The Psychology of Money (Part 3) – Keith Kurlander & Will Van Derveer – HPP 131
It’s a new year which means many people are reevaluating their goals and establishing new ones. With that comes an opportunity to think about your financial future. What does financial freedom mean? How can you build wealth to support your lifestyle even when you’re not actively bringing in income? How can you invest in yourself by preparing financially for your future?
While money can be a touchy subject, it affects various aspects of your life. Just think about how many choices you make that are dependent on your financial situation. In part three of this series on the psychology of money, we’ll discuss all of the above questions, plus we’ll share some good money habits you can use to get on the road to financial freedom.
A Realization About Preparing for the Future – 2:56
But I thought everything was okay in that regard in my life until I went to that seminar, and I walked away, realizing that I needed to, if I wanted to be prepared for a time in the future, where I couldn’t earn and couldn’t work, I needed to be saving money.
Planning Today Could Save You In the Future – 9:09
We’d have to go research that. But it’s a lot lower. So the problem here is that most people don’t care to even think about this stuff. So they’re not planning and they don’t even know what’s coming. So this is also a message of, you might want to look into this because in 20-30 years from now, if you’re planning on retiring, or whatever age you are, it could be 40 or 50 years from now. If you don’t think about the stuff you might be living off of 20% of your lifestyle if you don’t plan properly, and that would be a big change in a person’s lifestyle.
Financial Freedom Versus Retirement – 12:12
So for me, what motivates me is the financial freedom concept, which is, how long will it take me and how can I get there where I’ve actually earned my lifestyle on passive income from accumulating wealth that’s invested, so that my choices aren’t dependent on active income. Because when choices aren’t dependent on active income, you lose some freedom, obviously, you lose freedom of the opportunities that you can choose ~ But it motivates me because I think as most people I’ve talked to, there’s a level of stress of depending on your next paycheck, there’s just a level of stress of that dependency.
Deciding What You Want Financially – 19:50
And I was realizing it’s not going to be what I want if I don’t do something about this. So I think that’s the first thing I would, you know, offer to people, which is you’ve got to ask the question, what do you actually want this to look like? Like really get serious and sit down and either write about or whatever but or have a conversation with someone, like get very specific, what do you want either financial freedom before retirement or during retirement to look like.
Empowerment Through Education – 22:40
And it’s, you know, not that much is the answer to that, you know, like, how do you become empowered? Well, in any case, if I want to speak Portuguese, I have to take a class and Portuguese, I wouldn’t sit around thinking, well, if I just go to Brazil, I’ll just open my mouth in Portuguese or come out. It’s like the same thing with anything you’re going to learn like, you need to become a student of the thing.
Keith Kurlander, Dr. Will Van Derveer
Keith Kurlander 00:09
Thank you for joining us for the Higher Practice Podcast. I’m Keith Karlander with Dr. Will Van Derveer and this is the Podcast where we explore what it takes to achieve optimal mental health. Welcome back. So here we go on more talks about the psychology of money in the new year. It’s kind of fitting because quite a lot of people relate to the year and the calendar cycles time to sort of reestablish intentions and goals and priorities for the year and so it’s sort of fitting to talk about finances.
Dr. Will Van Derveer 00:51
Yeah, it seems as good a time as any to get into it.
Keith Kurlander 00:57
Well, so we’re going to talk a lot about, we’re gonna get into more some technicality that you and I have both been relating to for years around bringing a lot more order to the journey around money, and how order to money sets a person up for the most chances of success and opportunity to actually generate wealth in their lifetime. Right?
Dr. Will Van Derveer 01:29
Yeah, I think it might be good to start with a little story of how things began to shift for me. I think I mentioned in one of our previous money episodes about how, as a psychiatrist, I thought I was doing a great job to generate, to be a good earner, and to earn money, a lot of money for me which was great to have a private practice and, and make enough money to pay for my family and what their needs were. But over many years of doing that I wasn’t, it wasn’t even on my radar to be saving money at all. And then I went to a seminar that one of our mutual friends recommended to me and the guy was talking about, this is a kind of a controversial character, his name is John Demartini. We’ve had him on the podcast before. But one of the things that he talked about was being empowered in all the areas of life. And when he started talking about being empowered around money, all of a sudden, I realized that the way I’d been earning money and spending all the money I made to cover my family’s expenses every year, I didn’t have a plan at all about the future. And that was something that probably a lot of people listening would be shocked to hear but because maybe many of the listeners here already are aware that if you’re not saving money, you’re not planning for the future. But I thought everything was okay in that regard in my life until I went to that seminar, and I walked away, realizing that I needed to, if I wanted to be prepared for a time in the future, where I couldn’t earn and couldn’t work, I needed to be saving money. And that really shifted my perspective. And I’ve had a different relationship to saving since then.
