Episode #12: Don’t Hide Your Head In The Sand When Planning For Retirement
The NY TImes has reported that 75% of Americans have less than $30,000 saved in their retirement accounts. Hewitt Associates says that 4 out of 5 American workers haven’t saved enough for all of their financial needs in retirement. A recent survey from the Employee Benefit Research Institute found that only 42% of Americans have tried to calculate the amount of money that they will need to have set aside for retirement.
We are hiding our heads in the sand when it comes to planning for retirement. In this episode of Your Money: Your Choices, I interview Dana Anspach who is the the author of “Control Your Retirement Destiny – Financial Security Before The Big Transition”. We cover a wide range of topics about planning for retirement on this episode of the podcast show. We talk about planning for retirement topics such as calculating your retirement needs, how big your nest egg needs to be, not leaving money for your children in your will, spending plans, whether Social Security will be there for us, and a host of other topics. It is a great conversation that you won’t want to miss.
My Interview With The Crew From ReadyForZero
Additionally, I talk to Ben Feldman and Shannon McNay from ReadyForZero about how to get out of debt. ReadyForZero is an only community that helps users take back control of their debt. It is not a debt consolidation website. It is instead a free website with a smart phone app and a user base who help you understand and plan a way to pay off all of your consumer loan debt such as credit cards and student loans.
In the United States, Americans have over $2.5 trillion in debt that they try to deal with on their own. When you think about New Year’s Resolutions and other financial goals, getting rid of your debt and taking back control of your finances are often very high on the list if not number one. ReadyForZero is a free website that helps consumers monitor their debts. The website also helps you formulate a plan that will allow you to pay off your debt as fast as possible. There is a community for support and a great smartphone app to go along with it.
Roth IRAs, CDs, stocks, insurance, your 401K . . .what are the right choices for your financial future? Your Money: Your Choices will clear out the cobwebs and confusion surrounding these concepts and more with clear and concise information. You’ll hear tips and tools that you can put into action right now to help save your hard earned income in way that will protect your future for a healthy retirement. Whether you are a single mom or a father of five, “Your Money: Your Choices” will get you on track and put your money back in your control where it belongs!
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NARRATOR: Roth IRAs, CDs, stocks, insurance, your 401K – what are the right choices for your financial future? “Your Money: Your Choices” will clear up the confusion surrounding these concepts with clear and concise information. You’ll get tips and tools that you can put into action right now to help save your hard-earned income in ways that will protect your future. Whether you’re a single mom or a father of five, “Your Money: Your Choices” will put your money back in your control where it belongs!
Now here’s your host, Hank Coleman.
HANK COLEMAN: From Main Street America, this is the “Your Money: Your Choices” podcast. I’m Hank Coleman. Thanks for joining us today. You can find me on my website, MoneyQandA.com discussing all things personal finance. That’s also where you’ll find the show notes for today’s show. Be sure to email me, at Hank@MoneyQandA.com with any comments or questions that you have from today’s show.
Today on the show, we’re going to be talking about retirement planning, and actually how we haven’t been doing enough for retirement planning. “New York Times” recently reported that 75% of Americans have less than $30,000.00 saved in their retirement accounts. “Hewitt Associates” also went on to say that 4 out of every 5 American workers haven’t saved enough for all their financial needs in retirement.
And, the Employee Benefit Research Institute found in a recent poll they conducted, that only 42% of all people have actually tried to calculate the amount of money that they’re going to need in retirement. We all kind of see those ING commercials that are really popular on television a couple months back, where everybody was carrying around their million-dollar number, but only 42% have actually figured out what their number is. Is it one million, is it two million – who knows, if you haven’t actually calculated the number. And the same survey found that only 14% of Americans think that they’re going to have enough saved in retirement for all their needs.
So today we’re talking about retirement planning, and we’re talking with Dana Anspach. She’s written the book, “Control Your Retirement Destiny: Financial Security Before the Big Transition”. She’s also a featured columnist on “About.com” where she writes “Money Over 55.” She’s also a financial adviser and founded “Sensible Money LLC” in 2011. “Sensible Money” is a registered investment advisory firm in Scottsdale, Arizona, with developing the area of Retirement Income Planning. She’s a certified Financial Planner, retirement management analyst, a Kolbe-certified consultant and a member of the National Association of Personal Finance Advisors. So I’m pleased to welcome Dana to the show where we’re going to talk about all things retirement planning.
