March 16, 2022

The Unexpected Problem with Your Financial Goals

The Unexpected Problem with Your Financial Goals

Why your long-term plan will fail, and how to fix it.

Today’s episode is about the one major issue we all share with our financial planning:

As humans, we’re bad at anticipating what’s going to make us happy. 

Yep—it’s kinda hard to plan for what you think you’re going to want in 40 years, huh? Especially when some of those decisions tend to be inflexible.

You’ll also hear from Sam Dogen (a.k.a., Financial Samurai) about his journey retiring—then un-retiring—at age 34. 

You can preorder Sam’s book here.

Here’s more information about why humans are bad at predicting what’s going to make us happy (or unhappy), and here’s the article I referenced about optimizing your tax strategy for early retirement.


Full episode transcript below.


Katie: Welcome back rich girls and guys to The Money with Katie Show. Today's episode is about where you might have a problem with your current financial goals and the way you're planning for them.

Katie: So let's start out with the very simple question. Does anyone remember the million dollar question I posted on Instagram a few weeks ago? It asks you something that really doesn't seem like it should be that hard to answer, but for some reason, it is. The question is if you woke up this morning with five million dollars in your brokerage account, what would you change about your life? The intent of the question is to get you to examine your life a little more closely and more specifically determine why you want more money. What would you even do with it? Is it because you hate your job and you want to quit? Is it because you want to live in a nicer house, eat better food, help a family member. In general thinking self-reflectively about your why can be powerful and motivating. After all, if you're a sucker for every targeted Instagram ad, but you're actually interested in spending the next six months in Thailand, it can be helpful to clarify the best use of your money before you start a doom scroll destined for impulse, Steve Madden booties and pastel personalized phone cases.

Katie: There's only one problem. We're bad at predicting what's going to make us happy in the future. And I will link the research for that conclusion in the show notes, in case you're interested in diving a little bit deeper, but we think it's our job that makes us miserable. And maybe it is, but then we quit the job. And after a short stint of euphoria, we return to our baseline level of happiness or lack thereof. We think living in a larger house with granite countertops is going to make us feel happier, but then we move into the house. And after the first month of multipurpose spraying the shit out of our new gorgeous kitchen island, we realize that we really don't feel any different. You get the picture? It's a little bit like the song lyric I heard the other day that slapped me across the face.

Katie: Wherever you go, there you are. I remember the suspense and the anticipation of moving to Colorado. I was so ready to leave Dallas, where I had lived for the last five years and to live in the mountains, to wear flannel, to play in the snow, to drink craft beers with Subaru owners. Anytime I imagined this rustic hiking boot clad future, I was certain that I would be happier and fitter and altitude adjusted. And the first month it was fantastic. I loved taking bike rides with the giant fir trees in the park, walking the dog or on the lake, telling everyone who would listen that I lived in Colorado. I loved living in my little house with a charming century old facade, but gorgeous renovated interior. I even loved the fact that it snowed in April. It felt like I was inside a snow globe. You cannot begin to imagine the charm.

Katie: This is so much better, I thought during the first month. I am so much happier, but then a few months passed and I realized quizzically that I wasn't really any happier than I had been in Dallas, despite the fact that I lived in a nicer house and had more balance in my life. I mean, sure, I could point to a few areas where things had really improved, but I could also point to things that got worse that I wasn't really expecting. For example, I didn't take into account that my lively, expansive network of friends in Dallas would not be joining me in Colorado. I really underestimated the impact that a lack of socialization would have on my day to day life and the difficulty of rebuilding a new network. So what does all of this mean for your financial plan? This inability to accurately judge what's going to make us happy or unhappy bleeds over into our financial decision making. On a micro scale, we buy the thing or quit the job or take the trip or ask for the raise that we think is going to make us feel better.

Katie: But on a macro scale, we make much larger decisions, major long-term planning decisions around the future that we assume we're going to want. Sometimes these decisions have extreme impacts on our lives. Look no further than the fire community for an example. For those who don't know, the fire community is this really extreme approach to personal, not extreme in a bad way, but it stands for financial independence, retire early. Some people have different definitions of it. They'll say financial independence, relax early. And I think retire takes on different meanings for different people outside of the traditional retirement definition that literally means to stop work working, but in this fire community and this fire methodology, the whole idea is that you really live on as little of your income as possible so that you can save and invest as much as possible. That way you have the option to leave work and live on your own investments in your thirties or forties. As an early adherent to fire pedagogy myself, I was immediately drawn in by the promise of eventual, total freedom.

