Everything's an Investment: Building Your Epic Spending Plan

Katie: Welcome back, rich girls and guys to The Money With Katie Show. Today, we are going to talk about something that may not make you resent the absolute shit out of budgeting like you might right now. It is a better approach to budgeting that I like to call everything is an investment.

Katie: This is a true story. I was 30 minutes into a luxurious hour long facial at my favorite spa in Fort Collins, which sounds just honestly boujee to even say those words, I have a favorite spa, but it gave me an incredible realization, everything is an investment. Every time you deploy your financial or your energetic means towards something, you are investing in it.

Katie: It sounds so woo woo, but as I laid there and began to feel slightly guilty about the expense of a discretionary spa trip, I thought, "What if instead of an expense, I thought of this as an investment in my health, and not just my financial health or my facial health, but my mental health." Deep breathing on a table, conscious with my eyes shut for 60 minutes, I would never do that otherwise without falling asleep. But throw in some fancy skincare and a massage, and my nervous system loves it. It feels like a true reset.

Katie: My wheels kind of began to turn as I was laying there, what if everything you buy is an investment in something? Dining out is an investment in your relationships. Therapy is an investment in your psychological health. A nanny is an investment in your family and probably your marriage too. The list goes on. So something that really always bothered me about how we think about our financial decisions is this weird punitive binary distinction between spending and saving.

Katie: One thing that always turns me off, and I think it turns a lot of people off, from budgeting in the traditional sense is that it can feel like the spending side of the equation almost has this dark cloud floating over it. Every time I would allot a dollar towards something that was technically an expense, I felt like I was being irresponsible or that I was somehow soft because I liked creature comforts that cost money like facials.

Katie: In that way, every discretionary expense began to feel like I was favoring my now more than my later, or somehow too soft not to prioritize the compounding magic of the future. That meant that it was usually accompanied by some level of guilt. I would literally think, "Well, if I spend this dollar now on this unnecessary thing, it's a dollar that is not going to compound parabolically." I don't think I'm the only person that thinks that way.

Katie: It can be a helpful self check when you're spending, especially if every weekend you're completely wheels off, swiping your credit card at every cashier that looks your way. But for me personally, it quickly morphed into this guilt-ridden relationship with buying anything that I didn't absolutely need. The inherent good versus bad is clear. Saving is good, spending is bad, right? Well, maybe not. I thought, "You know what, this might require a re-categorization, a re-characterization for the ages."

Katie: So today, my budget has two major buckets, spending and investing. The spending tab is broken down into several key categories within which I divvy down even further. So housing, for example, has eight or nine categories within it, rent, gas, electricity, water, cleaning, lawn care, the list goes on. Honestly, as I think about this, it's so annoying how expensive it is to just exist in a neighborhood without breaking city code. But what if instead of categorizing in the traditional sense, we categorized as investments in all of these respective areas.

Katie: It just kind of feels like an epic reframing. For example, maybe investment in my career is a category. Now, cleaning isn't simply a housing expense, it's an investment in getting my time back so I can spend more time working or relaxing and less time cleaning my own house. Maybe coffee shops or other expensive caffeine, I don't know, you do you, would go into that category too. So would books and office supplies and anything that makes you better at your job. So those are no longer food or miscellaneous or housing expenses. They are career investments.

Katie: When you reframe purchases as what they are representative of potential for you to improve in certain areas of your life or enjoy it more, the guilt vanishes. What about an investment in safety and comfort as a category for your shelter related costs? Or maybe investment in physical health for the gym, your groceries and the occasional Lululemon run because maybe the new gear motivates you. Even just coming up with these category titles is making me more excited about planning my spending.

Katie: So what about investing in the traditional sense? We will still call this regular investing. We'll call it what it is, it's investing for the future. So maybe that means spending becomes investing for now. It'll make it super clear at a glance whether or not you are investing more for your future or more for today. As a result, it'll highlight inequity and imbalance on either side.

Katie: So if 100% of your income is being invested in today, it'll be clear that you're going to be living a pretty great life today, but maybe at the expense of tomorrow. If too much of your income is being invested in the future at the expense of relationships or marriage or experiences or mental health today, you'll probably notice that the today investments might look like they're lacking a little bit.