HANK COLEMAN: I really loved your book, the financial nerd in me. It had just enough charts and graphs to keep me happy and it was really easy to read. So I know that the novice investor, those without the amount of experience would really get a lot out of the self-help for retirement planning.
I wanted to ask you, why do we hide our heads in the sand when it comes to retirement planning?
DANA ANSPACH: You know, my opinion on that is, none of us really like the idea of getting older. And so it’s hard to plan for something that you’re not super excited and looking forward to it.
HANK COLEMAN: That’s true.
DANA ANSPACH: Yeah. We have to change our definition of retirement and create a term that we look forward to and…
HANK COLEMAN: What do you mean? How should we…
DANA ANSPACH: It’s easy to just say, you know…
HANK COLEMAN: Yeah. How do we change how we define retirement? What should we be calling it or what should we be looking at calling it?
DANA ANSPACH: Some people call it the third age, or the second age. You see all kinds of different phrases, but some people are looking at it as a point in time where you can choose to do what you want with your time. Maybe you’re still working but not in your current career. Some people are redefining it as a – maybe you go through periods of work, and then some time off and then work. You really have to find hobbies and interests and things you’re passionate about. And so what you’re saving toward, what you’re working toward is, “Wow! At this point in time, I’m going to have the financial resource to go pursue this and not have to depend on my time to work for a living.”
HANK COLEMAN: Yeah. You know, I always joke that in retirement, I want to kind of be an entrepreneur; I want to open my own driving range because I love golf so much. I just want to go out and just hit golf balls. I mean it’s not exactly retirement, but that should be a pretty cool retirement.
DANA ANSPACH: Yeah, exactly.
HANK COLEMAN: When we think about finally leaving the work force and retiring, are we leaving out parts of the plan? Do we not think about social security or taxes or our healthcare? I mean, I think maybe it’s just my own opinion, but it seems like we get so tunnel vision on and destined. We want to build up that nest egg, to have the huge nest egg to draw down in retirement. But it seems to me like we’re forgetting part of the plan
DANA ANSPACH: Yeah. I agree and there’s a lot of academic research that’s come out on that lately. There’s a Center for Retirement research report that talked about the misplaced focus on asset allocation – what funds do I own? What’s my allocation? And, how a lot of the other levers that you’re talking about, planning levers, when should I take social security? When should I start my pension? How about taxes, is there a way to minimize taxes? A lot of those types of things. Do I use a reverse mortgage? It can add a lot more value than simply, “What’s my investment choice?”
There’s a Morning Star paper that’s called “Alpha, Beta, Now Gamma,” that talks about the ability of planning to add almost a 2% return a year. So the right planning decisions can add value.
HANK COLEMAN: Okay. In your book, kind of going back to the book, I love the spreadsheets that you have. You have in there, basically a personal balance sheet that is a kind of a nice thing. We don’t normally always see that a lot in retirement planning, and net worth calculations. On Money Q&A, I find a lot of my readers don’t even do net worth calculations. Is that surprising to you, or you’ve seen it but it’s a shame.
DANA ANSPACH: It is surprising. I mean, it’s not surprising and it is. It’s one of those basic things, sometimes I equate it to, if you look at people in the gym who really make progress, they track their progress. And the same, if you have a balance sheet, and you start with, “Here’s where I’m at,” that ability to see things improve, to see your net worth grow is really powerful. It helps you understand exactly what you’re working toward.
HANK COLEMAN: And then how much you can draw down in retirement when you… right?
DANA ANSPACH: Yeah. And I use that balance sheet as a starting place to show people how certain decisions can reduce the cost of retirement. So for example, if the traditional plan, we project everything out and we say, “Okay, assuming a reasonable rate of return of, a conservative return of, let’s say 5%,” is going to cost you, let’s say $800,000 to fund your retirement lifestyle. But if we make the decisions this way, it’s only going to cost you $700,000 to fund that exact same level of spending.
So when you start with that personal balance sheet, it gives you a framework you can use to now compare different decisions.
HANK COLEMAN: You know, another work – I guess a worksheet, is probably you have a phrase at the best, that I hadn’t seen – maybe I’m just reading the wrong retirement books, but I was drawing out to timeline. And that was great, and it looked like a simple Excel, basically worksheet but laying out how much earnings you’re going to have as you go closer and closer throughout your retirement and in your retirement years, and the expenses that you’re going to have, and then if there are any shortfalls year by year. And I thought that was such a great tool in there, and I hadn’t really seen it before.
