It's Not Urgent Until the Basement Floods: Cleaning Out and Organizing Financial Clutter

Join Arsenal Financial advisors Doug Orifice and Jeremy Vaille as they open up their relaxed office conversations about various financial topics for everybody to hear. Today's episode is focused on all those financial things that have slipped down your to-do list. You'll hear about how things are fine...until they're not:

• Just as you cram stuff in boxes in your basement and then forget about it, we make financial decisions once and then forget about them.
• Hear Jeremy's personal stories of sump pumps, sneaky phone bill and mortgage hikes, and savings accounts changes made by big banks hoping you'll never check in on them.
• Learn why you need to make sure you're not still investing like you're in your 20s when you're in your 50s or older.
• Listen about how to address the emotional side of opening up those old financial boxes.
• Then finish up with what's new in Hanover and Watertown and of course a dad joke from Jeremy.

Learn more about Doug, Jeremy, and Arsenal Financial at arsenalfinancial.com or call (781) 335-9100.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The information in this podcast is educational and general in nature and does not take into consideration the listener’s personal circumstances. Therefore, it is not intended to be a substitute for specific, individualized financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.

Transcript

Doug: 0:04

Alright, hey, welcome once again to another Arsenal Money Clip podcast where we are trying really, really, really hard to give you a listenable podcast about money. My name is Doug Orifice. I'm a financial advisor here in Watertown, Massachusetts. I'm with my friend and business partner, Jeremy Vaille. JV, how are you this morning?

Jeremy: 0:21

Doing great.

Doug: 0:22

That’s confident.

Jeremy: 0:23

Yeah, I mean I don't know about you, but this is the best stretch of weather possible. The last two weeks, the best I've seen in a while. I don't know about you.

Doug: 0:33

It’s been gorgeous. It's been gorgeous. We're hanging out recording this on Friday the 13th here in September. So you know, as native New Englanders, I probably have to respond in the negative by being like ah, you jinxed us. It's going to rain now.

Jeremy: 0:47

You got snow season coming up. But I was like where can I find this? Where can I find this all year round? And I narrowed in on Santa Barbara.

Doug: 0:57

Really? Santa Barbara weather here in Massachusetts. We're loving it. So if this is your first time running into the Arsenal Money Clip podcast, Jeremy and I, we run an investment and financial planning company called Arsenal Financial. We have offices in Watertown and Norwell, Massachusetts. Here's what we're trying to do in this podcast. No, we're not trying to become Bill Simmons or Joe Rogan. We're just trying to give our clients, our network, our partners, just a little window into our conversations, our morning chats and what we face and what our clients are talking about, and that's what this podcast is all about.

Doug: 1:24

So, JV, today we have a weird title, right? Our weird title is called. Let me read this out here. It's called it's Not Urgent Until the Basement Floods. But this is not about, like, home insurance and it's not about flooding basements, but it is about using that as an analogy. I think one quote you and I have a lot is, “it's fine”. 

Jeremy: 1:45

Yeah, fine. Everything’s fine.

Doug: 1:49

I think this is the equivalent of it's fine until it's not. So we went through and we made a list of some things from a financial point of view that can be considered fine until they're not. Where should we start with this one, because we can apply this to investments. We can apply this to household finance. We can apply this to credit cards. There's a million ways that we can apply it's not urgent until the basement floods. But do we start maybe with the actual, like the basement flooded thing? (Jeremy: Yeah)

Doug: 2:18

How many people do you know, because, JV, you live in the South Shore and the South Shore has had some pretty bad rainstorms over the last couple of years. How many people do you know that have had a basement flood? (Jeremy: Oh, everyone. Yours truly.) You, me. Had a house flood in the past two years, right? So here's the analogy. It's not urgent until the basement floods. You have a whole bunch of stuff that you put in your basement and you forget about it, because the stuff in your basement, it's the stuff that you don't normally interact with. Do you have boxes that you still haven't unpacked since you moved a few years ago?

Jeremy: 2:52

Yeah, I've got boxes from like six moves ago. I mean it's narrowing down (Doug: But they're there.) I don't have 20 boxes from six moves, like a couple.