Keith Kurlander 03:19
Nice. Yeah. I don’t remember the workshop, but I went to a workshop in Denver. I wish I could remember what it was called. There were about 1000 people in this big conference room. And it was about the psychology of money and you know, but the whole thing was a sort of marketing pitch to do their coaching program. And first of all, it was kind of scary. I mean, it was like The Price is Right. They were like playing The Price is Right music and people running up to the stage and getting all these free offers. This is one of my first money workshops. But I did, you know, take away a couple concepts there, for me, and one of the concepts was, how important it is to actually value wealth building or you never will build wealth. And that if you don’t actually care about building wealth, then mostly you’re fantasizing about earning more money one day or making more money and actually saving it. And so there’s something that really came across for me in that and that was a long time ago, is the concept of that the way you accumulate wealth is by actually valuing keeping your money, some of your money for the future of your life. Right? And like you’re talking about and investing in your future and so, maybe a good starting point is let’s talk a little bit about the concepts, the concept of retirement in this culture, financial freedom and what that could mean to people and why don’t we start there? So the general kind of concept in this culture, right, is that sometime in your mid to late 60s you retire, right? That’s sort of the way the government has designed their retirement plans. It’s like, when you’re done with your career, you’re done with your job, you’re done working sometimes in your mid to late 60s, and then you’re living off of some different types of retirement plans, right? If you’re fortunate. So that’s kind of the cultural messaging is you retire at some point, and you work hard so you don’t have to work one day. So let’s start with that concept.
Dr. Will Van Derveer 05:33
I’m smiling because it already feels pretty antiquated and obsolete and I agree with you that that has been the messaging over the years, along with a lot of other kinds of messaging around working and, you know, staying with the same company for your career, for example. But the idea of being taken care of by the government at a certain age after which you’re not working is something that I think probably most people are not in the fantasy that’s going to work out well to follow along that storyline.
Keith Kurlander 06:08
Yeah, so there’s, that’s a nice piece to talk about. So there’s what happens if you are in the retirement mentality. So the first thing is like, okay, you know, you have to ask yourself a question, which is like, do I believe in what’s considered retirement, right? Where basically, sometime, probably in my mid 60s, I don’t want to work, I dont want to have to work for money anymore, I probably won’t even want to work and I’m retired and then. And that’s fine if you have that mentality, but then it’s like, well, how are you going to achieve that, right? And part of the cultural messaging is, Social Security will get you there. Right? From whatever you put into that, and your lifetime, that it will actually be enough and that it’ll be there forever. And then, of course, there’s other, you know, different types of retirement plans that the government supports, right? If you work at a job that has 401k, or whatever it is, right? But I think a good thing to talk through here is, Okay, so let’s say you do want to retire one day, you want to stop earning, and likely you should be considering about the possibility that you’re not going to be able to earn enough money at some point in your life to sustain yourself actively through active income. I mean, not many people can earn enough active income till they’re 90, if they needed to. So then comes what’s the plan? How are you gonna do that? So that’s the retirement model. So we’ll talk about what’s the plan there. But then there’s also another model, which is well, what would it be like to attain a different concept, which is the financial freedom concept, which is it’s not about not working, it’s not about a year you’re stopping working or, but it’s actually about what point would you attain financial freedom, where you don’t have to work for active income in order to meet the lifestyle you want and how are you going to get there? And is it 65 or is it 45? Or is it whatever and how you’re going to get to that if you want that in your lifetime, right? It’s a little bit of a different concept, financial freedom. Obviously, people who are planning on retiring, you would hope that they’re planning on financial freedom, when they retire. I also heard, so we’ll go down these two roads. But there’s also another interesting thing, which is that the average, let’s just talk for the moment of like, sort of the average retiree. And we’ll just talk about the United States. Each generation, the amount of their lifestyle that they can live off of is smaller and smaller in retirement than previous generations because of inflation. Right? So if, you know, if people in the 1960s, or 70s, when they retired, we’re at 80%. I’m making up some numbers here, right, like 80% of their lifestyle in retirement than they were during active income. I don’t actually know these numbers off the top of my head, but it could be as low as 40% when people like us retire. We’d have to, we’d have to go research that. But it’s a lot lower. So the problem here is that most people don’t care to even think about this stuff. So they’re not planning and they don’t even know what’s coming. So this is also a message of, you might want to look into this because in 20-30 years from now, if you’re planning on retiring, or whatever age you are, it could be 40 or 50 years from now. If you don’t think about the stuff you might be living off of 20% of your lifestyle if you don’t plan properly, and that would be a big change in a person’s lifestyle.