DANA ANSPACH: Yeah. Go ahead.
HANK COLEMAN: No. I was just going to – if you could kind of expand on that a little bit.
DANA ANSPACH: Yeah. What I see is that planners, we can do a good general plan, but as you get in your retirement, people are scared. That transition to, “Wow! I need to draw money out of this investment account. Is that really going to work? It’s a scary thing because we’ve been conditioned to save, to put money away. And, so that it really becomes important is, people who are nearing retirement are seeing exactly where their income is going to and coming from.
And, it helps them to live in retirement in a more relaxed fashion. And your comment that it was a simple excel spreadsheet kind of makes me laugh. It can be done very simply, but in reality there’s a full 1040 tax code calculator behind those numbers. So it’s accurately calculating the tax impact of various things. And that’s also an important component of it
HANK COLEMAN: Okay. Sorry, I don’t mean to make it sound so simple. It looked great though on the book. It… Are we underestimating our expenses in retirement, do you think?
DANA ANSPACH: You know it depends. We find every client is different. People tend to forget things like the cost of healthcare. Basic Medicare is going to cover about 50% of your healthcare expenses. You’re still going to have Medicare premiums for part B and part D, and likely, you’re going to have some supplemental policies. You’re always going to have dental expenses. And I was just talking to associates here at my company, and we have yet to see in a client’s budget that comes in with line item for dentists.
HANK COLEMAN: I’m not going to the dentist. So, I’m sure not putting it in my budget. I hate the dentist with a passion. I mean, they’re all wonderful people, but it’s scary. That’s a good point.
DANA ANSPACH: Yeah. As people get older, there’s going to be crowns and root canals. And there’s just going to be more dental work. I know I have 8 crowns, and…
HANK COLEMAN: I just got a couple the other week, and I really won’t talk about it. Let’s move on. My loaded question that I ask every financial planner that I get to talk to is, where do you come down on the rule of thumb that we need to replace 80% of our pre-retirement income? Is that valid or should we really be looking at a hundred percent of our income? Is our spending really going to go down by 20% as we enter retirement? What do you think on that?
DANA ANSPACH: You know, I think all of those rules of thumbs – I don’t like the word “rule,” because that makes it sound like, “Wow, I have to follow this.” I think they really should be called guidelines. But it’s a good starting place and that’s it. And it depends on how you define income. So I like to look at take-home pay. Obviously, if you’re living comfortably on your take-home pay today, let’s look at what it would take to replace your take home pay.
And so that makes it more concrete because income, gross income, maybe you’re maxing out your 401K, and so you’re not going to need to do that anymore once you’re retired. So it’s defining, “What do people mean when they say income?” I think replacing take home pay works for people.
HANK COLEMAN: Okay. Now we talked about changing, how changing the term retirement, or how we think of retirement. And I love it in your book you actually used the term “spending plan” as opposed to the big B word. How important is it to have a budget and a spending plan in retirement?
DANA ANSPACH: It is critical. The biggest mistakes that we see our clients have worked with, where they wildly underestimated their retirement expenses. And, there are a few reasons for that. One, they just didn’t get it right the first time. They didn’t do an accurate spending plan of what it was going to take. And the goal isn’t to say, “Oh no, you can’t spend money on that,” the goal is to, “What does it take to maintain a comfortable lifestyle?” And so they either got it wrong, or the biggest thing I see is overspending because of an adult child. An adult child gets in trouble, and most parents are going to do whatever it takes.
HANK COLEMAN: Sure. Help them out or… Or the boomerangs that come back at home, come back to live at home. That’s brutal. I joke with my wife and tell her that our kids are out at 18, 22. Go to college. They’re not coming back. I mean, I don’t know, they’re just going to sink or swim. I don’t think she agrees with me, but I don’t know.
HANK COLEMAN: And we’re talking with Dana Anspach. She’s written the book, “Control Your Retirement Destiny: Financial Security Before The Big Transition”. She’s also a featured columnist on “about.com,” where she writes “Money Over 55.”
You talk about the coverage ratio in your book, and I was wondering if you could kind of just expand on that and tell us a little bit of what it is and why need to calculate it.
