A CFP on Outdated Advice, “Jumping” Social Classes, & Why Money Mindset Matters

---

This week, ⁠Certified Financial Planner®⁠ Adrianna Adams joins us to answer six questions pulled from the cutting room floor of last year’s final round of listener submissions. After poring over hundreds, I selected these for how they captured themes that find their way into our inbox frequently. 

• (00:00) Intro
• (03:20) What are some outdated “numbers” that we need to move on from?
• (07:54) How should my financial plan change if I receive a serious health diagnosis that makes a much shorter life seem increasingly likely?
• (16:00): What should graduate students do to manage their money strategically, prior to earning a consistent income?
• (19:25) When should I consider changing my career to earn more if I know I’m being underpaid, but otherwise enjoy the path I’m on in a field that helps people?
• (30:43) How do I deal with straddling two rungs of the class ladder after inheriting money from a family member while working in and socializing within a low-income field?
• (36:25) When I look at my peers who stayed on a stable career path compared to my more volatile entrepreneurial journey, I feel uncertain and envious. How do I come to terms with the choices I’ve made and own my path?

📙 PRE-ORDERS FOR RICH GIRL NATION ARE LIVE.

💰 THE 2025 MONEY WITH KATIE WEALTH PLANNER IS LIVE—GET YOURS NOW.

Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is president of Morning Brew content, and additional fact checking comes from Scott Wilson.

---

Transcript

Adrianna:

We all chose a career when we were 17 or 18. And the decisions I was making when I was 18 compared to in my thirties, the decisions I make—it’s okay to reevaluate these things and say, this actually isn’t going to give me the life I want, and I had no idea. And it’s okay to change course now.

And there’s another financial planning saying that’s like the best time to plant a tree was 20 years ago. The next best day is today. I feel the same way for these types of decisions for clients who are analyzing it, never think that it’s too late, but it’s okay to take the leap and do something different because it’s what you want for your future now and who you are today.

Katie:

At the end of 2024, we put out a call for Rich Girl Roundup questions and received hundreds of submissions as we often did. Now as you know, we transitioned away from weekly Q&A Rich Girl Roundups in 2025, so there were a lot of great topics from that final round that basically got left on the cutting room floor. 44 of them had already been answered in a previous episode, 10 got answered in the last couple months of the year, but then the rest just floated into the ether long forgotten, but I have a confession to make.

As all of you hopefully know by now, I am not a financial professional. I do not work one-on-one with clients. I’m not formally trained in financial planning. I’m just a gal who likes money and there are plenty of important areas of finance that I have never encountered personally or read a lot about, and as a result, I lack the depth of insight in some of these topics that somebody who does work with people’s personal financial situations all day every day would have.

So every once in a blue moon, I like to bring a Certified Financial Planner onto this show to ask her the frequently asked questions that have piled up in the backlog that I never answered because I didn’t know the answer, so I didn’t choose them. Katy Song did the honors in last year’s episode and for this conversation I’m talking to CFP Adrianna Adams from Domain Money who you may have met if you attended our Rich Girl Nation Book Launch Party back in June.

The CFPs at Domain Money have been our partners for almost two years now. It’s one of the longest standing sponsors that make the Money with Katie content universe possible, and we have heard great things from those of you in Rich Girl Nation who have worked with them for fee-only personalized financial plans.

So this week I decided to hop back into those archives and pick six questions that felt like they represented a common theme in our inbox, felt more relevant than ever, and crucially have really never been explored in any depth on our show. And I hope you enjoy.

Adrianna, welcome to The Money with Katie Show. We are so happy to have you here. Are you ready to test your knowledge and your memory?

Adrianna:

Yes. First of all, Katie, thank you so much for having me. We at Domain Money love working with Rich Girl Nation and between you and me, our Rich Girl Nation clients are some of our absolute. So I’m so excited to get into their questions today and hopefully meet more of them.

Katie:

Oh my goodness, I love it. Well, we’re in good company. Okay, so our first question comes from Shin, which I absolutely loved. They say, “What are some outdated numbers or advice that is still commonly used in personal finance? For example, there’s the 50/30/20 rule, which has its own history, but today I think many people using 50% of their net income for needs could be unrealistic given the cost of housing. What are realistic goals that can help us keep ourselves on track when wages aren’t increasing? But prices are some other numbers that I’m thinking of: the 4% retirement withdrawal rule, three to six months of expenses for emergency funds (this one is on my mind a lot given that there’s a big shift to contractor gig economy work and away from full-time work with benefits), 10% or less of incomes spent on cars, 20% for savings in retirement, which has a lot of debate already on how this truly should be calculated. What actually makes sense for those of us who plan to retire between 20 and 40 years from now?” I know that’s a really wide range, but I thought this question was so unique.

