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The Thing We Never Talk About is an educational podcast about personal finance for creatives and other weirdos. We'll discuss managing cash flow with a lumpy income, when to save & when to invest, and how to reduce stress & build confidence when it comes to your money. No hot stock tips, no complicated strategies, and no finance bro jargon. We'll hear from artists, musicians, creative professionals, and other weirdos about how they navigate these questions for themselves. The Thing We Never Talk About is hosted by Timothy Iseler, CFP®, a former recording & touring audio engineer with 18 years experience in the music industry.
Timothy Iseler: Hi everyone.
Welcome to The Thing We Never Talk About.
My name is Tim Iseler.
I'm a certified financial planner and I
run my own independent financial advisory
business, helping musicians, artists,
and other people with weird jobs make
smarter decisions with their money.
You can learn more at iselerfinancial.com.
If you have suggestions for things you'd
like to hear about or a question you would
like me to answer in a future episode,
please visit iselerfinancial.com/podcast.
And if you like what you hear,
you can also subscribe to my
Keep It Easy newsletter at
iselerfinancial.com/newsletter.
I write about exactly this kind of stuff,
and I share it there every few weeks.
A few months ago, my brother-in-law
told me about a friend of his
from college who has been working
professionally as an actor for many years.
He's not a particularly well-known
actor, but he has been in some shows
or films that are well-known, and
he's at least been successful enough
to support himself for over 30 years.
My brother-in-law described how
his friend thinks about getting
paid in terms of how many months
each acting role can support him.
If a job pays him enough to get
through the next three to six months,
he knows he has time to line up the
next one without too much stress.
For a lot of people, certainly for a
lot of freelancers, but also many people
with straight jobs, that's about as
far as they go: having enough cash on
hand to make sure they can get through
the next three to six months, or maybe
even a year, without too much stress.
If they're really on top of it,
they also know that they should
pay off their debt quickly and use
a little bit of each paycheck to
invest in a retirement account.
All of those things are pretty
easy to manage on your own.
But what if that actor landed a job
that, instead of paying him enough for
three months or six months, paid him
enough for three years or six years?
Or 10 years?
Or maybe even more?
While on one hand that's totally
awesome, on the other it's
also kind of overwhelming.
The rules that work when you have a
quote-unquote normal amount of money
don't fit anymore when you're dealing
with more money than you've ever had.
That's what I wanna talk about today.
It's a problem that nobody really
discusses because it sounds
like one of those things that
shouldn't actually be a problem.
More money is great, right?
Who wouldn't wanna have more
money right now all of a sudden?
While that may be true, it often leads
to a lot of analysis paralysis: the
feeling that you know you need to make
a decision, but since there are so many
new options to choose from, you end up
not being able to make any decision.
In that situation, far too often, people
just let that extra money sit there
in cash and don't do anything with it.
To be perfectly candid with you,
this is one of the most common
issues that people mention when they
reach out to me for the first time.
Whether it's noticing that your bank
account is just bigger than it's ever
been after several really successful
years, or receiving money as part of an
inheritance, or having a sudden liquidity
event like selling a business or a
property, the same issue applies: I know
I should be doing something smart with
this money, but I don't know what that is.
It creates a lot of tension and
cognitive dissonance, because it's
a problem you've never solved before
and it feels like something you can't
really talk about with other people.
Who wants to hear about how stressful
it is to have too much money?
Well, I'll go ahead and raise my hand.
I'm happy to talk about it because, as
I mentioned, it's one of the most common
reasons that people reach out to me.
And because of that, I can tell you
that it actually happens way more
often than most people realize.
It's unreasonable to think that you
would somehow be prepared to deal with a
situation that's never happened before.
Which is also why the stats on
how people who win the lottery
actually use their money are so bad.
I'm gonna share a few suggestions for
practical steps you can take or the
things you should be thinking about if
you find yourself in this situation.
But first, I wanna make a general
distinction between when you need to
access your money And the choices that
match up with different timelines.
Generally speaking, if you need
your money right away, keeping
it in cash is the best option.
It's safe and it's reliable.
But if you need some of your money to
help support you 20 or 30 or 50 years from
now, then cash just doesn't work because
inflation erodes your spending power.
This is why we invest in
things like the stock market.
It's really bumpy in the short
term, but over twenty-plus years,
it's surprisingly reliable.
So the thing that works with your
short-term money is not appropriate
for long-term money, and vice versa.
I'm just gonna come out and say it:
if this really is more money than
you've ever had before, then you should
absolutely not treat all of it as money
you can just dip into whenever you need.
I can tell you where that leads:
realizing that you spent too much
money too fast after it's too
late to do anything about it.
So yes, some of that money should
be used for short-term things like
topping up your cash reserve or
going on vacation or just, you know,
treating yourself to something nice.
But a chunk of it, and maybe even the
majority of it, should be designated
for longer term goals like financial
independence, a k a retirement.
So the first thing to do when you find
yourself with more money than you've
ever had is to define how much you
will need in the next two to three
years and then keep that amount in cash
or cash equivalents like CDs, money
market accounts, or US Treasury bills.