DANA ANSPACH: Yeah, absolutely. So the coverage ratio, and the terms that I define it are, when you get in retirement, how much of your desired spending, you lifestyle, is covered by guaranteed sources of income? Things like social security, pension, and annuity income. And then we know what’s not covered is what needs to be supplied by your personal savings and investments. And the higher your coverage ratio, the more secure your situation in retirement.
And, particularly, I like to design plans so that coverage ratio is much higher later – meaning aged 70 and beyond. And the reason being, people – it has been proven unfortunately – cognitive abilities do start to decline in their 60s, and the ability to make the best financial decisions and deal with all these complex things can diminish. And we’ve seen cases where, due to Dementia or some other things, people starting to do some really strange things with their money.
And we have a lot of your expenses covered by guaranteed sources even if some mistakes are made later in retirement, we’ve given you a much higher floor of guaranteed income that you’ll be able to rely on.
HANK COLEMAN: So I mean, are we building the nest egg to live off the interest, or are we building the nest egg to whittle it down, or is it a combination of both.
DANA ANSPACH: You know, that’s a great question.
HANK COLEMAN: Everybody’s situation is different, right? Go ahead.
DANA ANSPACH: It is, yeah. I tell people, we can shoot for one of two goals: We can either go to maximize your retirement income. And, a lot of people are like, “I want to die with a dollar in the bank.” Great.
HANK COLEMAN: Yeah, me too. I’m not leaving anything to the kids.
DANA ANSPACH: Figure it out on their own.
HANK COLEMAN: Yeah.
DANA ANSPACH: The other goal is, “Do we want to maximize wealth transfer?” And some people are right in the middle. You know, “I want to know that I’m going to leave something, but I want to focus on my lifestyle while I’m young and healthy and able to enjoy time with the family.” So a plan can be tweaked toward one end or the other, and one may involve spending down some principal in retirement intentionally, at a planned rate so that you’re not going to run out, but that so you can spend a little more along the way. And the other plan would involve is, you start it off saying, “You know, just living off the interest and dividends.”
HANK COLEMAN: That’s a safe plan – the easy plan. Well, maybe not the easy to accumulate enough to live off the interest, but it’s… the more and more I talk to financial planners… everybody’s leaning more conservative. Everybody is coming down on, “inflation is going to be more than 3%.” The rate of return for investments is going to be less than the historic 8%.
You know, we’re going to live longer than the actuary tables tell us. I mean, there’s a lot of conservatism floating around in the financial planning community. It seems like.
DANA ANSPACH: Yeah, there is. And, I look at it like… What I care about for retiree is, what’s the worst case scenario? Because if we do better, great. We have more money to spend along the way. We have more money to leave to the people you care about. But what we really want to plan for is, “I want to make sure you can maintain your lifestyle, and in worse-case scenario.” And I think that’s the right way to go about it, and that’s probably why you’re seeing a lot of this conservatism. If we get better returns and lower inflation, that’s great. They will just make things better.
HANK COLEMAN: Right, that’s true. I understand. And it’s a hard cut – conservatism, optimism – it’s hard to… got to be a little bit of both, and I understand that.
DANA ANSPACH: Yeah.
HANK COLEMAN: Another question I love asking financial planners is, at what point should I hire a financial adviser? Where do I cut the cord of doing it myself and then go out and seek help? Do you have like a guideline?
DANA ANSPACH: Yeah. I mean, everybody is a little different, of course.
HANK COLEMAN: Sure.
DANA ANSPACH: It’s always going to be the starting answer. But I think: One, some people aren’t actually delegators. For example, I know an awful lot about taxes as you can tell from reading my book, but I’ve never done my own tax return. It’s not how I want to spend my time. And I look at the money I pay my accountant as money well spent. I don’t pay her though to get me a better return. I pay her to know all the rules and to get me the most – minimize my taxes for what’s legal. And, so at the point you’re hiring a financial adviser, I mean that’s really what you’re doing – you’re paying for their time to know all the rules. And if you’re a couple, it can often help coordinate goals and reduce conflict between the two of you. It can help catch you on the same page.
So if you’re someone whose time is better focused on your career, where you can earn a decent living, it might be worth hiring a financial planner [inaudible 00:17:48]. I think most people as they near retirement, the value that a specialist in retirement income planning can bring – I mean, they can find 50, a hundred, $200,000 of hidden money, and your plan by rearranging the way you do things.