Adrianna:

Yes, I absolutely love this question and first I want to just touch on the fact that there is no one size fits all And I want that to sink in. There are so many rules out there that you hear or things that you hear on the internet or if you Google it, but there is going to be certain things that work for some people and certain things that don’t.

And that’s honestly why I’m so passionate about what I do as a Certified Financial Planner because we get to take a step back and say, okay, but what do you want to do? So if that 20 to 40 year time horizon, right, we would look at what 20 years looks like and then let’s figure out what’s going to help get you there based on where you are today.

So I’ve never been a big fan of the 50/30/20 rule because I think it just varies drastically based on who you are and what you’re trying to accomplish. And same with the 4% rule. There’s good “back of the napkin math” to a lot of this, so I don’t want to completely discredit it because I think if you’re just trying to see am I generally on track, am I doing okay, these are great kind of benchmarks, but they’re not rules to live or die by, because nothing is for everybody.

Katie:

I think about that a lot with respect to folks who live in very high cost of living areas. And the kind of quintessential example that I often use is in New York City, you’re probably going to be spending more than 30% on housing, but you also probably aren’t spending very much at all on transportation if you are primarily walking and using the subway. So the 10% that we typically gesture at for a transportation budget can really be reallocated.

Adrianna:

Exactly. That is a great example and that’s why it’s important to not put yourself into a bucket that everyone else is putting themselves into. Comparison is the worst thing that you can do, I think, because it’s all about what you want to achieve and what your timeline looks like, and that will help us figure out what rules we should build for you. So everyone has their own set of rules once you’ve got a solid financial plan in place.

Katie:

When you’re creating these plans, is there a savings rate or a percentage of income that you tend to use as back of the napkin math in your own head? Obviously it’s going to be very different if someone’s retiring if you’re working with someone who’s 25 versus 45, but I’m curious just that kind of heuristic on your end with savings, how you think about that?

Adrianna:

I tend to not try to do too much back of the napkin math. We always start with getting into what your goals are first and then we can back into what we need to do from there. I would say if someone’s asking me a general question, if you’re saving 15% of your income, you’re probably doing okay. Right?

But the question is do you want to just be doing okay or do you have a very specific goal that you want to meet? So yes, I can absolutely throw out some numbers or things that we see and I would say 15% is a good target if you just want general, am I okay? Am I doing things in an okay manner? 15% is fine, but again, it’s not for everybody. Some people might need to save way more than that. Financial independence at 40, we’re talking a much different number there.

Katie:

Totally. Well, the next question comes from Mary, which jumped out at me immediately. She writes, “I was diagnosed with and treated for breast cancer this year at age 40, staring at the recurrence chart makes a stage four diagnosis look strikingly possible and possibly even likely, whether it’s in 10 years or 20 years or whether I get lucky and see it only in the rear view mirror, how should I think about retirement and other finances going forward? I’m single, so I’m thinking about self-sufficiency and being responsible for my own insurance even if I later cannot work already, I know I will take no steps to pay off my mortgage early, but should I tap my retirement savings or save in a brokerage instead of tying up in retirement funds? Truly, everyone runs the possibility of never seeing their retirement, but it feels like there should be more guidance when the risk of a shorter life is very apparent. Where is the calculator for this?”

Adrianna:

That is so important and uncertainty is your worst enemy, and that goes honestly, not just for Mary, but for anybody. If you don’t know what the cards look like and you don’t have an A plan and a B plan, I think that’s where we can make some potentially detrimental decisions because we don’t have the full picture of what things could really look like.

So what Mary needs to do is map out what is scenario A, if I have a shorter time period and what does my life look like there and then what would I want to do to make sure I’m on a good track for that? And then let’s map out scenario B, what does that look like and what’s an alternative possibility and how do we bridge the gap between the two so that we have some sort of game plan that could easily change one way or another to the other track record if needed. But that we’re going to be generally okay and I think that is the best thing. Getting the context around that is the best thing that somebody like Mary can do because then you can confidently make a decision of what you want to do.

Katie:

So in this particular instance meaning okay, I’m looking at this recurrence chart for this illness that I know that I have and maybe I see okay, 10 year, 20 or whatever, are you suggesting that it might make sense to kind of develop, okay, this is the strategy that I would want to use if I knew it was 10, if I knew it was 20, etc?

Adrianna:

Exactly. We like to usually plan for longevity because the last thing you want is to run out of money when you get to that point, but instead of maybe showing one example at life expectancy of 95, maybe we do want it 65 and we say, what does this look like? Or 85? We just will work and make quality assumptions based on her unique situation to then really map out what that looks like and then to your point, yes, then we back into, okay, this is what we should do based on this scenario and these are the type of accounts you might want to use or how we should think about things. So it really is getting custom and saying what’s a worst case scenario? Let’s do, let’s run the numbers.