Dr. Will Van Derveer 09:50
So just to define the term when you’re using the word lifestyle, what I understand you to mean is the basic expenses of living. So rent, food utilities, you know, the expenses of having a vehicle, if you’re going to have a vehicle, you know those kinds of things. So having a 80% reduction in your rent, for example, means you’re going to be living in a really different place.
Keith Kurlander 10:17
Exactly. And it’s whatever lifestyle you got accustomed to this percentage, like, you know, a person living off for 35,000 a year, I don’t think I don’t know what that means if it’s an 80% reduction there, but it’s whatever lifestyle you got accustomed to is what we’re talking about here. Right? So a person has a very lavish lifestyle, it gets cut down a lot to a non lavish lifestyle. So it’s just important to know and to go look at this. I think the starting point is, okay, if we’re just talking about when you become old, maybe you already are old if you’re listening to this, but it’s pretty wise to think about your future self. This is what you mentioned, Will.
Dr. Will Van Derveer 10:55
Right. Yeah, yeah. And as soon as, the sooner the better, because the sooner you start thinking about these things, the earlier you can develop a plan and if you’re, you know, on the younger side of this community, you might have decades to plan and save and develop a very sophisticated and high likelihood of having the kind of retirement years or financial freedom years that you want to have. But it gets much harder to achieve those goals the older you are, as you pointed out.
Keith Kurlander 11:34
Right. Now, I’m particularly biased about this concept of financial freedom versus retirement. Personally, it doesn’t work for me to think about my life as a retired person. Sure, I might be one day, but like, that isn’t what motivates me, that motivates some people, it doesn’t motivate me to think about when I can stop working? motivates me about how I can get to work tomorrow? So like, I’m just in a different mindset, right? So for me, it doesn’t motivate me to think about when I can retire. And that’s fine. If it motivates you, there’s nothing wrong with that. It’s just not how I operate. So for me, what motivates me is the financial freedom concept, which is, how long will it take me and how can I get there where I’ve actually earned my lifestyle on passive income from accumulating wealth that’s invested, so that my choices aren’t dependent on active income. Because when choices aren’t dependent on active income, you lose some freedom, obviously, you lose freedom of the opportunities that you can choose. And again, that’s, you know, working toward that is a very hard road, particularly prior to the elderly years. This is not easy to achieve. But it motivates me because I think as most people I’ve talked to, there’s a level of stress depending on your next paycheck, there’s just a level of stress of that dependency. And, you know, again, like most people, that’s their, what they live in. And I personally find the pursuit of trying to break out of that pursuit as inspired. Yeah,
Dr. Will Van Derveer 13:22
I wonder if you could elaborate on what you think the differences are between the mindset of looking forward to retirement versus the mindset of working your way toward financial freedom, and why you’re in the letter? Why are you in the second group of people? Why does that resonate for you?
Keith Kurlander 13:45
I think it resonates for me, because I just happen to be very value driven around service and career. Just my orientation of my personality. So I’m super driven around my career, and I’m super driven around a mission that includes a large body of people. So for me, I’m not orienting at all around when I can get out of that? Because I can’t wait to get out of it, or how do I get out of it? So I don’t orient around that just because it’s so high for me as a value and the level of importance that I don’t think about the day I can get out of it, because it’s exciting to me and it. It’s what I think about, you know, when I wake up in the morning, a lot of mornings, so it’s like, I don’t need a plan at this moment to like, can I get my way out of this? Now, that’s just because that career and service is just really important to me. It’s not important to everyone. For some people, that retirement mentality is actually a better mentality because it’s not important to them that that’s where they spend their time and energy and resources. Because it’s important to me their retirement mentality is not that relevant to me, but what’s very relevant to me is still what’s happening in retirement and for me Hopefully prior to retirement, which is financial freedom, I mean, financial freedom is an element of retirement, you need financial freedom to retire. But the piece that’s driving it is retirement. The thing that for me drives financial freedom is to have the experience of what people have in retirement, which is being financially free, prior to retirement, so that I don’t have the relationship of, you know, the stress of the paycheck, and what’s going to happen if I can’t work. And did I make enough money this month? Well, whatever it is, right? Like that relationship to money. That’s the concept of financial freedom. Can you produce that with a strategy at some point, to have that experience, not just to not work? Right? Now, you need that to not work. So that’s the retirement mentality. But the reason is to not work. That’s why I find in foreigners because for me, the reason is not to not work, because it’s so high my values, but it’s to have that opportunity, that freedom, and that reduction of stress while I’m working. It’s just a different thing, because of my own value system. Yeah,
Dr. Will Van Derveer 16:11
I think for me, there’s a powerful threat of wanting to be able to maintain calling my own shots, and not be dependent on the government or people around me, my family, when I eventually have a body that needs a lot of care. And, you know, we take for granted being able bodied and being able to work and be productive that way. And it can be gone tomorrow, you know, so having that foresight is really meaningful to me. And, you know, like you I, I think I’m in the group that lives to work rather than works to live. If, you know, people have heard that phrase before, sort of people who don’t have a big value on career, or a lot of existential meaning from being mission based, let’s say and career, maybe your mission based in other areas in your life. So, yeah, for me, that existential meaning I get from working is not something I’m looking forward to hanging up ever, you probably have to tear me away from my desk at some point.