Katie: What could be more valuable than my own time? I would insist with my eyes twitching to my coworkers who did not understand why I was scavenging in conference rooms after lunch meetings for dinner that night. I was a woman by the allure of total freedom because it sounded like the most magical goal to strive for. Unfortunately though, there are no shortage of stories from inside the fire movement of people who were a little bit surprised by how they actually felt when they reached it. They're just buried beneath the surface of all the evangelists. The story goes, something like this: person discovers fire, person becomes singularly obsessed with fire. Is this sounding familiar? This is literally me. Person spends the next X number of years pursuing it relentlessly and lets everything else take a backseat person. Person reaches fire. Person realizes after some time that the fun part was striving for financial independence and is now bored or disappointed.

Katie: If you had asked this hypothetical person how they'd feel when they reached fire, I'm sure they would've told you they'd be ecstatic, over the moon, like falling into a vat of festival drugs and glitter. And for some it might actually feel that way. But I would propose it's probably the exception and not the rule. In fact, as I was writing this episode, I realized I want to talk to someone that had this experience and not just anyone but someone who's been a prolific fire blogger since 2009.

Katie: So we're going to take a quick break. And when we come him back, we will hear all about it from none other than the Financial Samurai. If you are into the fire movement, you know my guest today, Financial Samurai or Sam as we will call him. He's been featured in the Wall Street Journal, Bloomberg, Forbes, Business Insider, Yahoo Finance, CNBC, Market Watch, and 47 other places. So sufficient to say, this is quite the honor. Sam started blogging about fire in 2009 and he left his day job 10 years ago in 2012 in his mid-thirties. He currently lives in San Francisco with his wife and his two children. Sam, did I get all of that right?

Sam Dogen: You got it. One son, one daughter. And I'm really excited to be here. The honor's all mine.

Katie: Oh, thank you, Sam. So to give people a sense of the timeline here, you've retired for the first time in 2012 and listeners who are listening closely will hear that I said for the first time, because you didn't stay retired. So can you tell us a little bit about what happened after you retired early?

Sam: Right. So after a 13 year career in finance, two years in New York City, 11 years in San Francisco, I decided I had enough of getting in at 5:00 a.m., 6:00 a.m., working 14 hour days, always expecting to do well every single quarter. The pressure was just crazy immense. And then after the global financial crisis in 2008, 2009, finance was no longer fun, right? We were the public enemy number one, bad guys, and it just didn't feel good to go into the office anymore. So I remember hiking around Santorini in 2011 October with my wife. At this point, I was already burned out and I was taking six weeks of vacation a year. I was like, "There's got to be something better to do with my life than this." And so we were hiking around and after about two hours, I decided to go to the top of this rooftop bar, overlooking the crater, and it was 78 degrees and it was amazing.

Sam: And I got a message from my phone and it said, "Hey, Sam, I want to advertise on your website for a thousand bucks." And I was like, "Oh really? You want, that's pretty cool. I'm in Santorini, but why not?" And so within 30 minutes I was sent an advertisement link. I put it up. The person PayPaled me a thousand dollars. And I was like, "Wow, that was unbelievable." I couldn't believe how quickly or how easily it was to make some money. And so I thought, maybe there's some life after finance. And so that was October 2011. And then I thought, okay, I don't think I'll starve if I leave, but I had to find some kind of exit, some kind of strategy because in finance you're paid via salary and then a bonus which includes cash and deferred stock. And if I left, I would've left hundreds of thousands of dollars on the table.

Sam: Just like a lot of people work in tech, they have RSUs and stuff. So long story short was I was able to negotiate a severance, which allowed me to keep all my deferred compensation over the next five years and then also able to get basically unemployment benefits and COBRA and so forth. So at that point at age 34, I said, "I think it's time to go. It's time to go." And I left, and it was really good for about six months to a year, but then after you see 10 European churches, they all start looking the same. And I just felt like there had to be kind of more to life than just early retirement.

Katie: Right. And so at this point, just to get a sense of the timeline, you mentioned that you were on vacation from this job from which you were very burnt out.

Sam: Yeah.

Katie: And you received the email about the website. How old was the website at this point?

Sam: So I started Financial Samurai in 2009. And so the email was in October 2011, so a couple years old.

Katie: Cool. So you had been doing it for a while?