Katie:

Something that’s coming to mind for me immediately as I’m thinking through this is obviously the benefit of using the retirement accounts, particularly something like a tax deferred account is saving on your taxes in the present tax year and then having that tax-sheltered growth over time. And I think that I would want to know too, is your income at a level right now where that tax break upfront is really meaningful to you? How do you kind of quantify that?

Overall in my strategy in chapter six of Rich Girl Nation, I really, again, thinking about that very long-term timeline and how those tax savings will compound over time and provide more income to you upfront to invest on the weighting scale of how much are we weighting flexibility versus tax savings versus whatever depending on income in this situation, I feel like I might lower my weighting on the upfront tax savings and that kind of compounded growth and maybe throw a little bit more weight behind the flexibility piece of things.

Adrianna:

Absolutely. I think that present income and the current effective tax rate or even marginal tax rate is so important in that decision because that’s exactly what we would do. We’d run the numbers and say, okay, what is the benefit I’m going to get if this does all grow tax deferred and then what does it look like if I pull out and pay the penalty if I want to pull it out early? Sometimes it actually does work outwards. It still makes sense because your income so high right now that later that numbers and penalty might not actually be that much.

There’s no one size fits all. I love running the numbers and digging into those unique situations because sometimes you’re right, sometimes you would weigh more towards flexibility and let’s do more brokerage because we know we want to tap into this and we may be tapping into it while we still have earned income, but other times it’s like if we are really looking at that worst case scenario and let’s say Mary’s earning $300,000 today, the tax break today may still actually set her up better down the road, it’s hard to say.

Katie:

Totally. Sometimes we think about that 10% penalty as almost being like a red line that under no circumstances you should cross depending on the numbers upfront and what you’re saving today that the 10% penalty, especially to your point, if you’re using the money when your tax rate is very low, you have no other earned income and your life expenses may not be that expensive. The 10% might not actually be that meaningful. So I think that that’s a really interesting point to confront directly or state explicitly that the 10% penalty isn’t necessarily something that you should avoid at all costs.

We will get to the rest of this conversation after a quick break.

Next one comes from Sarah and I am so antsy to get your perspective on this one because I feel like I get this question once a week and I always just feel like my advice on this is so obvious. She writes, “My question is broadly around student finances. I’m a second year master student and I plan to continue with my PhD, which means another five years of school. Most of my friends have started earning their big girl or big boy job salaries while I foresee another five years of no or negative income with student loan debt. I’m pretty good at budgeting and reducing costs already, but getting a part-time job in an unrelated field earning minimum wage only consumes time that could be going toward my schooling so it doesn’t feel like it makes much sense. Am I missing anything with how students should be managing their finances strategically? My peers make $60,000 per year while I’m consuming and not earning and it is stressing me out.”

Whenever I get this question, I’m always like, budget, try to keep your expenses low, focus on the earnings that you’re going to have in the future. If you have excess income, maybe throw something in a Roth IRA, but I am personally curious, I never know if I am missing anything either. When I tell people that, how do you counsel people that are in this position? What are the factors you’re considering?

Adrianna:

So what I would say to Sarah is you are doing a lot right with your strategy as a student. What I would tell Sarah that she’s doing wrong is comparing herself to other people. Everyone’s path looks so differently, so this is where I would put my financial therapist hat on and say, let’s talk about what your goals are and why you went down this path and what everything looks like and build out your plan based on that because if you are going to get stuck in that race of comparison, you’re going to be doing that for the rest of your life. You’re going to be thinking of people who are having kids before you or maybe you’re having kids before them and then all of a sudden you’re like, should I be doing this or getting married?

The timelines all look so different that I think she’s already mentioned that she’s saving and doing budgeting and trying to not spend too much money and she’s being tactical with that. So I think she will come out of school with a much better outcome if she mentally just stops comparing herself to other people and builds a financial plan for what she really wants to achieve.

Katie:

This is a really interesting answer. This is going to come up again. I think as you were saying that I was kind of imagining her sitting down and plotting out, okay, once I have this PhD and I start earning money in five years, this is how my income is going to start changing. And actually if you can project yourself into that future place to give yourself that sort of concrete reassurance that this is temporary and not only is it temporary, but it is an investment in that future. I wasn’t expecting you to take it there, but it sounds like tactically there isn’t some magic wand that, oh, this one simple trick that students are just unaware of that we’re missing here.

Adrianna:

No, exactly.