Katie: So this reframing might feel like semantic child's play, but it is impactful psychologically because it no longer pits enjoying your life today against enjoying it tomorrow, and instead classifies your relationship with money in a healthy, accurate way that represents how it actually is. To live a full balanced life, some should be used to invest in now and some should be used to invest in later.

Katie: I wanted to talk to someone who knows a lot about money and life, a certified financial planner who is also a level one certified financial therapist. Yeah, that's right. I didn't even know those things existed until I met my guest today, Adam Day, a wealth management professional, who also happens to have a little streak of life coach in him. So before we get to the interview, we need to give a little compliance note and to help us get through that, here's some calming music.

Katie: Adam is here to share with us his educated opinions on the matter and nothing that he's going to say today constitutes actual investment advice. It should not be considered a testimonial of any kind. These are just his opinions. Okay. Are you still with us? Great. Adam, welcome to The Money With Katie Show.

Adam Day: No, I'm happy to be here.

Katie: Yeah. I'm real, really excited that you decided to come on today because I think it's going to be super valuable to hear from somebody that's not only a wealth manager, but also understands those human behavioral components, if you will. So my first question for you, Adam, is when you think about people's sometimes fraught relationships with money, what do you see most commonly with respect to people finding balance? What gets in their way and how do you work with your clients to think through that?

Adam Day: Yeah, it's great. So first off, everybody's different, right? So there's really no out of the box kind of strategy. Like you mentioned, money is so psychological. There's so much emotion going into the topic of money. So it's really tough to find that balance, right? This is going to sound really simple, but money is just a tool. It's just paper. But we put so much meaning to it, different kinds of meanings to money. But when you think about it as a tool, right, you're going to spend the money now or spend money later. No matter what, it's going to get spent, right?

Adam Day: So it's really tough. If you kind of dig into it a little bit more, a lot of it is, in terms of finding the balance, right, you got to figure out the subconscious, your decision making that is actually pulling you out of balance to figure out how to get back into balance, right? We do that by kind of discovering what people's money stories are and their money beliefs.

Katie: Yeah. So I think money stories is really fascinating to me. If I was sitting here and we were doing this together, like you were my financial therapist and we were trying to dig to my money stories, where would you tell me to start?

Adam Day: It's finding out your first memories of money, right? So what do you think of when we talk about money? What are some of the decisions? We do use a couple of tools, but it's almost putting you in a couple of situations to say, how would you react to this situation, right? You win the lottery. What is the first thing you do with the money? Do you spend it all? Do you save it all? Do you give it all away?

Adam Day: So that kind of brings in some of these motivations where it's like, all right, subconsciously, what is the first thing I'm going to do when I have money? Then we can start to build on that, and really, all of this is just giving you more awareness about what your story is for the most part.

Katie: I love that. So yeah, I think self-awareness is huge. I've even recognized that in my own life with the things that I value, the things that are important to me at one phase of life that are not as important later and how I, in some phases, was kind of using money as a tool to find, it sounds so cliche, but to find meaning in my life. So being able to find meaning somewhere else meant that, oh, okay, well now I no longer need to be spending to fill that void or to fulfill that thing that was not being met another way.

Katie: So one thing that you had mentioned when we were talking before this episode was the go and the whoa. I would love for you to speak a little bit about go and whoa. Because when I first read that, I was like, "What the heck? I've read a lot about financial psychology, I've never heard of that."

Adam Day: Yeah. The concept comes from one of my mentors, one of the founders of our firm, James Lenhoff. It just is so obvious once you think about it. So really, it comes in couples, and when you think about their relationships together with spending money and having money and planning, right? So in my relationship, in our marriage, I am definitely the go, right? Usually, we figure out there's a go and there's a whoa in every relationship. Sometimes in those rare circumstances, two people are gos, and then we really have to figure this out, otherwise they're going to spend all their money.

Katie: What is a go? Can you dig into the go?