Doug: 3:02

So the things that are in your basement that you've accumulated over time or forgot about, right, it's fine. It's all fine and good until you end up with seven inches of water in the basement and then you're going to rip the place apart. So I'll ask you right, how did things change after you had a basement flood? Or how did things change for somebody after they had a basement flood that you talked to? What did they change about their basement?

Jeremy: 3:29

So I had all intentions of putting in the sump pump. Instead, all I did was cut the cement to put in the sump pump, never actually put the pump in. Luckily enough, we never had a flood in that one.

Doug: 3:35

It's not urgent until the basement floods.

Jeremy: 3:38

Yeah, well, that's the thing, right, because you had the hundred year storm. It flooded. That's not going to happen again. It's not going to happen for a while. I got another 100 years.

Doug: 3:48

So it's not until the basement floods that you put in the sump pump, that you put stuff on pallets, that you actually go and open some boxes, that you throw things out.

Jeremy: 3:56

The cardboard's disintegrated. The cardboard is shredded so now you got to use the plastic totes.

Doug: 4:10

Yep, yep, the totes. I think that's going to be a conversation piece about today is the plastic totes, right? Reorganizing the plastic totes. I think, as we talked about this analogy of forgetting things in the basement and it's fine for them to sit there until the basement floods, we thought of ways that this gets applied to investments, your retirement account, your credit cards, your insurance policy, your savings account, your streaming subscriptions, your auto pays, all kinds of stuff right. And as we talked about this, it's like man this applies across the board with finance.

Doug: 4:37

So you want to spin the wheel and pick one? Where do we start with analogy number one for financial planning-wise, it's not urgent until the basement floods. You pick.

Jeremy: 4:42

I mean, I've got two personal experiences that fit into those categories within the last couple of weeks. (Doug: Go for it.) My cell phone bill continues to ratchet up and I'm like, why? How did this happen? So now I'm opening the box. I'm opening the cardboard box that's disintegrating around me and I'm like why do I have a $200 and something cell phone bill. Time to change. But I've been paying that for I don't know six, eight, 12 months. (Doug: Because it's been fine) It's been fine, it's been totally fine. You know if you're paying 180, 160, what's another 40, 50 bucks. So that one finally took action, moved the plan, reset the deck, put it in the plastic tote that it belongs. 

Doug: 5:22

Love it. And it's labeled reasonable cell phone bill. Last reviewed 2024.

Jeremy: 5:29

Yeah and then yesterday I got the old dreaded mortgage statement that says hey, your escrow is low. We're going to need to juice your bill up. So and this is relevant to everybody out there right, that owns real estate. You have principal interest, taxes, and insurance on your mortgage statement. Principal and interest is fixed probably right, because 90% of mortgages are fixed. But what isn't fixed is taxes and insurance. Taxes go up. Insurance goes up. They require a certain amount in the escrow account so that when it comes to below a minimum, they increase that number and your bill, your monthly bill, goes up. So everybody knows insurance has been going up. Auto insurance is one of the most inflated items this year, home insurance as well. So now I have to pay an extra $180 a month on my mortgage statement for taxes and insurance increases. It's fine. Yeah, it's fine. Nothing really you can do about it other than shop around for a new insurance policy. So that's one of the things you can do.

Doug: 6:34

Right, you can't go and ask town hall to lower your taxes. But you can go to your insurance agent and say, hey, I've been paying a bill to Progressive for seven years. Can I do better? Can we review all these provisions that I have? I love when they'll get to question 17 and they'll say, Jeremy, do you have a sump pump?

Jeremy: 6:51

And could you imagine, though, if that 13% override passed. That bill wouldn't be going up 180 bucks. That bill would be going up 500 bucks a month. So all the things that you just put in the box and you let it sit and put on autopilot you need to take a look at once in a while and figure out what tote it goes in.

Doug: 7:09

I'd love to spin the financial wheel of fun here with it's not urgent until the basement floods and I want to land on that savings account that you have at a large national bank. Let's put things into context now. We went through 12 some odd years with very, very low interest rates. Post-covid inflation bit us right. Our first podcast was about inflation. The response from the Federal Reserve was to raise rates. Raise rates to try and cool the economy a little bit. Cool inflation. And looking back a couple of years, for the most part that has worked. We are in a more normal inflation zone right now.