Katie:

Okay. Hopefully that makes the graduate students in the audience feel a little more comforted that even though it might not be super easy right now, that you’re not missing out on some magic moneymaking or money saving opportunity. Obviously we would say the kind of standard set of money and high yield savings if you have it, get it at the margins where you can, but there isn’t some secret.

Okay, let’s move on to Paige who is struggling with some career ambivalence because she knows she could earn more in the private sector. I would love for every single 19-year-old employed by DOGE to hear this. She writes, “I’m a speech therapist, I work in government provided early intervention where I provide low-cost early speech therapy services for kids that aren’t talking on time. I get paid about $80,000 per year. My husband also works for the government and makes about the same.” Okay, and sidebar, this question was sent to me in August of 2024, so I really hope that you both are still safe from the chainsaw. “We live pretty modestly, so we’re fine, but I can’t stop thinking about how much more money we could make in the private sector, but then I’d feel like I’m not giving back to the community in the same way I vacillate between feeling like I’m doing good and important work and then also feeling like I’m a sucker for providing these services at a lower cost than the market average in my community.”

Okay. How do you typically counsel clients? Do you talk to people a lot who face trade-offs like this one? And what’s your general approach here?

Adrianna:

Yes, there is so much in financial planning that is about the trade-off, right? Because one decision over the other, I mean in life, right? Every decision you make, there’s a trade-off. So I would put my therapist hat on again here and I’m not a licensed therapist, but it is a big part of what we do as a financial planner and I need to get to the root of what Paige is really trying to accomplish here.

And how I would preface it for her is I would say, okay, if you were to change industries or jobs and make more money, what would you do with that extra money? Would you be putting it back into the same things that you care about and the same kinds of charity and work? Or would you be spending more of your time putting your time and effort into those efforts or would you actually feel better and want to do other things with that money?

If the answer is you would want to do other things with that money, then you’re probably in the wrong place because you want more control over what you do with it. Right now you’re essentially being forced into the good you’re doing with that money, which is fine if that’s truly what you wholeheartedly believe in, that’s awesome. But that is the trade-off. I would talk through with them to say, here’s what option A looks like, what does option B look like and which one are you going to be more happy with in the end of the day? And that’s where I would start in the abstract.

Katie:

The comparison piece is kind of coming up again, even though she’s kind of comparing herself to a different version of herself that could potentially be making more elsewhere. I think that when I think about my own career, prior to Money with Katie, my former career, I left a company that I really, really enjoyed working for and that I was very bought in with because I got a different job doing the same thing. But elsewhere that paid roughly twice as much. I mean it was a substantial increase in pay and I only worked there for a couple months before I left to do Money with Katie full time. So I’m not sure how things would have played out had I continued on that path. But it was a good learning experience for me because I think I had been very narrow-minded about what constituted a good job and was very focused on higher number always better.

And I think once I made the switch, I kind of realized how much I had given up in order to make more money and all the things, the intangibles about the old job that I’ve really enjoyed from a quality of life perspective. I did write about that example in the book of kind of like, okay, I talked to women a lot who find themselves in this position. Oftentimes they work in speech therapy like Paige or they’re teachers or they’re doing some job that is very meaningful to them, but obviously hashtag we live in an economy, we live in a society, so they’re kind of also aware that they could be making more, that they’re being underpaid.

Adrianna:

I had a very similar experience when I left the Wall Street world and joined the startup world. It was different in a sense that it wasn’t necessarily as much of a monetary decision for me, but it was like I have this stable job. I was at Morgan Stanley at the time, I loved my team, I still talk to them today, they’re my family. But I was helping a certain type of client and I was doing very specific types of financial planning and as I was growing up, my friends and my peers wanted more help with their finances and I couldn’t provide that at Morgan Stanley.

And so when the opportunity came along to join domain money and really make financial planning accessible and help this generation that didn’t have anyone to turn to yet, I weighed a very similar pro and con situation. I said, I am stable here at Morgan Stanley. I know I could stay here for the rest of my career and be happy and make enough money to live my life and I would be good. Or I can go to domain money and I don’t know what the outcome is necessarily going to be. And mind you, this was years ago when we were a much smaller company in a very different phase and that job could last me six months and it could be over or it could last me also my lifetime and my career.

And I asked myself, would I be more upset if I stayed at Morgan Stanley doing what I was doing and I saw that Domain Money built a new way to financial plan for all the people that I really cared about and wanted to get access to financial planning and I wasn’t able to be a part of it, or would I be more upset if I left Morgan Stanley and had six months at domain and then the company’s gone and I had to find a new thing and I decided I would be much more upset if I stayed at Morgan Stanley and didn’t pursue the option.