Keith Kurlander 17:20
I’ve tried to tear you away from your desk, you’ve, you’ve still trying, although this morning, you came in and you’re tearing me away by tearing each other away.
Dr. Will Van Derveer 17:30
Yeah, yeah, it’s good to exhale and inhale, you know, but the, the idea of having the choice to work or not work based on having achieved, having done the hard work, you know, don’t have the discipline, the commitment, and not just the internal resources to create that financial freedom. But also, you know, we have to acknowledge that there’s also luck. And there’s also external factors that are involved in being able to get that far with financial empowerment. So by slowly, getting there, I think, is something that’s really exciting to me, that the goal of getting there, and being on the road to getting there, no matter where I am on the path to get there. I just like being on the road to get there because it feels responsible in my system to, to care for that part of myself, and to work toward a level of health in that department of my being.
Keith Kurlander 18:32
Yeah, and you know, it’s good, you brought out that there’s different groups of people and places in the world where this is not, there’s places in the world, it’s not a possibility. There are groups that have way more obstacles to get here. But, you know, obviously, this is, this is getting a message out to anyone who’s interested in getting there, even though they might have different obstacles, and it’s way harder than it was for me or whatever it is, right. There are a lot of people who are interested in either retiring or getting to financial freedom earlier than retirement. Right. Those are both important realities. And, you know, from a lot of the people I’ve talked to, like, there’s not, there are people who relate to this, okay. There’s people listening right now that are like, Yeah, I relate to this all the time. Like, I’m on a path, this is how I’m gonna get to retirement, or getting to financial freedom this way. There’s a lot of people that don’t think about this at all. And they’re just hoping it works out, basically. And, you know, I was doing that until probably six or seven years ago, I was hoping it was going to work out. And then six or seven years ago, I realized it wasn’t going to work out the way I wanted. When I started actually asking myself the question of what do I want it to look like? And I was realizing it’s not going to be what I want if I don’t do something about this. So I think that’s the first thing I would, you know, offer to people, which is you’ve got to ask the question, what do you actually want this to look like? Like really get serious and sit down and either write about or whatever but or have a conversation with someone, like get very specific, what do you want either financial freedom before retirement or during retirement to look like. Because if you don’t know what you want it to look like, I guarantee you, you’ll be disappointed. Because then you don’t even know what you’re going for. And then you’re just basically allowing the universe to show you what you’re not getting. Because you won’t realize until later what you’re not getting, if you don’t think about it now. So you’re just going to be disappointed, as you know, you’re just randomly sort of getting thrown into this phase of life. And you’re like, Oh, I guess this is what I have now. And now, you know, and so because there was no long term strategy, which often leads to disappointment with matters like this. So I think it’s a really important thing. Just asking yourself a very basic question, and really getting serious about what you want this to look like? And are you willing? Let’s say you come up with the idea, you know, it looks like, let’s say financial freedom looks like this, and I want it and 10 years, whatever it is 20 years or, and whether that’s the retirement concept or not? And then comes the really hard question, which is, how are you going to get there? Right? How are you going to actually get there? And how are you going to start tomorrow? Well, let’s talk about a few of the items about starting tomorrow. If this is relevant to someone who hasn’t started, or maybe they’ve done a little bit. Yeah.
