032: Live Well Today and Tomorrow with Roger Whitney, the Retirement Answer Man

Roger Whitney is the Retirement Answer Man, and he believes you can create a great life that balances living well today AND living well tomorrow by having the right little conversations about money.

Over the last 24 years, he has worked directly with clients on this journey and shares the wisdom he’s learned on his weekly podcast, The Retirement Answer Man, and his blog at rogerwhitney.com.

This is a great interview with Roger. He’s really living out this “living well today” concept.

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I hope you enjoyed that. A big thank you to Roger for giving us the gold today.

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A Budget for Someone Who Hates Budgeting

Roger is quick to tell you that he absolutely hates budgeting. What he does love is spending money. He had a lot of guilt over that for years, trying every budgeting tool out there. He also feels like it caused conflict in his marriage if he or his wife spent money and there wasn’t a “category” for it.

The first thing that Roger did was to figure out about how much money he and his wife spent every month. He opened two accounts: an income account and a spending account. All of the household income flows into the income account and once a month he transfers their spending money into the spending account.

Because he does bookkeeping all day for clients, Roger isn’t interested in doing personal bookkeeping. This is his way of knowing what they’re spending without having to keep up with a bunch of different categories or do detailed bookkeeping. It also allows them to control their spending and know how much extra money they have to do other things with.

Building Wealth and Net Worth

So if Roger leaves the money that’s not for spending in the income account, how does he save for retirement, invest, etc.?

He actually lets that money build up over a period of 3-6 months. When he updates his net worth statement every 6 months, he looks at that amount that’s grown there to see how much wealth he has created over the past 6 months. He then goes through a checklist to see where those monies will be allocated.

Some of the options are to spend it, give it away to someone who has a need, pay down debt, save it (emergency fund or college savings), or invest it. Once he has gone through the list from top to bottom and allocated portions to wherever they are needed, the rest goes into long term investing.

Roger keeps around 3 months of living expenses completely liquid and advises his clients to do the same, with some caveats. For clients whose income isn’t stable, he has recommended as much as two years of living expenses be saved.

Budgeting Roger-style for Small Incomes

It’s all well and good to have plenty of money to just decide to spend, but does this system work for smaller incomes?

Roger can speak to that since he experienced a 75% decrease in income when he left Wall Street to start his own firm. He was counting pennies to pay bills at that point and freely admits that his style of budgeting works best when you get to the point of having excess cash flow.

The important thing is to capture that extra income instead of just spending it because you can. If things are tight for you, you’ll need to watch every penny until you get to a place where you have discretionary income to work with. And if extra expenses come up at the end of the month that necessitate pulling money from the other account, it should start a conversation with your spouse or partner over why you’re having to do that and whether you need to make changes to your spending.

Helping Others to Help Himself

Roger began his career as a financial advisor in 1990, right in the middle of the technology era boom. His day job was in trading stock, and he was making a lot more money than he was expecting to make. During his 20’s, Roger says he was a terrible money manager. Even though he spent his days helping others manage their money, he wasn’t doing very well for himself.

He became a CFP (certified financial planner) and spent his 30’s building the business and cleaning up the financial disaster he had created for his own family. The damage he had done to his relationships through the money mismanagement was causing him overwhelming guilt. He says he wasn’t who he wanted to be and he hated who he was. So he set out to change things.

“In my mind, mastering your money gives you more flexibility to live life on your own terms.”

What Roger’s Own Terms Looked Like

Roger is now beginning to experience some of those things he wanted to see as he began rebuilding his financial life.

He is able to serve the clients that he wants to serve, and while his business isn’t huge, it is growing at a rate that he’s comfortable with. He is able to be location independent for the most part, which means he can do things with his family that wouldn’t be possible otherwise.

The biggest benefit for Roger though is the fact that he can spend his time in his giftings and not have to just get a job to pay the bills.

Waking Up to the Need for Change

Roger was a successful financial advisor who had risen to branch manager for his firm, and yet there was something missing for him. He knew that while he advised people all day on their finances, his life was a mess. His financial mistakes had cost him not only money but also freedom and close relationships with his wife and kids.

The courage to make a change came when his wife forced the issue. He had to examine what he believed based on what the checkbook said. There was no more denying the problems; they had to be faced head on. Roger had to decide what kind of person he wanted to be and how to align his money with what he said he believed.

Getting on the Right Path Financially

Instead of making small changes to try to make progress in where he wanted to go, Roger decided to do something much more dramatic.