Adam Day: So a go is that person that it's like, "Hey, we have this awesome trip we can take next month." The go is like, "Let's do it. Right now, let's book it. Let's go." Right? The whoa in that circumstances is, "Whoa, whoa, whoa, whoa, whoa. Put on the brakes. Can we afford it? Can we do it? What about this? What about that?" It just is whoa to the brakes, right? When you are faced with these money decisions, the go is always going to compete with the whoa, right?

Adam Day: So if you don't bring back your awareness and create almost what you've talked about, right, on this whole episode is create the spending plan, right? How do I invest my money into the things that I care about? If you come together on what those are together as a couple, then both people have more awareness of why that other person is making the decision.

Katie: That's so fascinating. I was talking to somebody on a former episode about how she and her husband realized after they were married for a while like, "Oh, our natural tendencies toward money are just very different." This go and whoa framework actually is the perfect label because she was like, "If I want takeout, I'm just going to go get takeout. I'm like, 'Oh, that sounds fun. Let's do it.' Whereas he's like, 'Well, wait a second. How are we tracking on our money goals this month?"

Katie: So yeah, she's the go, he's the whoa. It's kind of interesting when you think about how if you add that level, that relationships layer to everything, that cranks up the complexity tenfold, because now we're not just talking about one person that is maybe not as self aware or not as in balance as they should be, but now we're putting two people together. So that's like an entirely different story.

Katie: So when we talk about balance, stripping it back now to just the individual, table the relationship thing, put a pin in that for a moment. To what extent do you think someone's ability to identify with their future self and to think about themselves in the future as just an extension of themselves now, how do you think that plays into people's ability who maybe do teeter too much on the I'm going to favor today, I'm going to invest in today maybe at the expense of tomorrow.

Adam Day: Dr. Meghaan Lurtz does a lot of awesome stuff on what she calls future self continuity, right? This might age me a bit, right, but I always think about Marty McFly Back to the Future II, right? He goes forward and he figures out that I did not like the way I am in the future. He comes back and he's got to fix it all. What we do is, especially as being that person that has a tough time of identifying the future and wants to spend money now, you have to envision, right, what that other person's going to do, what you're going to spend money on, what your new values are going to be, and really just envision yourself into that so you can identify with that person.

Adam Day: Otherwise, it's almost like you're planning for somebody totally different that you don't even recognize, right? So it is really interesting this dynamic of trying to put yourself in that future self. I feel like us as advisors, and I used to do this a lot of like, well, when you retire, what do you want to do? Oh, you probably want to play golf or you probably want to do all these things that normal people want to do. But now I think it's fun to take some real time and dig into what is really important to you now and what's going to be important to the future and is there anything that is important the whole time, right, that's going to stick in you, that's in your core in terms of values.

Katie: Totally. Things that are intrinsic to your character versus just preferences that can change. That was totally the point of last week's episode, which is, hey, you may think you're going to want this thing 30 years from now, but if you're planning for something super inflexibly, you have no idea if you 30 years from are still going to have this same prioritization that you now has. After this short break, Adam is going to dive into specific resources that you can use to help understand your money motivations. Oh, and I will compare myself to Scrooge McDuck. I don't think you want to miss this.

Katie: Okay. We talked a little bit about money stories and how we can begin to think about our first memories with money and maybe these things that we internalized over time. Are there any other exercises or resources that you would want to point people to who are starting to get a little bit more curious about their relationship with money and how they can dig deeper?

Adam Day: Yeah. We have a free tool that we use. It's right on our website. It just digs into your money motivations and it kind of narrows down one of three things, either your go, right? So you like experiences and fun things. You're generosity motivated. So you give all your money away. Or you're security motivated. You hoard everything because you're secure.

Katie: That's me. I'm the Scrooge McDuck hoarder.

Adam Day: Yeah. I think what would be fun to do as well for you, right, and for everybody is Dr. Brad Klontz has done a ton on these money scripts and they have a free tool out there, we can link it on the show notes, but where you can figure out what your money script is. That even goes deeper than just your motivations, but there's four different scripts. Then you can really comb through how is my mind wired when I'm going to of be faced with this decision.

