Do You Need a Financial Reset?

5 minute read

Jill Schlesinger, CBS Business News Analyst, CFP and best-selling author, didn’t set out to write another book as the country locked down during the pandemic. But she noticed that the questions that always poured into her popular Jill On Money podcast and radio show started to take a different tone.

Listeners weren’t just asking about how to bump up their credit scores or find financial advisors anymore; now they wanted to move across the country, quit their jobs, start new businesses, or retire pronto. One by one, they were telling her they wanted to shake up their lives – and they were looking to her for guidance on how to make it all possible. So, she took her show to an everyday format and started doling out advice on these specific questions. Then she wrote a book about it called, “The Great Money Reset: Change Your Work, Change Your Wealth, Change Your Life.”

It’s not an easy leap for people to make, she notes. “Every single conversation I’ve had with people around this topic starts with some very intense and scary moments where you have to take a good hard look at your money,” she says. “People are afraid to put pen to paper and say: ‘What am I spending my money on? And what do I actually need?’” And yet, what Schlesinger found is that digging into the numbers can actually be freeing. Once you have the information about what’s really going on in your financial life, then you have the power to make decisions about what you want to do in both the short- and long-term future.

WATCH Your Money Map: steps to take to start our own great money resets

Schlesinger recently sat down with Alliance Education Fellow and HerMoney CEO Jean Chatzky for Your Money Map to discuss all the steps we need to take to start our own great money resets. Below are the three specific items that anyone considering a major life transition – particularly retirement – should focus on. But before you dive in, take some deep breaths and slow your roll. “So much of what we go through when we’re contemplating retirement and what happens next is this scary fear of the unknown,” Schlesinger says. It’s important to recognize that retirement doesn’t have to be an all-or-nothing proposition. Schlesinger has found that people are very happy having a transitional period where, perhaps, they don’t go from working 70 hours a week to not working at all, but instead find a bit of an in-between. “It gives you the opportunity to think of your retirement a little more creatively.”

Item #1: Your Plan

The very first question to ask yourself is what you want from your life. Then you can start figuring out how your finances can take you there by taking a good look at your numbers.  What’s coming in? What’s going out? And where is it going? If there are any big surprises lurking – a life that costs more than you believe it does, for example – this will actually bring it out. Importantly, when you’re computing your income, make sure that you account for the value of your benefits. This is something, Schlesinger notes, that many people take for granted. But particularly for anyone considering a retirement that would require a bridge to Medicare, the cost of replacing employer healthcare can be many hundreds of dollars a month, if not more.

In this same process, you also want to consider your identity. Be honest about how much of that is tied up in the work you do today. Think about a path you can establish that will give you a sense of self and help you feel productive (while perhaps also providing some financial support).

That’s very much the exercise done by Mike and Chantal, a 52-year-old couple with two teens, whom Schlesinger chronicled for her book. Chantal had stepped off the full-time work treadmill and into a $50,000 job during the pandemic. Mike also wanted to scale back. But replacing his $250,000 income and making it last for their kids and retirement was tough. Schlesinger told them to use the next five years to sock away money in non-retirement savings and then look at a reset. The reset could become a reality as long as they were able – between them – to earn enough to cover their $125,000 in annual expenses, as well as their healthcare. Today, that’s the road they’re on, and they’re happier than ever.

Item #2: Your Spending

Financially, there are levers you can maneuver, and then there are levers you can’t. Spending – especially compared to earning – is among the easier ones. The pandemic, interestingly, helped people get a grip on that. Why? Because, as Schlesinger explains, “It distinguished between their needs and their wants.” During COVID, people were able to see what was truly essential to spend money on (healthcare, toilet paper, groceries, heat), and what wasn’t (pretty much anything else). Which isn’t to say that you shouldn’t spend money on those other things, if you enjoy them – but taking stock and continually evaluating your choices can help you use your resources more effectively. (And if you need help with this step, the 8-week FinanceFixx coaching program designed by Jean Chatzky can help.)

One tip: Leaning on those skills you crafted during the height of the pandemic can help you reduce excess spending now – and this can be a particular boon in 2023, because thanks to the ongoing series of interest rate hikes, credit card debt has become much pricier. For example: Put your gym membership on hold and take to the streets for a walk, run or bike ride. Do some meal planning, so that you grocery shop once a week rather than hitting the store each time you’re missing one ingredient and picking up seven. And: Eat. Your. Leftovers.

Item #3: Your Housing

When you look at the biggest item in your monthly budget – before, during and after retirement – chances are pretty good it’s housing. Many people feel that they’re stuck with a choice they originally made, perhaps at a younger age or different stage of life, but Schlesinger says that this needn’t be the case. “Sometimes the equity that’s locked in your house really can be freedom,” she says. She points to the case of Tom and Pam, frontline healthcare workers whom she wrote about in her book.

They, like many others, felt like they were working to essentially service the big financial life they had built for themselves, starting with the home they were living in. “One day,” Schlesinger writes, “Pam overheard some colleagues at the hospital remarking on how hot the real estate market was in their area and how hard they were finding it to buy a home. That same day, she suggested to Tom that they put their house on the market…It sold almost immediately, furniture and all, at $40,000 over their asking price.” Initially, the couple had nowhere to live, so they rented – for the long term – an Airbnb on a farm (which Pam loved because there were horses). They walked away with a much smaller monthly overhead, they were able to pay off all their debt, and they pocketed a quarter million in cash. And – as a silver lining – because they’re not feeling so burned out, they’re now planning to work longer.

Bottom line? You have options. You just have to be willing to examine them.

For more insights on how to protect your retirement and make your income last a lifetime, visit the Tools and Guides section of the Alliance website.