So within 5 years of retirement, I definitely think it makes sense to sit down with a specialist and have her go over everything for you.
HANK COLEMAN: Okay. And kind of a loaded question, across your business, what are you seeing as the biggest mistakes that collectively we’re making?
DANA ANSPACH: That’s a great question. So, there are big mistakes that I touched on in the book such as overspending in retirement. There are big mistakes such as claiming social security without a plan. People who are like, “You know what, I was claiming it at 62.” And, that’s a big mistake. It can cost you literally, hundreds of thousands of dollars, particularly if you’re married or if you have a prior marriage that lasted 10 years or more.
There’s other, what I call, small mistakes. I think that there’s an approach to building retirement income portfolios that is a little different than the approach that you take while you are in accumulation mode. So once you’re in retirement, if I need to take $50,000 out next year, I can’t afford to have that portion of my portfolio down 30%. And so I like a process that a lot of pension plans use, it’s called Asset-Liability Matching, where we specifically choose safe investments to meet your cash flow needs for the first 5 to 10 years of retirement. So you relax and you go, “Whatever the market’s doing, I don’t have to worry about that because that’s my 10-year money.”
So that’s what a minor mistake that I think, when you are in retirement, really aligning your cash flow needs and aligning your portfolio to those cash flow needs, is something I don’t see that’s done very often. And it makes a huge difference.
HANK COLEMAN: Okay. Well Dana, we have time for just one more question, and I want to ask you what you tell clients that have waited too long to start, or haven’t saved enough in retirement? What do you tell those guys.
DANA ANSPACH: You know what, too bad, you’re never going to be able to retire.
HANK COLEMAN: Oh, we’re going to eat cat- eating cat food and work in Wal-Mart for until we’re 90.
DANA ANSPACH: Yeah. No, I mean, really try to take a positive approach. It’s all you can ever do in life. I mean, we all look back and wish we had done things differently. There’s always going to be those things. But we can’t go back. So all you can do is look at where you’re at right now, and say “Okay, can I really focus on reducing expenses right now so I can save as much as possible?” Can I work until 70 so I get the maximum social security benefit? And how do I really do my planning right so most of my retirement income will be tax-free?” And those are really the things you have to focus on, if you started late.
HANK COLEMAN: Okay. Well the book is, “Control Retirement Destiny: Achieving Financial Security Before The Big Transition”. Dana, I really appreciate… Yes, I loved it. It’s a great book, it really was. Really easy to read and just enough of the needy greedy details with complex worksheets – not simple worksheets – that even a financial nerd like me could really get behind and enjoy. So thanks for being on the show, I really do appreciate it.
DANA ANSPACH: Right. I really appreciate the interview, Hank.
HANK COLEMAN: We’ve been talking with Dana Anspach a Certified Financial Planner (CFP) and author of the book, “Control Your Retirement Destiny”. You can find links to her book in the show notes on MoneyQandA.com.
Up next, we’ll be talking with Ben Feldman and Shannon McNay from ReadyForZero. ReadyForZero is a website, an app and a community to help you manage and reduce your debt while online.
Just kind of tell us a little bit about ReadyForZero. I mean, what it is and what it offers.
BEN FELDMAN: Yes. So, ReadyForZero was actually started by 2 people who realized that everyone around them had some kind of a debt – whether it was student loan debt, credit card debt – and it was a big problem for a lot of people. And our 2 founders, Rod and Ignacio decided to build a tool online that would help people not only track their debt, but also have a plan to get off it as quickly as possible and to stay motivated. So, the basic tenants of ReadyForZero is that, we help you stay motivated and understand your whole picture, so you can actually feel like you are in control of your debt rather than the other way around.
So when you sign up for ReadyForZero, you’ll actually see each of your debt accounts, each credit card, each student loan – listed, and then you’ll have a progress bar for each one. And you get to see that going down as you make more and more payments. And people have called it as very motivational, just seeing that visual side of the progress they’re making. They really like it.
HANK COLEMAN: So is it a free service?
BEN FELDMAN: It is, yeah. It’s a free service. We do have a premium product as well, it’s just called ReadyForZero Plus, and with the premium product, you can actually make payments to your debt accounts. So the free version, you make your plan, you can follow it, you get the motivational updates and information. With ReadyForZero Plus you can actually schedule and make the payments within ReadyForZero’s interface.
HANK COLEMAN: Okay.