Doug: 7:45

Right, in the backdrop of all of this, if you're a saver, you went from 12 years of not getting paid by your bank to a couple of years of getting paid very well, as a saver, so long as you were a vigilant shopper. This is where it comes into large national bank and maybe not taking a look at your statement and seeing what you're being paid. There are large national banks like Bank of America, JP Morgan Chase, that routinely pay very, very little on savings accounts because they know that you're going to forget about that money. And in fact I think for large national banks the rate of return is less than one half percent in savings accounts. The federal funds rate right now is over 5%. The 10-year treasury is at 3.65% this morning. Short-term rates are in the high fours low fives, depending on what you're looking at, and you can still get CDs out there at 4% plus.

Doug: 8:41

But the savings rate for national banks on average is less than one half a percent. That's because it's been sitting in the basement, forgotten for a while and the bank's counting on you to forget it. You know it's funny. This was another one of those things where it's fine. You know I like banking at this place. I don't want to change banks. It makes me feel good to have X in my savings account. But, man, for a couple of years to go by, to have inflation average over 3% over the last couple of years and then to get paid effectively zero in a time where people want to have a few more bucks in their wallet, they're really losing money and having their money erode when big national bank is paying you less than a half a percent in your savings.

Jeremy: 9:23

Yeah, I guess I have a third instance, right, personally in the last few week. Because I've been a customer for, let's say. Let's say I have a teenage picture on my debit card still. So it's been 30 years let’s say.

Doug: 9:36

It's the best way to add back hair.

Jeremy: 9:38

Right. And all of a sudden they changed the rules. So I was a vigilant shopper. I moved some stuff around getting higher interest. Now all of a sudden there's a minimum balance that you need to meet and if you don't meet that minimum balance, well, now you're going to get a charge. So now you get a fee and it's all new. 30-year customer. And if you're not looking at your statement now you're just getting that fee. But it's fine, it's fine. And it's funny not funny, but disappointing that companies are now preying on this distracted culture we're in, right. I mean, just think of all the promotional offers, the sign up, no payments for six months. They're counting on you to forget about it. And next thing, you know, now all of a sudden you've got a subscription or you've got a monthly bill that you're paying you never really intended to have, but it was in the box and it's fine.

Doug: 10:25

So I think the to-do list item here is, wherever you bank, go re-engage with what you have. So, if you have a checking account, a couple of savings accounts, a CD, just take a moment, you know, Saturday morning, before you're running the kids to soccer with the first coffee. Open up your bank statement, just examine it. Find out how much you're getting paid in terms of interest in your accounts. See if there's any fees that you're being charged that you didn't know about. And then also, if you have a credit card relationship with your bank too, look at what your interest rate is. So you kind of hit on it, JV.

Doug: 11:00

Life moves so fast. There's so many demands on our time, on our money, on every single day that several months goes by in a flash and, before you know it, again like you've had those boxes down there in the basement for years, right, and that box down in your basement is maybe your Bank of America savings account of 0.01%. So there is something you can do about that. That box down in the basement could be your credit card that happens to have now a 24% interest rate and you've been rolling a $3,000 balance for years, right. There are things that you can do about this stuff. So maybe that's the nudge.

Doug: 11:37

Your banking relationship, go check them out. Go open a statement, maybe even have a conversation. Drop into a local branch and just say, hey, I got four accounts here. Is there something I can be doing better. And at most banks, you know people want to help. You know there's customer service for a reason. But I guess this doesn't apply just to bank accounts too right. It applies to the things that we take care of for clients, which is investments, and you know it's tough on this one, because you do need to give your investments time to cook. So they do have to live in the basement for a while. But if you ignore them forever, that's a disservice too right.

Jeremy: 12:11

Yeah, you want to open the box every once in a while. Re-sort it, if need be.

Doug: 12:17

In the last year or two how many times have you run into someone new to you or a conversation you've had where somebody's had accounts kind of scattered at a whole bunch of institutions and really hasn't looked at them in quite some time?