Dr. Will Van Derveer 21:30
I was thinking about, you know, end of year reflections and future goals for 2023. And I came across this guy by the name of Gustin. I think, you know, you’ve met this guy, he coaches people on things like goals, goal setting, organization and stuff. And he has a question he asked that it really resonated for me, which is, who do you need to be? Like, what kind of person do you need to be for these goals to become real? You know, so it’s not like a kind of kid in the candy store kind of fantasy of like a dream about all the things that you want, maybe, which is how I think a lot of people approach, thinking about the future of like, financial future, like, oh, what will I get to buy? You know, as opposed to who do I need to be in order to be able to save money this way, or invest money this way, or take care of my financial world this way? And, you know, I think, when I asked myself that question, I asked myself, well, what do I actually know about how to handle money in a responsible way? And it’s, you know, not that much is the answer to that, you know, like, how do you become empowered? Well, in any case, if I want to speak Portuguese, I have to take a class and Portuguese, I wouldn’t sit around thinking, well, if I just go to Brazil, I’ll just open my mouth in Portuguese or come out. It’s like the same thing with anything you’re going to learn like, you need to become a student of the thing. Right, right. So keeping that in mind, as we move into tactical pieces here and start talking about some of the practices that can help people get there.
Keith Kurlander 23:17
I’m glad you said that, I mean, anybody that’s listening and is interested in, let’s say, they have not taken financial freedom or retirement, they haven’t really taken many steps toward any of it. You have to become a student. And increasingly, more and more time into being a student in this endeavor, if that becomes very important to you to do these things, because even you know, listening to whatever, a couple hours in the podcast isn’t going to do it. Right. So I’m glad you said that. I’ve struggled with being a student. So I’m a slow learner. But you know, I come along. Well, I think the first really important thing, the first thing that’s very important is yet to actually know how much money you need to live off of, for whatever this is, whether your your financial freedom is, you know, prior to the cultural retirement age, or whether it’s at the cultural retirement age, you need to know how much money you want to live off of. What’s your budget? And what’s your ideal budget? And what’s your like, you know, the absolute minimum,
Dr. Will Van Derveer 24:28
I can get by on a budget?
Keith Kurlander 24:30
Yeah, you need to know those two, and then if your ideal budget is a lot higher, are you willing to go after it? Right? So you got to get clear on those two concepts. And then you need to get educated around how much money you need to accumulate in order to produce that money, and we’re not gonna get into that today. So once you figure out how much you want to live off of, whatever this you know, whatever year you want to manifest this by, then you need to I mean, Go to financial advisors so on to help you figure out well, how much money do you need to accumulate to do this? And whatever, you know, you may be counting on inheritance, whatever, but you need to figure that out. And then comes the strategy. Well, how are you going to do it? Right? How are you gonna get there? And I would look at right now, like, what’s the path you’re on? If you don’t change anything? Where are you going to get to? A lot of people, if they don’t change anything, aren’t even gonna be close to this ideal number. Right? A lot of people aren’t even going to get close to the ideal number, especially with inflation. I mean, that’s a whole nother piece. That’s another piece. That’s right. And that’s the whole piece of why people are the percentage of their lifestyle, well, as they get older, keeps decreasing, because the rate of inflation over time. So yeah, you just want to get clear on that. And I think a good starting point is, this has changed my life, which has forced accelerated savings, the only way you’re going to get there is to start to change your relationship between consuming and investing. If you’re not on the road already, where you’ve already got the plan mapped out, and you’re fine, you’re done, you don’t even need to listen to this. Then you have to change your relationship to investing in consumption, and how much is going to consumption, how much is going to investing. And the thing that changed my life is forced accelerated savings, it totally was a game changer for me. And that’s just the concept that, first of all, you’re putting money into savings, a certain amount, you know, let’s say monthly for the moment. And you’re increasing the amount you put towards savings. Maybe it’s quarterly, I mean, people do this in different rhythms. Let’s just throw out the rhythm quarterly for a moment that you increase by some percentage, every quarter the amount, you’re turning towards savings. It’s very difficult for most people to get to their goal just by saying, Okay, here’s the number and I could do it already. And I’ll get there. Typically, we don’t have enough earnings to do that, right now, with how the economy is operating. So this force accelerated notion, what it does is that over time, you’re putting more and more away towards savings, which means eventually, you have to earn more to keep up.
Dr. Will Van Derveer 27:23
Right? And to get even more granular, so you, you basically take what you have available right now. We’ll stay in the monthly rhythm conversation for now. And you decide what would be a comfortable amount for me to put in the same account every month. Starting now doesn’t matter if it’s $5, $500, $5,000, whatever it is, and you just start there, right? And then you pick the rhythm, whether it’s quarterly. A lot of people do quarterly, let’s just say quarterly increases of an amount that’s subtle enough that it doesn’t cause you emotional stress and doesn’t cause a disturbance, like 10% increases right per month. So you know, $5 in the first quarter, $5.50 in quarter two, and so on.
Keith Kurlander 28:16
We look forward to connecting with you again on the next episode of the hire practice Podcast where we explore what it takes to achieve optimal mental health.