Smart Money Podcast — Budget Like a Boss: A Financial Planner’s Tips for Achieving Your Money Goals

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Learn what it truly means to work with a certified financial planner (CFP) and how personalized advice can help you set and achieve your financial goals.

What should you know before working with a certified financial planner? What strategies can help you navigate societal pressures and make personal financial choices? Host Sean Pyles talks to Magda Doemeny, a certified financial planner with NerdWallet Advisors, to discuss the power of personalized financial advice and behavioral budgeting to help you understand how to align your financial goals with your personal values. They begin with a discussion of the role of certified financial planners, including the fiduciary responsibility of CFPs, the specialized knowledge they bring to areas like estate planning, and common strategies for cutting through societal noise to focus on personal priorities. They also discuss the innovative concept of behavioral budgeting, which involves creating sustainable financial habits like limiting dining out.

NerdWallet Advisory LLC, dba NerdWallet Advisors, is an SEC-registered investment advisor and wholly owned subsidiary of NerdWallet Inc. The advice provided in this episode of Smart Money was for illustrative purposes only and not intended as financial or investment advice specific to your personal facts or circumstances.

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Welcome to NerdWallet’s Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I’m Sean Pyles. This episode, we’re going deep into financial planning, what it actually means to work with a financial planner, how working with a planner can improve your finances and why we sometimes have such a hard time changing our financial behaviors.

Over the last few months, we’ve shared a series of conversations between our listeners, a certified financial planner from the NerdWallet Advisors platform and me. In these conversations, our advisor, Magda Doemeny, has given a range of advice to our listeners. Today, we’re going to hear Magda’s philosophy around financial planning, who might benefit from working with a CFP and how people can better their finances on their own. Magda, welcome back to Smart Money.

We’ve talked about this before, but give us that refresher. What is NerdWallet Advisors and what is your role there?

I’m an advisor on the NerdWallet Advisors team and we offer affordable financial planning memberships, which gives you access to a certified financial planner like myself for a low monthly cost. What we’ll do is we’ll go ahead and take a look at your financial situation and come up with a financial plan and give you some bite-sized action items for you to try and accomplish your goals. That will give you unlimited access to myself or your advisor, and we’ll check in periodically, but ultimately you can access us by scheduling a call or sending us a message at any time.

All right, so let’s start with financial planning 101. What does it mean to be a certified financial planner? What is the financial planning process like? Give our listeners the intel.

The financial planning process is diverse, just like everyone’s financial situation is diverse. And so ultimately, the high-level process starts with understanding somebody’s current financial picture and their goals. You can have two people who have the exact same financial makeup and different goals and they would have wildly different advice given to them, because there are some people who want to spend the last penny on the day they die. And there are some people who want to accumulate so much wealth, they can pass it on for generations.

And so the advice you might give to somebody would look very different from that perspective. But really, what you’re trying to do is figure out what somebody is trying to accomplish with their money, whether it’s pay down debt, purchase something large like a home or a car, or make sure they can retire at a certain age, and then help them come up with the right ways to accomplish that via savings vehicles or investment vehicles or certain types of accounts that might work better for their situation.

What sort of information do you need to take in from a client before you can really understand what they’re working with financially and how you might be able to help them?

The most basic part that you want to take in is their current financial picture. Probably pretty straightforward, but all of their assets. So how much money they have today and what types of accounts it’s in, how much money they’re making, if anything, and any debts that they may have, whether it’s credit card or mortgage. We want to get that full picture, but we also want to know their personal situation. We want to know if they’re married, if they have children, if they’re divorced, do they have grandchildren? And then we also want to know again, those goals related to those types of things.

So it’s a pretty robust introductory process when you’re going through this, whether it’s for the first time or just with somebody new because it’s important that we understand your full picture. And the other important aspect of this I find with many people, especially those who maybe have debt, is really understanding what money means to them and how they think about money, because that may impact how we suggest doing certain types of financial planning.

A lot of quantitative hard numbers like what’s your budget look like? Are you saving for retirement? And then the qualitative stuff, what do you feel about money? What do you want from your money?

Exactly. A perfect example is that for an emergency fund, traditionally on paper we would say if you have a dual-income household, which means there are two people in your household that are earning an income, you only need three months worth of expenses in a high-yield savings account for an emergency. Why? Because the likelihood of both of you losing your job at the exact same time is fairly unlikely. And so that three months of expenses plus the secondary salary should be enough to get you through getting a job again.