Jeremy: 12:31

All the time, all the time. And I would say even to further that, an older client who is investing like they're 20, right, because they put the 20-year-old investments in the basement. Really haven't touched it for 30, 40 years.

Doug: 12:44

For our listeners. Explain that a little bit more. Investing like you're 20 when you're a little bit older. Dig into that. What's that mean?

Jeremy: 12:50

So when you're younger, right, you're going to be a little bit more aggressive because you have time for it to cook and grow and time for it to recover when there are the inevitable volatility in the market where we're going down a little bit. We have time for it to recover and then do its thing. Older you get, the closer you are to retirement needing that money, that's when you want to be a little bit more conservative and you want to take less risk in a lot of ways because you want to be able to count on that money being there when you need it. And so if you're 60, 70, 80 in retirement needing that money, you can't necessarily weather a 30% market correction like you can when you're in your 20s.

Doug: 13:29

Especially if you're taking $5,000, $8,000, $10,000 a month out of it for living expenses, healthcare needs, what have you. I think you and I have both had situations in the past couple of years where we've run into and this is really not the fault of an investor or a saver, it's just life changes. Sometimes the person in the household who was, we like to use this term the household CFO right, sometimes the household CFO something has happened to them. They've passed away, they've cognitively declined, or maybe an adult child has kind of taken over the reins. But a lot of times a portfolio or an investment strategy or a bucket of investments could be the same thing for 30 years. And to a degree, again, this is where I get a little conflicted about this, you do want to leave some of these investments alone when structured the right way, and then when the box is opened up and when it's inspected and when it's reorganized once a year, then that works.

Doug: 14:28

But there is probably a red flag when somebody has had maybe an all-stock portfolio, when they're 47 and they wake up one day and they're 87. And my spouse that maybe used to be the personal CFO or the CFO of the household, who used to interact with that portfolio, hasn't looked at it in 10 years or hasn't been able to or is gone period. That could be a red flag because you could certainly have a 2008, a 2020, 2022, a bear market that also meets a time where there is a need for some or a good chunk of that money and you don't want it to meet an unfortunate time in the market right.

Jeremy: 15:06

Actually, if they did that recently, they would have been better off right. Better lucky than good, because we've had all-time market highs continuing into this year. So if you happen to do that, yes, you are exposed to a massive amount of risk and the possibility of a 30% 40% correction, like we've seen in the past. 

Doug: 15:32

You've also had a bull market behind your back, for 15 years. (Jeremy: You've been lucky.) A line that we've said many times to folks who are maybe a little north of us in their 50s is that what got you here may not get you there. So the last 15 years we have had very low inflation on balance, save for these last couple of years. Very low interest rates. We've had Federal Reserve policy, which has encouraged risk-taking, which has encouraged money to go into more risky investments right, because your bank and bonds hadn't been paying you much. So you know we've had a 15-year period where the wind's been at your back. Now we might have slightly higher inflation than we've been used to. We might have slightly higher interest rates than we've been used to.

Doug: 16:11

The Federal Reserve doesn't want to entangle with your life all the time, right. So A. you may not have the wind at your back that you had as an investor for 15 years. Plus, maybe that was a journey from age 35 to age 50, and age 50 to 65 are your final working years too, where you might want to pump the brakes. So the box in the basement that is your 401k, that has sat there for a while, maybe the box is OK and maybe the stuff that is in the box is OK too, but we should open up that box in the basement. Make sure it's on a pallet, make sure it's in a safe place so that it doesn't get damaged by floods, and then it can serve you when you need to take the contents out of the box. I don't know if that's a wonky analogy or not, but.

Jeremy: 16:50

I mean, there's a whole nother element to this and that's the emotion that comes with the box. (Doug: Oh, yeah, right.) You don't want to necessarily open that box and bring back old memories or sins of the past or what you did or didn't do getting up to this point, or what you didn't or did put into that box.

Doug: 17:09

On a more positive spin, too. You open up a box that was from your teenage years and you're like, oh man, you know, here's this thing from high school, or this thing from college, or you know this magazine that I saved, right, that could also be the stock that you've held for 25 years. Which it could be the stock you've held for 25 years that is worthless. It could be the stock that you've held for 25 years that's named Apple.