Sam: Yeah, just a couple years, but I started it during the depths of the financial crisis because there's so much chaos and is so much fear. It was the worst time to be in finance or to be just kind of employed in general. You were losing tons of money. I lost 35% of my net worth in six months. And instead of drinking or smoking, I decided to write and just kind of reach out to people and try to get some connection going. I was just writing and it just felt really cathartic kind of like therapy. Probably podcasting is kind of might be therapy for you, for me too. And it just kind of went from there.

Katie: Okay, amazing. So you've retired early. You're really enjoying yourself. You're going on all these vacations and then six months to a year passes. And it's like, I feel like there's got to be more than this. And so a lot of proponents of early retirement will talk about this all encompassing freedom as the end all be all. And they expect that total limitless freedom is going to make them happier than anything else could. So I want to hear more about your experience with that total freedom. Were there any consequences that you didn't take into account when you were forecasting how happy that was going to make you?

Sam: Right. So do you remember a time when we had summer vacations in high school and college?

Katie: Yes.

Sam: It was awesome. But after about two months, I don't know for me, I personally started itching to go back to school, to see my friends, hang out, have fun. So that freedom was amazing for three months, six months, pretty good. But after again, we went to like 20 countries. We traveled everywhere and after a while it just kind of got monotonous, the same thing. And I was living in San Francisco, and I turned 35 years old in June. And I thought to myself, wow, this is web 2.0 right now. Things are back. Economy's coming back in 2012, 2013. Web 2.0 is amazing. Uber was invented in 2009. A lot of other companies were invented and created during the recession. So I thought I need to participate.

Sam: I can't look back when I'm 67 and say, "I didn't do anything internet related while living in San Francisco for 20, 30, 40, 50 years." So what ended up happening was I decided to scratch the itch and pursue startups and FinTech companies, financial technology companies, just to try to understand what it was like because I was living and working in finance for 13 years and seeing all the good times and people doing well while finance was kind of struggling. It wasn't that fun. So I decided to consult for three startups, one an angel investment startup, one series A and one series C level in terms of funding rounds, just to understand and understand the culture, understand marketing online. And there were obviously a lot of synergies with Financial Samurai and I just thought I was really fun to get into that group setting because I think I'm an extrovert and I like hanging out with people as well.

Katie: Yeah. I've always heard people talk about how you don't realize how much of your identity comes from what you do until you don't have that thing anymore. And I feel like I've read that, something to that effect in one of your blog posts about things that you didn't necessarily expect and kind of that shift in identity from what is my purpose now? Why am I here? I was curious if there was anything that you wanted to add about kind of that identity shifting and maybe that wasn't really what you were thinking was going to be the outcome of retiring early.

Sam: Well, in finance, if we're frank, the people who get into finance want to make money, as much money as possible. So in terms of the good deed that finance does, it just kind of greases the capitalism wheel to help companies go public, raise capital, hire people and so forth. But deep down, it didn't feel like I was helping humanity at all. Right. You're just working finance basically to make more money. And so my pivot was to start Financial Samurai as a personal finance site to help individuals get well with their money, to feel more confident, to build enough courage because financial independence, we crunch the numbers. We talk about 25 times expenses. I like to use the 20 times annual income as a financial independence number barometer, but doesn't matter how much you crunch the numbers. And a lot of people crunch the numbers are gainfully employed.

Sam: It doesn't really matter until you actually are faced with a decision to change your life for the better. If you don't have the courage to change your life for the better, whether it's you're in a bad relationship, whether you're in a job where your manager degrades you and abuses, you're not financially independent. You have to have the courage to change. And so that's kind of been my journey. I thought, okay, accumulating X amount of net worth and having let's say $80,000 a year in passive income was great in San Francisco. But things change.

Katie: On that note, things change. You mentioned that when you retired, you did not have children. And I know now you have two children, right?

Sam: Right.

Katie: How did that change the equation? I imagine doubling the size of your family that may or may not have been something that you and your spouse were intending on doing, or maybe it was, but a little curious about kind of how that shifted the calculus for you.

Sam: If you ask anybody who has children, they'll probably say, I would say 95% of people will say that having children is the best thing in their lives. And it's also the most difficult thing. And if you want to have children or you're thinking about children and you have the right partner, you should probably have children a little bit sooner than anticipated because life gets crazy. Our biology doesn't cooperate. So we weren't sure we wanted children until I was about 32 and she was 28. We started thinking about it. Right. But living in a big city, it's so expensive, right, housing, rent, buying a car, everything is so expensive, tuition. So we, unfortunately, we delayed until about 33 when I was like 33. And she was 30. There's a stat that says it takes about seven tries to successfully get pregnant and then give birth.