It takes a little time and deliberation
to figure out how much you should
keep in cash, but you should be able
to pin down a reasonable estimate
in an hour or less per year.
Then anything above that amount
should be moved somewhere else
where it can be put to work for
you over longer periods of time.
Okay, now that you know how much to keep
in cash and how much to invest, we still
need to make some distinctions when it
comes to what the money is for and the
timeline when you actually need it.
For example, setting aside money to
pay for a kid's college education
in five years is very different from
saving for retirement in 25 years.
And because those different goals
have different timelines, they
should have different strategies.
That makes sense, right?
I think that everyone everywhere
should have at least some of their
money invested in the stock market.
And for reasons of diversification
and managing risk, I also think that
everyone should have some of their
money invested in less volatile things
like US treasuries or corporate bonds.
But how much of each depends on how
much you need the money to grow and
how much time you have to grow it.
For the sake of simplicity, let's
compare and contrast the strategies
that make sense for someone retiring in
more than 20 years versus someone who
plans to retire in less than 10 years.
If you are more than 20 years
away from making work optional,
then you need a strategy that
works best with that timeline.
And as it turns out, stocks are
volatile in the short term, but
tend to perform reliably well over
fifteen to twenty-plus-year timelines.
So it makes sense for someone in
that situation to invest mostly
in stocks because that's what
lines up with their timeline.
And as I mentioned, keeping a
little bit in bonds helps with
diversification and reducing risk.
But if you're less than ten years from
retirement, then a decent chunk of that
money needs to be invested in things
that are more stable than stocks,
Provide more predictable returns, and
generally have a shorter timeline, and
bonds fit that description really well.
But perhaps surprisingly, even people
who are already retired should keep a
fair amount or even a majority of their
investments in stocks or stock funds.
Some of the money needs to be more
steady and predictable over the next
three to ten years, but you also
need a lot of that money to keep
growing throughout retirement to
support you for the rest of your life.
Okay, that was a whole lot of
information, and I wanna get
back to our original question.
What should you do when you find yourself
with more money than ever before?
Here's a quick recap of
everything I just said:
first, come up with a reasonable number
for how much you need to keep in cash.
This should cover an emergency
fund and any planned expenses
in the next two to three years.
Above that amount, you should invest
most or all of the remaining money.
How you invest that money will depend on
A, what it's for, and B, when you need it.
The more time you have until you need the
money, the more you can lean into stocks.
And the less time you have until you
need the money, the more you need to
prioritize more stable and predictable
investments like bonds and US Treasuries.
And of course, I think it's also
helpful to just generally have a
plan for where you want your life
to go and how money fits into that.
Some of you will already be able to manage
those steps on your own, including coming
up with at least a pretty good general
plan for for where you want your life
to go and how money should fit into it.
That's totally great.
If you can manage these things
without paying a professional like
me, then I encourage you to do so.
Big thumbs up from me if
you can do this yourself.
But lots of people, when they are actually
faced with these kinds of decisions, will
either not know what to do or not feel
able to take action, even if they kind
of know what the right things to do are.
And that's totally okay.
That doesn't mean you're bad with money.
It just means you haven't
faced this challenge before.
I mentioned it already a few times,
but this is exactly why lots of
people decide to speak with a
financial advisor for the first time.
So whether you want help coming up with
that plan for how money fits into the rest
of your life or you just wanna offload
the work of managing the investments,
that's a great reason to speak with a
financial planner like me, for example.
If you have questions about any of this
stuff, please feel free to reach out.
You can send me an email at
podcast@iselerfinancial.com.
I'm always happy to talk about this stuff.
That is it for today.
Next week I'll be talking with Alan
Sisto, host of The Prancing Pony Podcast.
I am a big fan of The Lord of the
Rings, both the book and the movies,
and am generally the nerdiest person in
the room when it comes to this topic.
But I was completely out of my depth
when I found The Prancing Pony Podcast,
named after the inn and tavern where
the hobbits stay on their way to
Rivendell in The Fellowship of the Ring.
Alan started the podcast over 10
years ago, and over the course of
over 400 episodes, he and a rotating
mix of guest hosts have read through
and discussed the works of J.R.R.
Tolkien, including The Silmarillion, The
Hobbit, The Lord of the Rings, and more.
I had a great time speaking with Alan
about how he started his podcast, how he
successfully turned it into his full-time
job, and the community surrounding the
podcast that makes it all possible.
This is a great example of
taking something you love
and turning it into a career.
So I look forward to sharing that
conversation with you next week.
The Thing We Never Talk
About is for educational and
entertainment purposes only.
It is not legal investment or tax advice.
People on the show, including myself,
may have interests for or against
any investments discussed, so do
yourself a favor and don't ever make
any investment decisions based on
what you hear on this or any podcast.
If you like what you hear, please like
and subscribe to this show wherever
you are listening to it right now.
If you have a money or finance question
you'd like answered in a future episode,
please visit iselerfinancial.com/podcast.
Thank you so much for listening.
Thanks for being here today.
I appreciate you.