“What I am right now is who I don’t want to be. So I am going to blow it up and I am going to start from scratch and be pure and become who I think I should be.”

Roger says that although he used this strategy, it isn’t the best or the smartest way to get on the right path. He has since learned better and more successful ways to turn things around. Today, he would say that if you have a career that isn’t where you want to be, it’s okay to aspire to something better. It’s okay to have those goals and dreams of making changes.

But rather than blowing everything up, spend some time every day working on the skills needed to make the changes you need to make. Once you see that you’ve made significant progress, then you can begin to think about getting rid of whatever was holding you back. It’s an easier transition financially, and you won’t end up suffering unnecessarily because of a dramatic shift.

For Roger’s family, his dramatic shift meant that they had to sell their house and their cars. His wife had to go back to work and they scrimped and saved every penny to try to make headway in their financial goals. His children were young and thankfully Roger and his wife were able to move closer to his family when they gave up their house. But having to pull his wife away from their young children is not something that Roger takes lightly.

Seeing the First Signs of Success

Roger left his job and made all of his drastic changes in 2003, and it wasn’t until 2005 that he began to see some of the benefits of the changes he had made. The thing about starting your own business is that in the first months/years, it seems like a ton of work for absolutely no results. But the fact is, it takes a while to gain momentum.

And when that momentum catches up to you, you see the cumulative effect. If you are handling your business correctly you will hit a point where your revenue begins to increase but your expenses are pretty much stable. And at that point, your bottom line begins to look very different.

What happens next is that eventually, you will have to spend more money to take your business to the next level, which will cause a dip in your earnings. You have to follow the cycle through again before the expenses will stabilize and the earning will continue to increase.

Having the Right Conversations About Money

When asked which part of money management he isn’t good at, Roger says he isn’t really any good at any of it. That’s why he needs the right conversations with the right people at the right time to be successful.

He gets advice from others and then makes lots of little adjustments along the way that suits his personal circumstances. With that, he throws in conversations with his wife all along the way so that they are always in agreement with every decision.

Roger admits to also being a bit baffled by the long-term care piece of the puzzle. He’s had to make decisions about it but still doesn’t feel he has a good handle on the subject. It’s a big topic and there are a lot of products being sold around it, but this area of finance has only recently even been a business. As the baby boomers begin to hit the age of needing long-term care, the industry could be in for some major changes as that group of people begin to file claims against their policies.

Looking Toward the Future

As he already mentioned, Roger’s wife went back to work in 2003 when they made all the big changes in their lifestyle, but he is happy to say that she will retire within the next 5 years. He intends to continue working indefinitely, but they will become location independent. They will keep their home, but be able to travel and live and work wherever they want to be.

Roger recently sold his part of the firm he has been a partner in back to the other partners, and while he still works with clients through the firm, he has no more administrative duties that were sucking the time he wants to focus on his personal future. He is spending more time on taking his own business to the level that he can look toward retirement and travel. He also writes and speaks on the issues that he has struggled with and gained some mastery over.

Show Notes

• 01:45 Why Roger hates budgeting and how he does it instead
• 04:00 Where does the extra money go?
• 06:25 How many liquid assets does Roger keep on hand?
• 07:20 Does Roger’s style of budgeting work for someone with a lower income?
• 12:35 How managing other people’s money taught Roger to manage his own
• 16:00 What did “living life on his own terms” mean to Roger?
• 17:30 What did it take to wake Roger up to what needed to change?
• 19:00 Roger’s mistakes in his early years of financial advising
• 22:10 The strategy that Roger used but doesn’t recommend to get on the right path financially
• 24:33 What happened when Roger ditched everything to turn things around
• 26:30 The financial ramifications of the changes Roger made
• 28:35 When Roger finally began to see some success from the new lifestyle
• 30:05 Tracking every single dollar to make progress
• 33:00 Managing his investments
• 34:00 How conversations with others helps Roger be successful with money
• 35:00 Dealing with long-term care issues
• 38:12 What does the future look like for Roger and his family?

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Links/Terms/Concepts from the Show

• Quicken
• Certified Financial Planner
• UBS
• Fidelity
• Vanguard
• LPL Financial
• Mutual Funds
• Annuities
• Index Funds
• Dimensional Investing
• Long Term Care Insurance

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This show is part of the FinCon Podcast Network and was produced by Steve Stewart.