Sam: That's just for the average couple, but for us, it took over two years. And so there was a point where I was thinking, well, maybe children is not in our destiny. Right. We always kind of think positive and say, "What's our destiny?" And so when we had our first son in 2017, it was just unbelievable. And there's a great saying that says, "Have children and the money will come." And the reason why there's that saying is because you will do everything in your power to work hard, stay fit, be a good parent, read all the books. I think most people will think that way. But suddenly, without a day job, my wife left her day job at 34 as well. So we had no subsidized health insurance. We had to go and pay full health insurance, which now we're paying about $2,300 a month.

Sam: And then with the prospect of paying for preschool tuition, which was 2000 a month at the time, and now it looks like it's like $2,500, 3000 actually. It just keeps on going up. So there is this big fear that we're not going to have enough money. And really in retrospect, achieving financial independence where your investments can cover your basic living expenses is kind of like a walk in the park when you don't have children. Because man, once you have children, it's crazy difficult because it's not just the expenses, it's the time, right? They take up so much of your time and energy. So the cost goes up, your energy goes down, and then also your worry about their future goes up. So there's this financial and mental strain, but then we still have children because we love them to death.

Katie: Totally. Okay. Thank you, Sam, for this insight. I think it's unrivaled I think to hear from someone that has actually been through this that actually did it, made the decision, walked away, was like, wait a second. This is not exactly how I thought it was going to feel, be, turn out. So I really appreciate that you shared your experience with us. I hear you have a book coming out soon. Can you tell us a little bit about this book and when we can expect it and a little bit more about it?

Sam: Oh, thanks for asking. Yes. So for the past two years, since the pandemic began, I signed a book deal with Portfolio Penguin, Random House. And the book is entitled Buy This, Not That: How to Spend Your Way to Wealth and Freedom. And essentially it's a book about how to achieve financial freedom sooner rather than later, so you can do what you want. Doing what you want is the goal, whatever it is that you want to do. So not only do I crunch the numbers and do the math, but really what I do is talk about life during the journey to financial independence and then after financial independence. So, so much about personal finance blogging is crunching the numbers. And that really kind of gets boring after a while. We're so unique and different in our desires and perspectives and our goals, right?

Sam: And so the book tackles some really big topics that I think a lot of us would love to discuss and we should discuss such as, let's say, should I marry for love or marry for money? Should I have children earlier or later? Should I join a startup to try to go for that home run or join an established company and make more money? Should I go and move to the Midwest to save on our expenses? Or should I go to somewhere I don't know, and it's really expensive to try to go for glory. All these things, private school, public school, these things that we talk about that we should talk more about because at the end of the day, our life is about accumulation of experiences and memories and money is just a means.

Sam: And so that's what Buy This, Not That is about. It's about talking and tackling those biggest dilemmas and hopefully you can do it in a group setting where every single chapter, there's a dilemma, you read it, and then you argue about why things are the way they are. And what's also unique about this book is that I encourage people to think in probabilities, not absolutes. So this is the investor in me. As soon as you think, ha I know exactly why this stock is a buy. You're so confident you go on margin and then you blow yourself up. The longer you invest, the longer you live, the more you'll realize that a lot of things aren't what they're going to be as expected. And so this book encourages you to think in probabilities because if you think in probabilities, then you also leave room for error and you also make room for other people's perspectives and you're also very humble when you approach things.

Katie: I love that. And I also appreciate the fact that from what I've read and heard from you, you always do bring a very unique perspective to things. I never get the sense that if I go listen to Sam's podcast to read a blog post, he's just going to be regurgitating what every other personal finance writer or podcaster is saying. I will definitely be buying this book. When can we expect to see it on shelves?

Sam: June 28th, 2022. And yeah, and pre-orders for hard copies and all that, they're open right now.

Katie: Oh, amazing. All right, Sam, thank you so much for being here today. I think it's really, really important again for people to hear from someone that has set a financial goal that is about as extreme as it gets and then achieved it and then realized that sometimes achieving the things that you think will make you endlessly happy do not always permanently improve your life across the board the way that you think they're going to. So thank you very much for being here today with us.

Sam: Thanks for having me.