Jeremy: 17:33

Yeah, either way, you're sentimental to it.

Doug: 17:36

Right, you know, sentimental, I feel bad about it. Sentimental, I'm like, oh my God, this has worked out so well that I have to stick with it forever. But still it deserves to have the box opened, to re-examine what's in the box and think about what should be in the box. Just because you've had this stock that's been worthless for five years doesn't mean you can't not take action on it, move on from it. Or because you open an account and it's 80% in Apple stock, like you can't do something about that. 

Jeremy: 18:02

Right in our last move, my wife finally made me throw out my trophies. I was so sad. 

Doug: 18:09

Were these the dad of the year trophies or your hockey trophies?

Jeremy: 18:11

These are hockey, baseball, tennis, Boy Scout trophies. All the trophies right. There's a box with them and I was so sad to get rid of them. It's been too long, I finally gave in on it.

Doug: 18:25

I love it. What else is on our list here? So we talked a little bit about debt. We talked a little bit about investments that sit around. I think we'd be remiss not to talk about another one of those boxes in the basement that sit there forever.

Doug: 18:37

Retirement plans at old employers. Again, that's another one of those things that I think sometimes investors are most successful when they do set it and forget it. Which is great, but maybe we should say set it, forget it, but don't forget about it. To your point, when you're 20 or 30, you're an investor in a certain way. 25 years goes by, you're in your 50s, you're a different sort of investor and you're at a different point in your career where you may only have 10 years of work left. It's really important, if you have these retirement plans that are scattered all over the place, at least go inspect and see what's in the box. 

Doug: 19:16

In your 401ks, there's one of these options that you probably see like a year tethered to the name of the fund. Right, like a 2040 fund, a 2050 fund. These are called target date funds. What's interesting about these funds right here is that by choosing a target date fund, it does put it in a little plastic tote in the basement. Target date fund, generally speaking, is going to carry generally the amount of risk that you should be taking at a certain age. So if you do choose a target date fund and you forget about your 401k and, we say this to folks that we're helping, target date funds, they're not flood proof for the basement but they are a better way of making sure that you're taking a consistent amount of risk, consistent with your age, consistent with where you are kind of on the timeline.

Jeremy: 20:02

Good chance you don't open the box at 80 and you're not invested like a 20 year old timeline.

Doug: 20:14

So the analogy of opening the box is actually going to log on to your 401k provider that you haven't logged into for seven years. Take a peek, see what you're in. If you're in a target date fund, there's a good chance that that jives with your age. If you're not, maybe talk to somebody about that or maybe just review what your options are.

Jeremy: 20:26

There's one other side to the coin. (Doug: What's that?) That's the homeowner that looks at the box every day and is obsessed by the box. (Doug: Good point.) That's not healthy either. (Doug: Why not, JV?) Well, because we're thinking about things, especially when we talk about retirement planning, we're talking about things in a long time horizon. Right, it might be 10, 20, 30, maybe even 50 plus years. When you're looking at the box every day and you're seeing the noise in the system and you're watching the news and you're seeing the day-to-day market action or the day-to-day headlines, those things are not going to impact your long-term plan over the course of 50 years. So you get clients that you talk with that are every day in the box, and then you get clients that haven't opened the box.

Doug: 21:11

So I guess it's the happy medium of having the basement where we have the sump pump, where we know it's down there, where we get stuff up on pallets, where they're in the totes but they're labeled and we check them out every once in a while. I guess, as opposed to going down to that same tote in the basement and messing with it once or twice a day with something that you won't necessarily need right away. Because your retirement money, you don't need it right away. you can't really even touch it until you're 59 and a half or older in theory.

Jeremy: 21:38

It sounds a lot like having a plan for the flood. Doesn't it?

Doug: 21:42

It does. So hopefully our analogy's been helpful. But I think this is where financial planning comes into play, and you know I kind of talked about this the other week that preparing for the basement flood really is what financial planning is all about. We can take a lot of different things, we can automate them, but I think automating them and forgetting them is not always the best solution right. 