So that is exactly the kind of energy I want to bring to clients when we’re walking through these examples is not to necessarily always be looking at worst case scenario, but figure out which one is really going to impact you more and which one you would be more upset with or more happy and then weigh the pros and cons of those two things. It sounds like you did something very similar when you were in that transition

Katie:

Yeah, project yourself into those two futures. And I think that the worst case scenario I think is actually a really helpful exercise. Sometimes my coach Elizabeth will be like, what are you actually afraid of here? Let’s actually articulate what it is. Sometimes you have this ambient sense of downside or opportunity loss, but it can help to actually put words around, okay, this is the scariest thing that is kind of lurking beneath the surface here that I feel like I might be either missing out on or that I might have to confront if I make this change.

Okay, so going back to the questions you should ask yourself when you’re dealing with a trade-off like this one, I outlined a couple questions that I always recommend thinking through, and these are on page 235 in the book, do I love what I do? So am I happy in this profession? And if so, am I comfortable operating within its supposed bounds of the lifestyle it can provide for me? Number two is can I see any path to higher pay? Are people who are way further along in this field paid substantially more than I am? Or is this salary progression going to be relatively flat regardless of my skill level? Number three is would entrepreneurship change the financial outcomes? Do I know anyone in this field that is earning the type of money that I would like to earn or is this limit on income legitimate and real? And then finally, am I willing to do other work that is more lucrative or has more upside to fill in those gaps? So the example that I use is a teacher who may in the summers does part-time tutoring or is that a lifestyle compromise with my time and energy that I’m just uninterested in for personal professional reasons?

And I think the key is, yeah, these aren’t always easy questions and there aren’t right answers to these questions either. It’s not like you’re searching for some magic truth that if you make the ‘wrong’ decision, you will never be able to live it down. But I think that it really does come down to whether you see that job as a vocation and a purpose that is very meaningful and you are comfortable working within the financial parameters. And I think in that case, sometimes seeing those financial parameters on paper and actually having that projection of like, okay, well I know what this means in the present, but what does this mean for the future? How much am I able to save? What is this setting me up for really? And other people look at that and they conclude, yeah, the lifestyle that I envision for myself is really not going to be possible on this current path and I actually do need to make a bigger change. And that can be scary too.

Adrianna:

Absolutely. Being very methodical about what questions you need to ask yourself I think is so important. And the other thing I’ll say is we all chose a career when we were 17 or 18 and the decisions I was making when I was 18 compared to in my thirties, the decisions I make, it’s okay to reevaluate these things and say this actually isn’t going to give me the life I want and I had no idea. And it’s okay to change course now.

And there’s another financial planning saying that’s like for the best time to plant a tree was 20 years ago, the next best day is today. I feel the same way for these types of decisions for clients who are analyzing it, never think that it’s too late and it’s okay to take the leap and do something different because it’s what you want for your future now and who you are today.

Katie:

I remember when I was faced with that decision to essentially leave my career as a UX writer and a copywriter behind and try to do this full time, it feels crazy in retrospect that it even felt like a big decision, but at the time I think there was this underlying story of am I giving up on that thing that I thought I wanted to do to your point when I was 18 and decided that this is what I was going to go to school for and then this is the path that I’ve taken to get here and if I really make this 180 pivot in my career, I’m never going to be able to go back to that was the story. At least if this doesn’t work, I’ll never be able to go back to that old job.

And I think at the time there was some truth to that. I was signing a three-year contract, so I was like, by the time this ends, if this flops and I fail, that world of tech UX is going to have changed so much that I’m not going to be employable anymore. There were a lot of those hangups around giving up on or leaving behind or risking losing what I thought I had wanted.

And your story really resonates with me because that was ultimately the assessment that I ran was, okay, well will I regret which one? Am I going to regret more doing this or not doing it? And ultimately we all know what I chose. We will get to the rest of your questions after a quick break.

I did my best to pick questions that I thought would generate these very tactical and nerdy answers, and I think it’s very telling that so much of what we’re talking about is dealing with our own money psychology and our own hopes and dreams for our lives and how we conceive of ourselves.

So with that segue said, this next one comes from someone who would like to remain anonymous. They write, “You have talked a bit about the great wealth transfer and I have been really interested in those episodes because I am already experiencing it and it is throwing my social interaction and class dynamics for a loop. I’ve been lucky in that I’ve received hundreds of thousands of dollars in inheritance from my grandparents, which I’ve invested smartly in real estate and the stock market, but it has created a very strange dynamic where there is an enormous difference between my peers in the art world and me in both circumstances and experience of life. My annual earnings are still dwarfed by my investments, so I by no means feel rich, but most personal finance content doesn’t really tackle the social and physical burdens of rapidly straddling or jumping classes. I am now a landlord, someone who invests and pays capital gains taxes. I have inherited wealth and I know that I probably wouldn’t have made it like this on my own. My privilege is too vast to ever claim that and I need to constantly caveat any success that I have with noting that privilege. I feel like I’m now the bourgeois bogeyman my friends and folks on social media rail against.”