Katie: One thing that I noticed after I talked to Sam that I thought was really interesting is that he mentioned a few things that came unexpectedly later in life. And it's not that when he set this crazy goal to retire at 34, however old he was going to end up being that the things thought he was going to want, he didn't really end up wanting. It's just that other things happened that he could have never foreseen. For example, web 2.0, he mentioned living in San Francisco during this big tech boom. He didn't know when he was leaving finance that was going to be the case and that he was going to feel like he needed to be a part of that and work in that way, but that just ended up happening. Same with having children. He didn't know that he was going to end up wanting kids and not just one kid, but two kids and that it was going to take them a few years to have children.

Katie: He probably also didn't expect that their daycare and health insurance costs together were going to be $5,000 a month. I mean, that's outrageous. So I just think his story is so fascinating because it highlights so perfectly that it's not that we don't know ourselves or that we're necessarily wrong. It's just that when you are trying to forecast how you're going to feel in an uncertain future, it's basically impossible to do. That is a relevant example within the personal finance world. But it's not the only one. Imagine saving for years to move into a nicer house. Maybe the one you've got is fine, but you've got your eye on one down the block that costs twice as much. You skip vacations. You pack your lunch every day. You go light on the birthday celebrations because you've got a goal worth striving for, baby, that bigger house, or honestly for millennials in 2022, it's probably just a house in general, but you know what?

Katie: It feels good to work toward a goal and to see the progress in your bank account as the balance creeps upward. You might even relish in the sacrifices you're making because with each dollar saved, you imagine a little more elaborately, the vision of future you doing somersaults in your new entryway with 10 foot ceilings and those Alexa controlled smart lights. Years pass, and finally, you're ready. You drain the high yield savings account. You plunk down your big down payment and strap in for those higher monthly costs. You furnish the house with brand new shit, invite your friends over to humble brag about your quiet close drawers, and you bask in the glow of property ownership. But then something breaks or more realistically, you just adapt to your new surroundings, and the spell is broken. The years of sacrifice and saving and dreaming and wishing culminated in this huge change.

Katie: So why don't you feel the way you thought you would? Why does your life feel more or less the same as it did before? Two words, hedonic adaptation. Put another way, we as humans generally adapt to our surroundings and they lose their luster. I think this is why we're bad at predicting our own happiness or unhappiness because we pretty much get used to everything that happens to us. So if we're bad at anticipating what's going to actually make us happier, how we're going to react to things in the future, what's the point in planning for our financial futures at all. Let's talk about some considerations for DIY financial planning as a fickle, unpredictable human being. What is a human being with a limited amount of resources to do? Give up entirely? Say, fuck it, and join the 401k plan to pre-order the Tesla model Y. I mean maybe, but I would suggest something else. Avoid extremes when planning for the future.

Katie: Now I know that might be hard to hear if you have an obsessive personality like I do. That's probably akin to suggesting that you avoid taking in too much oxygen while breathing. In other words, if you're obsessive like me pursuing any goal gets taken to an extreme, but it comes down to this. We are rarely made as happy or as unhappy as we expect by the great things or even the bad things that happen to us. That doesn't mean positive or negative change isn't possible, just that we tend to overestimate the impact it's going to have on our baseline level of satisfaction. Avoiding extremes can take on two key forms really. It's number one, making decisions today that have extreme consequences in either direction like buying a $10,000 handbag, I'm looking at you Chanel, or swearing off restaurants for a year because you want to save money.

Katie: That's kind of extreme number one. Number two is locking yourself into decisions that are very hard to undo or generally inflexible in nature like putting every dollar you have into an investment account that you can't access easily for 40 years. Now obviously I am a huge proponent of tax advantaged investing. I practically proselytize it, but to contextualize my perspective, think about the financial position that I'm in today compared to a few years ago when I did not contribute the maximum to any retirement account. Contributing the maximum to all three major accounts, your 401k, your Roth IRA, and your HSA would cost about $30,000 in 2022. That is less than 10% of our total gross income now. And it's really not at all extreme, but in 2018 that would've represented more than 50% of my total gross income. In most scenarios, contributing the maximum to all three major retirement accounts when I was 22 would've been considered an extreme decision.

Katie: Of course, if I had lived at home and my parents were still bankrolling me, it may have actually been fine and not all that extreme. After all, if your expenses are nothing, any additional income is discretionary and saving a lot of money becomes substantially more practical, but if you're trying to make ends meet on your own, and you've got $50,000 a year coming in, yeah contributing $30,000 of it for future you is kind of giving present you the shaft. It might be worth it in 40 years, but then again, you're only 22 once. And if you skip out on every fun experience in your twenties because you want to make sure your sixties rock, you might feel some regret and resentment later in life. In other words, balance. If you're a fire devotee like me, you are probably ready to take a hammer to your used 2013 Dell laptop saying, "What Katie, how dare you suggest it's extreme for someone to contribute the maximum to their retirement accounts."