However, you can sit down next to somebody who says they’re very anxious about money, they’re worried they’re going to run out of it, and they are just hoarding as much cash as they possibly can. Now while I don’t want them to have that much cash and I might tell them that we should do something with it, I might suggest they have six months worth of expenses because I know that getting three months would just cause too much anxiety and that’s not worth it.

Okay. Now let’s talk a bit about what it means to be a certified financial planner. We talk about CFPs a lot in the personal finance space. I’ve been going through the education process to get my CFP certification, so I know a lot about this, but some people may wonder what’s the big deal? So Magda, what’s the big deal?

The biggest deal is that we have an obligation as fiduciaries to do right by the client.

Fiduciary, meaning you put their interest first.

That’s exactly right. So we’re not intended to sell them a product or give them something that isn’t in their best interest. So that’s really important. The secondary is that we’ve gone through the training to understand the intricacies of the financial system.

The value you can find here is you can get a broad, a CFP that has a broad range of information and you can get folks who specialize in certain areas that might be niche. That can be really helpful because you know that that person has spent a good amount of their career deep diving into a specific area like maybe estate planning or something like that.

And CFPs can also connect you with people in the state attorney to help you draft those documents. They’re really your one-stop shop for other things in the financial world, getting your estate plan set up, finding insurance that you need, et cetera.

Exactly. It’s another thing on the list that’s important to us is telling you what we don’t know. So it’s important that we always say, “This is outside of my scope of work, but happy to point you in the right direction of where you could get that piece of your financial picture taken care of.”

So thinking back over your 10-plus years of being a financial planner, what do you think makes the difference between someone who is able to really benefit from your relationship, what a financial planner brings to their life, and someone who doesn’t really have a successful relationship with a financial planner, you or someone else?

I do think to start, it’s really important that for better or worse you jive with your financial planner. You need to make sure, kind of like a therapist, that when they’re speaking, you’re listening and they need to know that. This isn’t all about dollars and cents. Like we talked about, part of it is emotional. Money can bring out emotions in people, so you want to make sure that you are able to communicate well with your financial planner. Outside of that, I think the other really important aspect of being successful is making sure that you can commit to the process that is set forth.

A lot of financial planners are creating a plan in some capacity. The plans can look different, some can be long, some can be short and one might work better for you than the other. But when they set forth the plan, the intention is to try to take those actions and then check in regularly, whether it’s every three to six months or so to make sure that the plan can get adjusted, because life happens and things change. You may change jobs or get a pay raise or get married or what have you. And all those things impact how you might think about your finances.

I think people may underestimate the amount of work that they have to do when it comes to working with a financial planner. They might want a planner to do all of these things for them. But I, much like therapy, see the need to actually enact uncomfortable change sometimes to get what you want out of your finances. And that can be hard for people to grapple with. But I do want to talk about some through lines in the conversations that we had with our listeners over the past few weeks. One thing that stood out to me really is how similar financial planning is to therapy.

As a somewhat broad generalization, I’ve noticed two main camps of people who go to therapy. I say as someone who’s been to therapy myself, there are clients who want a therapist just to give them permission to do what they want and justify their emotions and behaviors. And there are maybe also in the other camp clients who want to be directed and given guidance around how to change. I did see that in our conversations with listeners. Some people wanted guidance, others just wanted your stamp of approval. Is that common in financial planning relationships?

I do think it’s common depending on their situations. The idea of stamp of approval, those tend to be folks who are maybe underspenders and they’re sometimes so knowledgeable about their finances that it’s a hindrance to their personal life. And so they may want you to say, “Hey, loosen up a little bit. It’s okay. You can afford that thing.”

Right. It’s like our conversation with Sean who had over a million dollars in assets and was afraid to really use it to enjoy his life.

Exactly, exactly. Then there are other folks who come looking for guidance, whether or not they actually, they might actually be looking for you to tell them it’s okay. And the hardest part, but also the most gratifying part of our job is being able to, in this gentlest way possible, tell them that they do have to stop doing that thing or maybe they can’t accomplish the goal the way they thought they wanted to accomplish the goal and we do need to actually change the behaviors. And so whether or not those folks are always open to coming in wanting a stamp of approval and not getting it is one thing.

But I do think making sure that you can take somebody who wants a stamp of approval and change them into somebody who can take action is really empowering and a really fun part of the job. But there are definitely people who come in here in this planning process ready to make a change. They just don’t know what to do. And that’s amazing, because their eyes are open. They’re looking for not the answers, because we’re not going to give you the answers, but looking for the structure to be able to start to make good or different financial decisions.