So I am curious, Adrianna, how often your work with folks surrounds this aspect of feeling as though you no longer identify with the class you find yourself in and that sort of cognitive or social dissonance. Do you have any thoughts on this?

Adrianna:

To first answer your question way more often than you think, this is so common. There’s so many different ways. It can come from an inheritance, it can come from the sale of a business that you didn’t even realize had value. There’s so many ways that this class jump can happen, but what I would tell Mr. and Mrs. Anonymous is that this is a great candidate to work with somebody that they can talk to about these things without judgment. And most people don’t feel comfortable talking about some of these different things with people in their circle. It’s usually some of the better things. They don’t want anyone to have a different view of them or things like that. And that’s the beauty of working with a financial planner is there is no judgment. We’re truly here to help you work through things and figure this out.

And it goes back to what you were saying earlier. There are tactical ways that we can help them get more comfortable with this, but in the end of the day, they really just need a person that they feel comfortable talking to about what their life looks like now and how it’s changed and it’s not necessarily going to be something that they’re ever going to be comfortable talking with their peers and friends about. So having that confidant is so important.

Katie:

They did talk about how they’re in the art world and how they make very little money as an artist and how a lot of their friends are kind of the same way. And the thing that I appreciated and I think that this kind of self-awareness of privilege and I didn’t do anything to earn this, I think that that can be very healthy. But I also found myself reading this being like you inherited a couple hundred thousand dollars from your grandparents and obviously that is going to put you in a vastly different money for most people, but you are not Elon Musk. You haven’t suddenly ascended to some level of evil wealth concentration that you need to feel really guilty about either.

So I think that sometimes there is this grouping and I love that my friends and my social media rails against, but there is a world of difference even between millionaire and I think this identification with the bourgeois bogeyman thing is really funny and is worth being like no, you’re probably just now on track for a normal retirement and everyone deserves to be on track for a normal retirement.

Adrianna:

Yes, and you said something there that I want to hit on too. They have come into this position but they weren’t trying to take credit for any of their success moving forward now they were trying to be like, well, I still owe it to this, but I think that it’s so important how they have reacted or used the money or what they have done with it and the decisions they’ve made. They should take credit for that, how they have set themselves up for success or what they use the money for.

Maybe it is for the greater good of other things or their community. Yes, you did have something that was out of your control, but everything since that money came into your name has been in your control and you could have done bad things with it, you could have done great things with it, you could have done nothing with it. The decisions that that person has made, I think they need to give themselves a little credit for how they are using that money for things that they care about.

Katie:

Yeah, when they said I invested in real estate, I’m now a landlord. I think there’s also a pay it forward element of this where you can be a great landlord that never raises rent. You can be a really exploitative and extractive landlord. That is an area too where if you’re doing fine, you can be a positive force and whoever your tenant is, you can actually be a positive force in their life too. It does not necessarily mean that you have to be the bourgeois bogeyman.

Adrianna:

Exactly.

Katie:

Our last one is kind of long, but it is another anonymous entry and it’s about starting a business. This one just moved me, so I’m going to read the whole thing. I just have a feeling it’s going to help some people in our community.

So they write, “This question is for those in the trenches of starting our own businesses. I made a trade-off when I got started. We’ve already talked about trade-offs a little bit. I left my $80,000 annual salary to make $0 year one, $50,000 in profit year two, $75,000 in profit year three. And now in year four, I am finally on track to exceed what I was making four years ago with $120,000 in take home pay.” That’s a 50% income increase. I’m just going to point that out for them.

Theoretically the trend will continue. They say, “I’ve stuck with it for the potential to out earn my previous career track over the long term and on my sunny days, I believe I made a good choice. However, in the meantime, my friends who kept their W-2 jobs got to pay and save for weddings, buy houses, start families, and on my rainy days I feel so behind. Not only have I saved almost nothing in the last four years while building this business, but I had to take on some credit card debt just to make ends meet with interest. This has turned into a $40,000 hole. Before I struck out on my own I was saving $20k per year. I like my freedom. I am not interested in another JOB, but what’s the fairest way to assess the damage and make a plan to get my financial picture looking better than it otherwise would have? When I quit my job to start my business, two male family members and one male best friend individually reached out to share their concern that I was impulsively making a risky or bad choice. It came from a place of care, but it hurt. And now anytime I’ve doubted my choice, I’ve had to put on blinders to the naysayers and just keep pressing forward. Now I’m newly 30, I’m reckoning with those statistics that say my earnings should be peaking soon and I’m looking at my friends who are getting ahead, whereas I have just gotten back to where I was.”

