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In September 2016, Sharon suffered a ruptured brain aneurysm. On September 20, 2018, she presented The Sharon Epperson Chair of Research, a $15,000 grant, to Dr. Brian Hoh, who’s researching the formation of brain aneurysms, as well as innovative tissue engineering technology to improve treatments.
Maria Bruno: Hi. I’m Maria Bruno, head of U.S. Wealth Planning Research here at Vanguard.
Joel Dickson: And I’m Joel Dickson, global Head of Advice Methodology at Vanguard. Welcome to our podcast series, The Planner and the Geek, in which we’ll discuss topics that are important to individual investors.
Maria Bruno: And we’ll have some fun along the way.
Joel Dickson: Well, Maria, I got the twice-a-year call from my mom last night on financial help.
Maria Bruno: Tell us more.
Joel Dickson: Usually I get two calls a year. I get one from her when it’s time for her required minimum distributions from her IRA and just where to take the account from and so forth.
I get a second call, invariably, each year about some unexpected expense or one that she decided it’s now time to finally deal with. In this case, it was her roof. So, she said, “I need to finally fix my roof.” So first question was, “Do I have enough money to do that?” And second question was, “If so, how should I fund it?”
Maria Bruno: Okay, just stop for a moment.
Joel Dickson: Yes?
Maria Bruno: Does your mother have a special ring on the phone?
Joel Dickson: No. Actually, no, she does not have a special—
Maria Bruno: Okay, and—
Joel Dickson: But, I do see the number come up because she’s in my favorites, so it says, “Mom.”
Maria Bruno: Okay, and how many times do you call your mother in a year?
Joel Dickson: Oh, more than twice!
Maria Bruno: No, you don’t need to answer that.
Joel Dickson: More than twice.
Maria Bruno: That’s not a question that’s meant to be answered.
Joel Dickson: And she calls me more than twice. It’s just with this issue—
Maria Bruno: There were roof issues.
Joel Dickson: Yes. So, there were roof issues and, actually, in her case, she could deal with what needed to happen from the roof standpoint. But I think it highlights this question that comes up all the time as you’re thinking about planning, and we tell everyone to think about saving and the long term and so forth. But, invariably, something comes up that puts a wrench into the plans. How do you handle that at that point, and how can you prepare in advance for the unexpected which, by the very nature, is unexpected?
Maria Bruno: Well, yes, that’s life, right?
Joel Dickson: Exactly, life happens.
Maria Bruno: Life happens. Some people use a different four-letter word, but stuff happens.
Joel Dickson: Exactly. Wow, we really are going to get fired. So, anyway, I thought it was a good lead-in to think about this concept of preparedness and the different approaches that people will take to think about—or sometimes avoid the idea of—taking into account the stuff that you just have no idea what’s going to happen. And you can’t assume that things are just swimmingly going to go along year by year, at least from a financial perspective, without any bumps in the road. So, I just thought it was an interesting approach or anecdote that really highlights this concept of preparedness.
Maria Bruno: It’s a good one. I think many of us, when we think about being financially prepared, it’s around having a liquid cash account or liquid emergency reserves that I can tap into in case I need a new roof or something happens to the car.
Joel Dickson: Yes.
Maria Bruno: But that’s just one example.
Joel Dickson: Do I get to do a Maria fun fact here?
Maria Bruno: You’re stealing—that’s my part!
Joel Dickson: I’m stealing your branding?
Maria Bruno: All right, let’s see. Let’s see how fun your fun fact is.
Joel Dickson: So, according to a survey that bankrate.com did—I think it was late last year or earlier this year—
Maria Bruno: Did you just Google this before coming into the studio?
Joel Dickson: Hey, this is just basic financial knowledge that we need to have.
Maria Bruno: That means you just Googled it. Yes, what did Google share?
Joel Dickson: Wow! Calling me out, this is just not good. We’re going to have to renegotiate our roles here.
Maria Bruno: Our unwritten contract?
Joel Dickson: Yes, our unwritten contract. We’re going to have to renegotiate.
Just 39% of Americans would actually be able to cover an unexpected $1,000 setback using their savings. So, another way of saying that is the vast majority of people are living day to day or paycheck to paycheck.