BEN FELDMAN: And then we also have a bi-weekly payments feature, which allows you…
HANK COLEMAN: What is that?
BEN FELDMAN: It’s actually really cool. For people who have mortgages or student loans who may be having a hard time paying a little extra, it’s a good way to kind of lock in to this payment plan where you’re actually paying a little bit more every month. Because instead of paying monthly, you break that amount into 2 and you pay it every 2 weeks. And so over the course of a year, you will pay, I think it’s one extra payment.
HANK COLEMAN: Right, yeah. Exactly. But, it’s a visual tool on the website that helps you do that or see that – that how that payment works.
BEN FELDMAN: Yeah.
SHANNON MCNAY ReadyForZero Plus is linked in and is where everybody’s payments basically live. And, you can choose to make your payments either monthly, one-time monthly or recurring payments, or you do the bi-weekly. And, if you decide to setup bi-weekly payments, you can see it right on the dashboard.
HANK COLEMAN: Okay. But the bread and butter of the service is the free service, where I can see all my – I input all my debts. You have the all-in-one snapshot, and then the service helps me, the free ReadyForZero service helps me with a game plan of how to attack that, right?
SHANNON MCNAY Yes. It’s all about tracking, managing, and keeping you motivated.
HANK COLEMAN: Is there a social aspect to it? I mean, can I share how I’m doing with my friends or…? Is that a part of it?
BEN FELDMAN: Yeah. You know, we do have a ReadyForZero snapshot that each user gets. And it kind of shows your current debt picture. And it sounds kind of weird at first, but we’ve actually found that it can be a really good motivational tool because some people will set it up so it gets emailed to their spouse, or to their mother, or to their best friend.
HANK COLEMAN: Oh no. That would be dangerous, but I could see how that would definitely help motivate me.
BEN FELDMAN: Exactly, yeah.
HANK COLEMAN: Is that… I was going to ask you guys, how to get the most or the most out of the service. What are some tips to using it? Is it that great or the cool app, or is one of the ways to get the best there and the most out of the service to go online, or is it a combination of both?
BEN FELDMAN: Yeah. We do actually have an app. It’s currently only for the iPhone, but in the future we may have it for other Smart Phone devices.
HANK COLEMAN: Okay, I’m good. I got the iPhone.
BEN FELDMAN: All right. Great. We’re looking forward to seeing what you think about it. But otherwise, we also have a blog. And a lot of people signup for ReadyForZero, and then they’ll start reading our blog regularly. And we probably talk about many of the same things you talk about at Money Q&A.
HANK COLEMAN: Sure.
BEN FELDMAN: And people find that really helpful. And then we also have actions within the product as well that kind of just relates to a general financial picture. So most of us haven’t necessarily learned everything we need to know about finances. And so we’ve setup these actions that help our users learn about any aspect of personal finance that they may not feel they know everything about.
HANK COLEMAN: Why is paying off debt so hard? Why do we struggle with it so bad? Are we burying our heads in the sand?
BEN FELDMAN: That’s part of it. I think what makes it so hard is that money is much easier to spend than it is to save. And, I suppose it has to do with human nature. But, nowadays, with credit cards and so many advertisements in front of us every day, it’s very easy to be tempted to spend money. And, it’s very easy to just swipe a credit card and make a purchase without even feeling the pain of like seeing the money leave your wallet.
And, that’s something that I think is really hard for people. And, so once you have this big debt, it’s also very hard to feel motivated that you can actually pay it off.
HANK COLEMAN: Or even know how to start or where to start.
BEN FELDMAN: Exactly. It’s very challenging.
HANK COLEMAN: Yeah, absolutely. Does ReadyForZero kind of advocate the… you know, you got 2 sides of the house, what do I start with? Do I start with my smallest debt first and attach that, and then snowball it into the next smallest, next smallest, or do I attack the debt with the highest interest rate? Has ReadyForZero come down on the argument on one side of the fence or the other, or it’s up to the user to choose?
BEN FELDMAN: Yeah. If you use ReadyForZero, we’ll recommend that you pay off the debt with the highest interest account first. And the reason we do that is just because it can help you get out of debt faster, particularly if you have a lot of debt and if you have high interest rates, it just makes mathematical sense to get that amount paid off with the highest interest rate, you can avoid having that interest keep on compounding and accumulating, which is only going to delay your date of being debt-free.