“Am I successfully bucking the trend or did I toss a sizable chunk of my key earning and savings years in the trash? Was ignoring the doubters healthy and protective for me or just willful ignorance? I’m not asking you to answer those questions for me. Just wondering how you frame these trade-offs.”

Okay, so Adrianna, I would love your thoughts in two parts. One, the financial trends of it all and kind of particularly the debt payoff piece. And then two, if there’s anything in there that speaks to you about risk taking and I have some thoughts as well, but I’m going to pass to you.

Adrianna:

Sure. I’ll start with the trend piece and I will say most businesses take several years to turn into a success or at least have something tangible there. So the fact that in four years, I mean you already hit on it, Katie, that’s a lot of money that they’ve made and a lot more growth than they would’ve likely experienced elsewhere. So I think it’s so important to take a step back and say there’s absolutely should be no regret considering where you’re at today.

Then if we want to get a little more tactical though, and let’s talk about the debt piece, right? Okay. I would never encourage somebody to go out and rack up credit card debt at a high interest rate as part of their financial plan, but we also have no judgment here and the most important thing is figuring out where you’re at today and where we go forward from here.

So I would look at that as an opportunity cost. I mean it sounds like they’ve built this amazing business and their income has significantly increased and now they have an opportunity to figure out what the rest of their life looks like. Let’s figure out how to strategically get that debt paid off and let’s move forward.

And I don’t think that it was a bad idea to put those blinders on because I’m hearing a lot of success coming out of this and I just hope that they also can take that and harness it and say, okay, this is where I’ve come from and how far I came in four years. I know the next four years are going to be even better. And sure it’s not going to be without struggles or unexpected things that come up, but I’m really excited for this person and the new life path that they’ve carved for themselves.

And I think to answer your question on the risk piece, going back to the trade-off, they’re already thinking about the right things because talking about the trade-offs they made, and I think that is so important in saying, okay, here is the worst case scenario or what my life looks like if this doesn’t work out.

And then here’s the worst case scenario. If I stay here and I’m extremely unhappy in this career for so long and they already confirmed that they do not want another JOB, what I’m hearing is that they have successfully launched their own business and are carving a beautiful life that they’re super excited about and they just need maybe a little bit help figuring out how to pay the debt off and getting themselves set up for success long term.

One more thing that I find relevant for so many people is understanding their break even income number. So they need to set a goal for how much income they want to make because it’s great to just be like, we’re going to double again, we’re going to make two 40 next year, but what does that even mean for them? So for this person in particular, I want them to map out what that ideal life looks like and what they want to do and then let’s figure out how much they need to cover their expenses, cover taxes in whatever state they’re in, and also save enough money to create that life that they’re looking for. Maybe that’s $150,000 and they’re almost there. Maybe it’s $200k, maybe it’s $120k and they’re actually perfectly on track for this life they want now. They will feel so much better about all of their decisions once they understand that number.

Katie:

I noticed that they described themselves as being right back to where they started, and I just want to emphasize that no, you’re not. You are ahead of where you started. I mean even inclusive of the debt, you now have an income that you totally own. All the benefit of what you’re building is going to accrue to you. That is significant too because it means that any upside is yours.

I also really appreciated that you pointed out that they experienced more income growth than they actually likely would have on their other path. So I think that that’s important to double down on of. Yeah, it’s unlikely that you would’ve gotten a 50% increase in income staying in the job that was paying you $80,000 per year, so you are already ahead of where you were and probably where you would have been.

And when I’m reading this, I kind of am visualizing like a bird flapping their wings really hard and having a lot of psychological weight, ankle weights wrapped around your feet pulling you down and you’re having to expend so much energy to keep yourself afloat or keep yourself moving forward and you’re carrying all this baggage and all this weight with you. And I hope that recognizing that you are actually ahead of where you probably would have been had you stayed can help ease up on some of that weight.

But the other thing that I like that you pointed out is the piece about what is kind of the breakeven number. I think that that can be really comforting, particularly if you’re building out. Sometimes what I like to do is build out what do I absolutely need to be bringing in every month in order to keep the lights on and to feed myself what is the living large budget look like on top of that? How much more to live at my normal lifestyle? What am I able to pare back to if absolutely necessary?

And it’s usually less than you think and sometimes having those numbers in front of you can be really useful because I do think that paying off this debt quickly is going to be important and you’re probably already taking it seriously. I know that balance transfer cards, you can transfer the balance, you pay 3%, you get it on a 0% card for 18 months. That can be an effective little tool or strategy if you’re really trying to pay off debt quickly and you want to put a pause on the interest.