Jeremy: 22:04

A hundred percent, and it's like you know I read this book not too long ago. It's called the Slight Edge by Jeff Olson, and he says the power of the plan is not that it will get you there, but that it will get you started. I really like that, because when we build a plan right, it's only as good as the day we build it. (Doug: Correct, right.) And we talk about that a lot right. But it requires continuous monitoring, maintenance. Things in life are going to change, goals are going to change, conditions are going to change, and we want to continuously be adaptable to the ever-changing environment around us.

Doug: 22:36

Almost like what we talked about in our education funding podcast. Get a start somewhere. Get started somehow. Knowing that as you get a little bit more comfortable in your career and your family life and your cash flow, try and save a little bit more every year and ratchet it up and re-examine your cash flow and see how much you can dedicate towards that.

Jeremy: 22:57

The plan creates action, right. (Doug: That's it.) You put the sump pump in, you get the pallets in place, you got your totes.

Doug: 23:03

And I don't know about you, right? I don't want to spend all my time in my basement either. (Jeremy: Right. Exactly.) Know what's down there. Make sure you know where things are. Forgot to mention one of the reasons why this thing even came up. Went on a family bike ride, I was telling you about this, right, and I guess I get to embarrass myself in front of everybody. I went on a family bike ride and we have this bike rack for four bikes. There's three of us in the family, right. And I couldn't find the key and the straps to the bike rack because they were downstairs in the basement. Not set it and forget it, just completely forgotten, like I hid it from myself. By the way, found it two weeks later, right after cleaning the basement. That's kind of what got us thinking about this is just make sure you know what's down there, but don't overdo it with these things, but don't underdo it and completely ignore it too.

Jeremy: 23:52

Walk down there once every few months. 

Doug: 23:57

Yeah. Alright so I think we've beat this topic pretty well today. Have you got a dad joke for us today?

Jeremy: 24:01

Yeah, I do. I've actually kept it on the sideline for you just so it could be a shocker. (Doug: Oh, I love it.) Alright, you ready for it? (Doug: I know I'm not ready) And this is so relevant. It's great. (Doug: Go for it.) Why can't drummers come back from retirement? 

Doug: 24:18

Oh my God, why? 

Jeremy: 24:21

Alright. Because there will be repercussions.

Doug: 24:25

Oh my God, that one's pretty good. Yeah, I think that's actually your best one, 

Jeremy: 24:30

Is it really?

Doug: 24:31

Yeah, it's not cringy at all. That one's kind of fun. I love it. I love it. So I think this will come out sometime in October. Tell me about October and Hanover and the South Shore. What's going on in the community? Anything you want to give a shout out?

Jeremy: 24:46

Let's see. We have the Hanover Chamber of Commerce kickoff luncheon next week, which is going to be fun. That's great. HYA, soccer, fall sports are in full effect. Those are the highlights for the moment. What about you? What's going on in Watertown?

Doug: 25:05

It is September right now. We're going to have our 25th anniversary of the Faire on the Square, which happens on September the 21st. That will probably be successful and over and done by the time this thing comes out. So wishing that a whole lot of luck. And, man, you know, it's just a lot of getting back to it with the schools, you know. 

Doug: 25:20

So this has been great. It is not urgent till the basement floods. So go down to your financial basement, take a peek. What's down there? If you go down there and you do find a mess, or you find a little bit of a stack of moldy boxes in the corner or whatnot, you need some help. Feel free to reach out to us. JV, until next time. Looking forward to our next podcast. You have a great weekend. (Jeremy: You too.) We'll see you next time. (Jeremy: Alright, bye.) Well, with that we're going to wrap this up. Thanks for tuning in to the Arsenal Money Clip Podcast. If you have any questions, please check out our website, www.arsenalfinancial.com. We have blogs on a whole number of topics if you click on our blog section. If you have a question about anything, you can reach us at info@arsenalfinancial.com, or you can give a buzz to the office at 781-335-9100. Thanks for joining us and we'll see you next time.

Speaker 3: 26:12

Securities and advisory services offered through LPL Financial, a registered investment advisor member, FINRA, SIPC. The information in this podcast is educational in general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.