But at the same time, we also understand that people sometimes find motivation in paying off that lowest balance amount first. So if you have a credit card that only has $500, and you really want to get that paid off first, we understand that. Totally nothing against that. And you could probably hack a way to make that happen even as a ReadyForZero user if that’s what you wanted. But…
HANK COLEMAN: But when I’m creating my own plan, I’m free to choose? I mean, I know ReadyForZero makes a couple of recommendations on which debt to attack first, but I’m free to kind of choose my own path a little bit?
BEN FELDMAN: ReadyForZero will set it up to pay the highest interest first.
HANK COLEMAN: Okay.
BEN FELDMAN: And we did that just because I think a lot of people are a little overwhelmed by all the interest rates and all the debts. And so we want to make it really easy, like you just signup, and here’s your plan, and it’s going to get you out of debt the fastest mathematical way possible. And we hope that, because ReadyForZero does have a very encouraging and easy-to-use interface, and because we send you reminders and encouraging emails.
HANK COLEMAN: And my mom reminders.
BEN FELDMAN: And the mom reminders. But, that’s a good.
HANK COLEMAN: That’s good, yeah. Absolutely. We got time for just… I’m sorry, go ahead, go ahead.
BEN FELDMAN: Oh, I was just going to say because of all the things we hope that you go with the mathematics and preferable way. And, you also kind of get the motivation that you need.
HANK COLEMAN: Yeah. We have time for just one more question. I think I know the answer, but I always love to hear it from the horse’s mouth, so to speak. How safe is ReadyForZero? I mean, I’m putting all my credit card data in there. I’m putting all my loan data into the website.
BEN FELDMAN: Yeah, of course. And that’s something we get asked a lot, and it’s so understandable because you do have to be careful. We use the same security measures that banks use. So, you can be very sure that your data is going to be very secured. There is more information on our website if people want the needy greedy details. But I think in terms of the general perspective, just knowing that we use the same security measures that banks and other financial institutions use usually put people at ease.
SHANNON MCNAY And, there’s another important security thing to remember is that we’re not storing the data that some people think we’re storing. So typing in your login credentials to your bank. And as soon as the link is created, that’s gone. So we don’t even have that information. So, basically all that you see on ReadyForZero is your account balance, your minimum payment, and your APR.
So, on top of the fact that we have bank-level security, I also hope for people to know that we’re not storing that information in the first place.
HANK COLEMAN: Definitely. That’s some peace of mind for sure. Well Ben and Shannon, I really appreciate you all taking the time out to be on the show today. Thank you so much.
I want to thank my guests on the show today, Ben Feldman and Shannon McNay from ReadyForZero.com, the online community that help you reduce your debt and eliminate your debt. I highly recommend you go to ReadyForZero.com and check it out. You can also find a link to them on the Money Q&A website, along with the show notes for today.
In addition to the show notes, we started a new feature on Money Q&A where I have the transcripts available for this podcast and the previous podcast episodes right there on Money Q&A. So I highly encourage you to check out MoneyQandA.com where you can find the transcripts in addition to the show notes for today’s show and the past episodes.
NARRATOR: Want to connect with Hank online? You can find him at: Facebook.com/MoneyQandA. On Twitter: @MoneyQandA or on his website MoneyQandA.com. Thanks for listening this week and don’t forget to recommend this program to anyone you know who’s thinking about their financial future.
[End of transcript 00:33:33]
Past Episodes Of “Your Money Your Choices”
- Episode #11 (7-29-13) – Investing In Gold For Your Retirement Accounts
- Episode #10 (7-15-13) – Interview With Gary Vaynerchuk & Getting Through Burning Out
- Episode #9 (6-24-13) – What Is Your Magic Retirement Number?
- Episode #8 (6-10-13) – Life Insurance Policies That You Do Not Need
- Episode #7 (5-20-13) – Why Everyone Needs To Have A Will And An Estate Plan
- Episode #6 (5-6-13) – Increase Your Investment Return With Peer-To-Peer Lending
- Episode #5 (4-22-13) – Living Your Life And Completing Your Bucket List
- Episode #4 (4-8-13) – How To Incorporate Your Values Into Financial Planning
- Episode #3 (3-18-13) – You Need A Side Hustle To Earn Extra Income
- Episode #2 (3-4-13) – Conquering Your Debt With The Debt Movement
- Episode #1 (2-18-13) – Everyone Should Be An Entrepreneur