Adrianna:

I definitely like the balance transfer idea, but I think this is a great time to take inventory of everything on the balance sheet, which it sounds like they probably have a good handle based on all the details they’ve laid out for us, but I would also get creative in how we can pay that debt off.

The balance transfer is a great way. Sometimes I see clients though with a huge chunk of cash in their high yield savings account and they think it’s like that red line or the red tape that we talked about earlier.

Katie:

Good point.

Adrianna:

I can’t part ways with my emergency fund because that’s just like rule number one, but if you’re increasing the interest on the credit card, you actually might be better off using some of that to pay off your card and then using the card as the emergency fund. If you need, and I’m just giving one hypothetical example, but I really would just urge them to say, what is everything we have available to us right now and what is going to be the best situation moving forward and how do I use all of my resources the best way?

Katie:

So to reiterate, I’m just going to say that so it lands for myself too that if you have a lot in savings and you have this number of this is the emergency fund that I can’t, the number I can’t go beneath, but you also have this credit card debt that you might be thinking about them in the reverse where there is a situation in which it actually makes more sense to use some of that emergency fund to pay down that debt and then rely on the credit card while you build up the emergency fund if needed, if an emergency arises.

It’s kind of a gamble. It does feel like a little bit of a gamble or a risk, but it might be worth it if in this case of a high interest bearing credit card, the interest that you’re being charged is a certainty, the potential emergency is not.

So you are kind of taking the risk of like, okay, I am rolling the dice because I know that I’m going to be paying 28% and if I can try to live very cautiously, well I build this up, the emergency is not a certainty.

The other thing that I wanted to note that I again am kind of getting hung up on is similarly to what I referenced with respect to my very narrow definition of good job equals higher number before I think that it’s worth taking a step back and I’m keying in on the I like my freedom. I don’t want a JOB again. And I think that there might need to be a value that you assign if you’re in this position to your autonomy, how much is that autonomy worth to you? That has a dollar amount too. Not having someone looking over your shoulder, not having to submit for paid time off and hoping it gets approved, being able to be in full control of your time, that has value too, and it clearly, you really value it anonymous questioner.

So I think that just thinking about it as my W-2 job was stable and it paid me this and now my business pays me this, but I feel behind even though I have, I think it is worth recognizing that you have also this kind of intangible of the autonomy that you are benefiting from in this case that you would not have in that other situation had you prioritized the quote stability, which I think stability with W-2 jobs is a little bit of a misnomer. I think that it’s not a total mirage, but most of us are at-will employees who can be let go for any reason at any time. So it’s not as though most jobs are as secure as they might feel. I think maybe that stability or that sense of I could have been further ahead or I could have been more stable is maybe not true.

Adrianna:

I could not agree more and I don’t want to open this entire can of worms right now. Maybe we’ll do another episode.

Katie:

Open it.

Adrianna:

I feel the same way about looking at renting versus buying. Everyone has this understanding that owning their home gives them more stability and they’ll be in a better place. The bank owns your home If you have a mortgage and you are required to pay that mortgage every single month, it could take months. It could take a year to sell that house if you no longer want it or need to change jobs or need to move. So I actually feel like renting gives you more flexibility and sometimes more stability in your own ability to manage your money because you’re usually only on a year lease, maybe two years, and so it’s finite. And if you change jobs or want to start a business, you can go find someplace cheaper to live.

Or vice versa. If you end up your business is exploding and you can afford something nicer, you don’t have to sell the house. You can upgrade. And so again, this is a whole can of worms and I can make a case for both sides, but I just do think it’s really interesting that owning a home does not always mean more financial security. Sometimes actually renting can give you more security in your long-term plan.

Katie:

I love that you opened this can of worms. This is confirmation bias bonanza for ol’ Katie. One of the bonuses when you order a Rich Girl Nation is a bonus chapter that we had to cut in editing just for length and to keep the scope of the book really tight. But it is a very protracted rent versus buy analysis that says, okay, let’s run the numbers for real, for real. We’ll look at the upsides, we’ll look at the downsides, and then hopefully you can apply that same cost benefit analysis to your own situation if you are feeling very on the fence. But I actually really appreciate you opening that can of worms.

So thank you and thank you so much for joining me today. This was so fun. It was so fun.

Adrianna:

Anytime I’ll be back hopefully. No, it was great, Katie. Thank you so much and this was great conversation and I really just love how detailed everyone got with their questions and what they were looking for help with. I feel like this will hopefully be really enlightening for people who listen and can relate me too

Katie:

Well. I’ve got about 200 more, so come back anytime.

That is all for this week. I will see you next week to talk to the authors of the forthcoming book Fixed: Why Personal Finance Is Broken and How to Fix It. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin with audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew and additional fact checking comes from Scott Wilson.