Katie: Okay, sweet. So yes, just like Adam said, we will link the money motivations and the money scripts, free tools in the show notes that you can kind of go through these exercises as you're thinking about it. Adam, last kind of big question for you now that I'm curious. If we're talking about these different approaches that people have where somebody might be totally I'm the go, I'm in the now, I'm not going to worry about tomorrow because I'm trying to live my fullest life today versus generosity versus scarcity, hoarding money, afraid to spend, always kind of worried. What would you say is the most common? Is there a most common one? Or do you feel like you see kind of all three of them equally?

Adam Day: There isn't really one that is the most common. That's going to be the easy answer out, right? In relationships, you do really, one person right away identifies with the go, one person right away identifies with the whoa. They laugh, they raise their hand and you get to have fun with that concept. I think as people get to talk through it, they're like, "That is totally me. How do we fix it?" Right? Then they're welcoming to trying to fix it. But no, there's definitely not one more than the other. Everybody's different.

Katie: Okay. That makes sense. I was going to say that I would guess that most people have that at kind of like present state mindset, but actually the more that I think about millennial cohort, I feel like we're all just terrified of what's going to happen economically and financially to us. So maybe that circumstantial or external factor of that fear and uncertainty would have a tendency to manipulate your natural tendency.

Adam Day: It has a lot to do with the stories, right, and people's stories and how their parents have taught them and stuff. So I think if you figure out, us millennials, how were our parents raised and all that kind of stuff travels in there too. So yeah, but we've lived through a lot already as millennials.

Katie: Definitely. Any last parting words that you'd want to leave our listeners with, anything that we didn't cover yet that you would like to share?

Adam Day: Don't take money so serious. So give yourself some grace and really just try to be open and welcome to your own story. I think it'll help. Awareness is the biggest thing that you can do. So the more you know, the more it'll help out.

Katie: Amazing. Thank you so much, Adam, for being here today.

Adam Day: Thanks Katie.

Katie: Let's talk about how this investment framework for budgeting helps remove some of the unnecessary granularity. All right. So while my answer for this issue before was just having a fat miscellaneous budget, I do think people who hate the nitty gritty side of budgeting, like, "Oh, I just bought this Barefoot Dreams blanket. Where does that go? I don't have a blanket budget," I think that they'll find that this investment framework works a little bit better. It's simple. You simply identify the things that are important to you.

Katie: Maybe it's your marriage, your children, your comfort, your safety, your creativity, your friendships, your favorite charity, your looks, let's be honest, right, your mental health and your general enjoyment of life. That's a pretty baller list. Honestly, I bet everything you buy could fit into one of those categories. Random blanket, comfort. Facial, beauty. Brunch with pals, friendships. You just determine overall how much you want to allocate toward the future versus the present, and then give yourself overall guidelines for each one.

Katie: After all, it's not silly to invest in how you look if it's important to you, just like it's not silly to invest in your future if your future matters to you, which obviously it should. But if any one category becomes too unwieldy or constantly over budget, it'll become clear quickly as you notice that, hey, maybe the comfort category is always super in the red and it can raise really helpful, useful, actionable questions, like one that I actually grappled with recently, am I too concerned with being comfortable? Is that a thing for me? Am I too obsessed with my life being as easy as possible outside of work? Is that even a good goal?

Katie: Whereas an upgraded plane ticket from coach to first class could be an investment in comfort, or it could be an investment in your marriage if you're doing it together. I think this investment framework for budgeting works because at the end of the day, every single dollar should serve a purpose, whether that's an investment in you today or an investment in you for the metaphoric tomorrow. This framework quickly exposes dollars that are not doing their job and it allows you to spend, or should I say invest in a way that reinforces what matters to you.

Katie: All right, thanks for listening. That's all for this week. I will see you next week, same time, same place on The Money with Katie Show. Our show is a production of Morning Brew and is produced by Nick Torres and me. Alan Haburchak is the director of audio in Morning Brew. And Sarah singer is our VP of multimedia. Maybe coffee shops are... Sorry, my cat just knocked my phone off the table.