They’re open to change, which is a huge thing.

What you were just saying reminds me of our listener, Jim from Milwaukee, who is interested in cashing out his retirement account to move to San Diego. He seemed to want that stamp of approval from you, and you and I were both kind of turned off by the idea about him cashing out his retirement. And so you did have to do a really careful pivot of what his financial goals were and say, “Hey, how can you make some more money where you are now and fund that move in a less risky way?” So that’s an interesting part of financial planning too. It’s about exploring alternative ways to get to where they want to go. Because there are so many options available to people and they may not really even realize that.

I do think a lot of it is about being creative and meeting them where they are. You do have to recognize maybe where your living situation is could impact their ability to execute on something that we’re suggesting. I might say, “Hey, your rent is too high.” And they may say, “Yep, that’s as cheap as it’s going to get here.” And so you have to find a way to, is there something else we can do to have the same result, which is increase your overall savings.

Another common theme in our conversations was the idea of external pressure that people feel about the things that they quote should be doing with their money. One listener knew that she was spending too much on discretionary purchases, but felt like it was what she should be doing to have a certain lifestyle, even though it was causing trouble for her financially.

And she could fully acknowledge that, which was so fascinating to see. How can people cut through the noise and the shoulds and find out what they really want from their money and make sure that it’s a goal that they personally truly care about, not what other people expect of them?

It’s hard. I think in the environment that we have today with easy ways to spend your money and seeing easy ways to know how much everyone else has and/or not has, but how they spend their money doesn’t mean they have it, I do think that is a very big challenge for a lot of people. But I think giving yourself the space a couple of times a year, maybe every six months, you could call it new and you can call it over summer. It’s something you can work with a financial planner on to sit down and really ask those questions. What are you trying to accomplish?

Because I’ve noticed when folks come in here, they have these goals, but when you sit down and you ask them, does that thing that you bought or that thing that you said you wanted, is it more important than your retirement? Most of the time, they say no. Right? And so working with somebody to help you put your goals into context can be really helpful.

But I do think it’s hard to do that alone, but you should spend every six months or at least every year thinking about, “Okay, what’s changed in my life? What are the things that I’m trying to accomplish? Do I want to get married now? Has that changed from the year before? Do I want to buy a house?” I have folks all the time say they’ve been wanting to buy a house for years, and all of a sudden they said, “You know what? I don’t want to do that anymore.”

And that’s great. If that’s the decision that you’ve come to, we can adjust your finances to move, shift your money to do something different, travel more expensively now. So I think it’s tough, but-

I think having the dialogue with a financial planner can be really helpful, especially in the beginning because I try to keep a running almost meta-narrative of my financial decisions where I ask myself, why did I do that? Why did I buy whatever? Why did I want to go on this specific trip? Why am I saving so much for retirement when all my friends are like the world’s burning? Why bother? And getting really clear on what it means for me to be making these decisions helps me feel more confident that I’m doing the right thing for myself. But it’s hard to get to that place of having that sort of higher level conversation without some guidance, at least initially.

Yeah, and I do think it’s really important to not spend too much of your time comparing yourself directly to the people, whether you know them or not, because what you don’t know is what’s behind the curtain. Somebody could be living a very lavish lifestyle and be in debt up to their eyebrows, and you would have no idea. That’s not how it looks, but that could be the reality.

And so I think that’s why it’s so important to talk to somebody about it, because we can pull you out of that world and look at your world and where your income is and where your expenses are, and ask you what lifestyle you truly want to lead and figure out how we can bridge the gap between all of those things.

All right. Well, I want to go a little bit deeper into your personal financial philosophy. From our conversations, I know that you’re really into what you call behavioral budgeting. Can you describe what that is for us?

Behavioral budgeting is something that’s done in conjunction with exact budgeting or traditional budgeting, as you may have it. Traditional budgeting is putting down all your expenses with the dollar amounts and setting a goal that is dollar-based. You only want to spend $500 a month eating out. That type of budgeting is really important because you do need to know the dollars in and dollars out. But I have found that sometimes if you don’t incorporate behavioral budgeting in addition to that, you tend to fall off after a period of time, because it can be a lot of work to pay attention to every dollar that’s coming in and out every month for the rest of your life. Even just saying that out loud seems daunting.

