel like you're playing a role you're, you know, someone's going to find you out sooner or later. So to have someone who's walking alongside you, who has seen a lot of these things, to be able to say, like, hey, was this a good decision? You've seen this before, how have you seen people handle this before? You know I'd say, Well, I've seen, I've seen that multiple times before, and I've seen it play out multiple ways. Here's maybe some things to do to make sure that it works out in your favor. Yeah, hey, that's a really good idea. But maybe we want to wait six months before you do it. Because here's some things that can go wrong. So we want to make sure that we have a little bit of money set aside. So when it does go wrong, or if it goes wrong. Sometimes we make good decisions, and decisions that we make go wrong, not because there were bad decisions, but we didn't prepare enough for the things that could go wrong. So if we spent a little bit more time preparing for the things that can go wrong, then we can increase the chances that it's successful.
And once we've established that relationship with someone like you a planner, what would be a healthy relationship in terms of communication and frequency?
I'm going to answer with the answer, you're probably not going to like. And the answer is, it just depends. I've got some clients that are more needy. And when I say needy, I'm not saying in a bad way. They just need more guidance. So we talk more regularly. And I've got some clients that, Hey, it's time to do our annual review, like I'm good. Like, you know, I need answers these questions, just answer these questions for me. So it just really depends on your personality. And I think a planner is gonna be able to meet you where you are. And some planners work in real, real specific niche market places. So like, you know, I work a lot with business owners. It's a niche that I have. So if you're a business owner, I'm equipped to answer a lot of questions that business owners have. You know, I'm a business owner myself, so I understand the grind of owning a business. So depending on your, your profile, so to speak, you might need more conversations with your advisor early on in the relationship. I will say we front load our relationships, meaning we spent a lot of time on the front end with our clients. And that tends to reduce the amount of time that we need on the back end or ongoing. But I would say if you are paying a planning fee, you probably should be having, I would say, at least twice a year having a little bit of a deeper dive. And then access is a big thing, having access to individuals, whether it's through email, text, phone call.
When you're working at a school, right, all the people that we work with, all of our colleagues were kind of in a similar position, at least with our salary and benefits, where we know maybe we're contributing to a pension plan and an X amount of years, we're gonna get our retirement. And so it's hard to seek counsel from people in your school when you're looking to do something outside of the school house, like outside of what everyone else is doing. And that's where I think an outside financial advisor or planner. So not someone from the district, who's maybe working with, like 200, teachers or whatever, which is what JoDee kind of alluded to. You're not going to get the same amount of traction with someone, I don't think that, you know, that's the world that they're working in. That's their specialty. If you're considering that that might not be your career, your profession forever. Building your relationship with someone outside of the school house, outside of the district, I think could be extremely beneficial, because they can help you with those dreams, with the long term goals that you have and how to make that possible. Another thought I had was talking about some of the benefits. Again, when you're in a school district, everybody's getting the same benefits package. So we're all saying to each other. Oh, which plan did you pick? Did you pick Plan A? Or did you pick Plan B? Oh, well, I pick plan B for these reasons. When you go to work for a new employer, which I've done multiple times, those benefits packages are very overwhelming, right? And to know, like, Should I get the life insurance? Should I get this? Should I do these these different things? Again, I think having someone outside can be really helpful. Like I know, we've gotten to our financial advisor to talk about how much life insurance I should have, or what are our goals as a family. And so how much should I be contributing to my retirement? And so I think, with transition in mind in particular, I can really see that person playing a pivotal part in knowledge. Because again, I only knew what I knew from my school. I only knew what I knew from my colleagues. And it's so much different in the corporate world.