Katie: Now, to some extent, extreme is subjective, but I would argue it's a little bit like that Supreme Court case that attempted to define pornography. You'll know it when you see it or rather feel it. So flexible planning might be the answer here. The tricky part of course, is that the math is clear that not contributing enough to your 401k or in other words, under saving will likely mean that you may not have enough to retire when you want to. So there are no easy answers here, but a good way to hedge against the fickle nature of our changing human desires is to save in a way that's both not too extreme and not too constrictive in nature. Spend some of your money on fun things and experiences today and save in a way that'll widen your breadth of options later. This mitigates the risk that you're backing yourself into a corner or betting your present on your future, or the other way around. Under saving is kind of the same thing as sacrificing your future for your present.

Katie: And neither extreme is good. After all, how shitty would it be to skip every great experience in your twenties and thirties in anticipation of a kick-ass, mid to late stage period of life only to develop a chronic illness or for some reason, be unable to enjoy the fruits of that sacrifice. It's one of those things where if it works, it really works, but if it fails, it really fails kind of like individual stock investing. For example, I wrote a piece of while ago about how to optimize your investments and taxes for early retirement. And I'll link it in the show notes. This is a very specific, very niche way to plan for the future because it involves narrowly defined inputs and outputs to achieve one extreme goal. And that's the thing. If that one extreme goal is definitely what you want in your mind, won't be changed later, this is the best path to follow that we know of today with the current tax code, right?

Katie: But if there's a chance you're going to feel differently in 10 years, it could be suboptimal. Paying off your mortgage, super early, buying a car in cash, taking out a massive 401k loan. These are all extreme financial moves that place a levered bet on the future you think you're going to want. And it's great if it works out, but much like investing with borrowed money, when things go wrong or really just don't turn out the way you thought they were going to, or make you as happy as you thought it was going to, it can be catastrophic. That's the essence of flexible planning. It's not putting all your eggs in one basket even if you know that today it might be suboptimal from a tax or investment standpoint.

Katie: It's like diversification, but for the future more broadly. You're acknowledging that the things you want today may not be the things that actually make you happy later. So you're baking future you's changing preferences into the plan today. That might mean not contributing the maximum to your 401k and Roth IRA. That way you can put some money in a taxable brokerage account that's accessible to you whenever or spending more money today than you otherwise would because you realize that maybe retiring at 40 won't actually be what you want by then or buying the home you can actually afford instead of waiting a long time to buy the one you think you actually want because you realize that the super nice house may not actually impact your quality of life as measurably as you think it will, or vice versa. Maybe it's renting for longer until you can comfortably afford the house you actually want instead of buying the first house that hits your price range because you think being a homeowner is the thing that's going to change your life.

Katie: Essentially. You just take any financial decision you're considering and you dial it down a few percentage points. Shoot for moderate instead of extreme, and the chances that you'll end up with more flexibility and happiness later becomes higher. So let's talk about one last exercise worth indulging. This is the tangible takeaway, right? At the end of the day, I genuinely believe the best thing you can do for future you is run the numbers. Understand where you are on your current path, and it'll be a lot easier to navigate seemingly difficult financial decisions. I like using my financial independence planner for this. It's available on my site, but you can make your own projection tool or use online retirement calculators too. For example, if you're stressed about whether or not you can afford to splurge for the Ritz Carlton on your once a decade, Hawaiian family vacation, instead of the Courtyard Marriott, it might be helpful to see that an incremental $2,000 spent this year doesn't materially really impact your financial independence timeline whatsoever.

Katie: And it becomes an easier decision. Splurge. If you're worried about the addition of a potential new car payment that'll set you back $500 a month for the next five years, plugging that new expense into your projections and seeing that it pushes back your retirement by three years might actually make that decision pretty clear, not worth it, or maybe it is if you love your job and you love the car.

Katie: The bottom line is if you know your numbers and where you're headed, it's much easier to make decisions that feel nebulous or fall victim to financial dogma like don't spend a thousand dollars a night for a hotel room because that's insane. Well, is it actually insane if it doesn't really meaningfully set you back at all? Happy planning, rich girls. Remember, avoid the extremes and you will be just fine. Thanks for listening. That's all for this week. And 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 at Morning Brew. And Sarah Singer is our VP of multimedia.