So instead, I found that behavioral budgeting can help in that you can actually create a behavior in your life that could be more permanent and acts as a budgeting tool. That would be something like you only eat out twice a week. I’m not putting a restriction on the dollar amount that you can purchase when you eat out, but I’m taking somebody whose lifestyle was three or four or who knows, and asking them to check every week that they pick just two days. It’s a short timeline.

It’s usually a lot of the behavioral goals are weekly, so you can do it in your head. You don’t need a tool, you don’t need to write it down. You can say by Sunday or Monday, I did it or I didn’t do it. And it will naturally bring down how much you’re spending, and in theory, can be permanent. You get in the habit in order to execute on dining out only twice a week. It’s not just, “Oh, I can do that.” You actually have to learn how to plan. So every Sunday, you have to figure out what you want to eat for the week.

You have to make your grocery list, you have to go to the store, and maybe you have to do some meal prep, because if you don’t do those things, you will end up eating out more than twice a week. And so eventually, it becomes a habit. Sundays are my, do not bother me from three to five P.M. because I’m executing on my plan for the week.

I think habit is such a key word here. You have to build up the routine of doing certain things in a certain way and being more intentional about it, especially in the beginning.

Okay, so Magda, as you know, despite many people’s best efforts, folks can really struggle to change their financial behaviors, like overspending or not setting aside money for retirement. What do you think it really takes to change financial behaviors?

I do think it does take a level of, I don’t know if discipline is the right word, motivation might be it. It’s not too dissimilar from other types of goals that I think many people can relate to, whether it’s health and nutrition goals. You’re thinking you’re not healthy, so you commit to finally going to the doctor for them to decide what is it? Or you buy a gym membership or you start working with a nutritionist.

All of those are the first steps in the process, but if you’re not able to actually be determined enough to learn and execute on the step-by-step of that process, which is for the gym, you got to come every three days and you got to do these workouts or the doctor’s going to say, “Okay, well, we need you to start eating these types of foods and we need you to adjust this,” and you have to actually execute on that. Your finances are the same thing, right? Coming to a financial planner helps be the person that tells you, here are some of the next steps you need to take.

But you do have to come into it with a mentality that it might not be easy, right? It’s not you’re going to come in here and somebody’s going to say, “Just do these two things. They’re all ten-minute exercises and voila, you’re a millionaire.” It’s not like that. It’s a slowly, but surely, you’re learning more about your finances, you are learning some techniques of things you can do differently, and you’re checking in somewhat regularly to make sure that we’re still on track for those things. And so I do think the fix it quickly is just not the mentality that you can have to be successful.

Yeah. Have realistic expectations about what it means to change.

Okay. Well, I want to talk about who might not need to work with a financial planner, because as we know, CFPs typically outside of platforms like NerdWallet Advisors can be quite expensive to work with. So who do you think is fine doing it on their own, maybe working with a financial coach or someone else?

I do think that it will depend on what they’re looking for. CFPs, in particular, do specialize in looking at very specific aspects of financial planning. And so I do think that folks who might be in very severe debt could benefit from working with a financial coach first. That could be somebody who is helping them just really hone in on their budget and potentially looking at some alternatives to their debt management, like credit counseling or something like that.

But I do think that it’s all, in general, access to a financial planner is usually cost prohibitive, which is what’s so great about NerdWallet Advisors is that it’s a low monthly fee, and so it does give you access to, gives financial planning access to the masses really. And I do think that there are some folks who might want something a little bit more robust on investing their assets and so that, you would want to have an investment manager look at your assets.

Okay. Well, Magda, if you could give one piece of advice, and only one, to our listeners, what would that be?

I think it would be to give yourself a break from the exhaustion of trying to be perfect as it relates to your finances, but also not to give up on finding a path to success for yourself. Whatever that first step might be, whether that’s reaching out to a financial planner or at minimum, getting your expenses in order so you can really look at it in the mirror and figure out where your spending is, I think you should take that next step.

Give yourself some grace, do the work.

Great. Well, Magda Doemeny from NerdWallet Advisors, thank you so much for talking with me.

And that’s all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-N-E-R-D. You can also email us at [email protected]. Also, visit nerdwallet.com/podcast for more info on this episode. And remember that you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio, to automatically download new episodes.

Here’s our brief disclaimer. I am not a financial or investment advisor. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

This episode was produced by Tess Vigeland and myself. A special thanks to Magda Doemeny, Georgia McIntyre, and Emily Canedo. And a big thank you to NerdWallet’s editors for all their help. And with that said, until next time, turn to the Nerds.