Yeah, so you said something I think is really important. I'm gonna add another, another question that your listeners can ask when they're interviewing financial planners. One is how are you compensated. But one is, we have we have an entire podcast called, I think it's called, Who are you taking your financial cues from? And the idea is that we all have different goals. We all have different personalities. And the problem is right, it's the Hey, hey JoDee, you should go buy this stock because it's really hot right now. And like, it's gonna go up. And that's what your, your coworker is telling you to do this. But they're playing by totally different rules. They have a totally different situation with debt. They have a spouse at home, that's making a ton of money, so they can afford to, you know, make a speculative investment or something along those lines. So it's make sure you know, who you're taking your cues from. So here's the question: Describe for me what other types of clients you work with? And how have you helped them? So if you're, you know, mid 30s to 50, right, and, you know, you're, you're still accumulating. You're, you're, you're still saving for retirement. You have kids. There's a lot of stuff tugging for your money's attention, in that, that kind of, I would say that 35 to 55 year old range. And you're talking to a financial advisor who works almost exclusively with retirees, they might not be as sensitive to the financial issues that you have as a younger accumulator. They might be, but they might not be. So that's something really important to ask them, like, you know, you just handle 401K plans, then you might not be a good, you know, financial planner for me, if you just work with 401 K plans at a high level, as opposed to getting involved in people's decision making outside of just how should I allocate my 401K. That's a really important question to ask. And if I can here real quick, JoDee, you asked what is financial planning? Let me tell you real quick, what financial planning should do for people. So we look at it from the other end, not what is it? But what should it do? Number one, it's going to give you a sense of direction. You know, financial planning isn't goal planning. Goals are binary. You meet your goal or you don't. The problem with goals is once you meet them, then what? Right? I'm gonna get out of debt. Okay, you're out of debt, now what? You're gonna go back into debt? Like what's, what's what's happens next? So plans should be like this really long term thing that points you in a direction. I want to be debt free, so that I can give 50% of my income to charity. Well, that's a direction that that you're kind of always working towards. Just getting debt free is very binary. So planning isn't give you such a direction, it's going to give you security. Right, when you have a plan, and you can see the decisions, you're making an impact that they're going to have 10, 15 years from now, there's a sense of security in that. And look, I get money, you know, don't find security money, because money can, you know, can let you down. But you know, as our as our high school friend who asked about, you know, I'd rather be crying in a mansion. Money can provide some, you know, a sense of security for tomorrow. And along with that idea, there's a hope. Right, you could be in a tough spot today. Tou're making a hard decision today. But what planning can do is it can paint a vision for you of what it can look like 2, 3, 4, 5 years from now. And sometimes hope is what keeps us moving forward, keeps us moving in that direction. And then last thing that planning should do for you, it should give you a sense of fulfillment. Because what's going to happen is when you start aligning your decisions with money, with your values, and your long term goals, you're going to feel really good. You're gonna feel really good, because I hear a lot of people say, Yeah, I'd love to give more, but I just I just can't have too much debt. Well, why do you have too much debt? You have a $15,000 purse? Well, that's, that's why, right? Crazy stuff, right? Stuff like that, like shaking your head, but we see that. You probably know people like that, who are making financial decisions. I'm not saying you shouldn't buy a $15,000 purse, like, I don't care what you buy. But are you going to look back five years from now and be happy with that? Maybe. Maybe not. So once you start making those decisions that are in alignment, you feel better. You feel more fulfilled. So that's what planning should do. Planning, it's not about getting the highest return on your investment account. That's important. But that's not what planning is about.
Yeah, I think that's investing versus planning. I think it's a different, different ballgame there. Thank you so much for going into detail about what planning was today. Things we can consider when looking for a financial advisor or financial planner. And for our listeners, to learn more about Erik Garcia, visit www.plan-wisely.com where you can find links to Erik's podcast and ebook. Five Pillars of Financial Security: A Guide to Managing Your Money Wisely. You can also connect with him on Instagram at stuff about money underscore, on LinkedIn at Erik Garcia financial, and Facebook at plan wisely wealth. We'll also link these in our podcast notes. Thank you again for being on the show today, Erik.
If you liked The Great Teacher Resignation, give us a five star rating and follow us on Instagram, Facebook, Apple Podcasts Spotify, Google Podcasts, Amazon Music, and audible. Today's episode was written and recorded by me Alexandra Simon, and my co host JoDee Scissors. Executive produced by Teacher Brain. Produced and edited by Emily Porter. Original Music: Emoji by Tuber. Special thanks to our sponsor Paper Planes