Maria Bruno: Correct, PhD, correct.
Joel Dickson: Thank you.
Maria Bruno: So these numbers are a little staggering.
Joel Dickson: Yes.
Maria Bruno: Because $1,000, that’s an easy car repair. That doesn’t even make a dent in a roof.
Joel Dickson: Yes. That’s a refrigerator that blows out, or something like that, that hadn’t been planned for or is unexpected. A lot of people would have to go into debt in order to fund that. So that kind of vicious cycle—if you get in debt and you can’t get out of debt, and then something unexpected happens and you’re not prepared—leads to this inability then to meet other financial goals as that occurs.
Maria Bruno: So, where do we go from here? We’ve got roughly a third of individuals—
Joel Dickson: By the way, was my fun fact okay?
Maria Bruno: Yes, it was okay. We’ll leave it to our listeners to determine how fun that was.
Joel Dickson: Oh, okay. Well, I mean, if we’re going to do cross-branding here, I have to make sure it’s okay.
Maria Bruno: All right, so we realize this is the case. Let’s talk through that in terms of how we suggest going about rectifying that. So, the situation here is many individuals—and we talk about this in the context of young investors who have competing priorities—we talk about saving for retirement, we talk about paying down student debt, we talk about living expenses, and we’re also talking about having an emergency reserve fund. Now that’s just one example of investors, but many investors struggle with this.
Joel Dickson: Often we think about items in isolation—where people have these financial health indicators, or how much house can you afford, or how much rent can you afford as a percent of your income—but it’s kind of done one-off—
Maria Bruno: Well, it’s also saving for retirement. We talk about rules of thumb, so I might be saving, I might be on target for my retirement, or maybe I’m over-saving—if that’s even something that I should be talking about there—but prioritizing these goals and basically it being a balancing act.
Joel Dickson: Yes, I agree. Obviously, emergency savings is the one that is most often talked about. But then how do you trade that off? And I think you and I don’t necessarily agree exactly on how to do it.
Maria Bruno: No, and I’m more conventional in terms of when you think about emergency reserves— to have three to six months’ worth of living expenses in some type of cash or money market mutual fund, for instance.
Joel Dickson: I tend to question that a little bit, because of all the different competing goals and objectives as say a millennial investor may have starting out—trying to pay day-to-day bills, save for retirement, maybe pay off some debt, and at the same time, have this emergency savings. How do you get into a longer-term savings mindset if the first objective is to have half of your income saved as emergency savings? Well, if I save 5% a year, which isn’t an unreasonable amount for many Americans, that quick math—it doesn’t take into account any compounding of anything—that’s ten years before I’m to six months of expenses. So, do I forego all other savings of different forms in order to get to this three-to-six months as the first thing that I do?
Maria Bruno: Well, yes, but I’m not saying that. I’m saying that that should be the watermark; at least in my experience—in my professional opinion and personal opinion there—it’s a balancing act. And, yes, when you think about situations where you need to fund unanticipated expenses, you can tap into nonretirement accounts—you can tap into a Roth, for instance. We talk about this in terms of the ability to access contributions, income tax and penalty tax-free. But that, in and of itself, is a tradeoff as well, so it’s balancing that. And some of it is a personal preference in terms of how you want to be able to fund those types of what-ifs.
Joel Dickson: Oh, I still, as you know, chuckle a bit because you had written a blog on one way of maybe thinking about emergency reserves—if they are needed—is that you might be able to take contributions from a Roth IRA because of the withdrawal rules from a Roth IRA. And the comments that you got on that blog, in many ways, were priceless, such as, “No, don’t let the worlds collide of my retirement saving and other saving.” But that’s exactly how I think about it. It’s a whole pot of money that serves many purposes and what’s the most efficient way to meet those different purposes. But a lot of people find it more convenient to bucket.
Maria Bruno: Yes, and I think it’s really how you view that account, right? So, the intent wouldn’t be to use it as a transactional account, but the reality of it is that type of account has flexibility that a traditional IRA or 401(k) may not. So, I can appreciate the different points of view on that, but the reality of it is, that it is a source of liquidity if one should need it. Now, you can put the money back within a 60-day window, for instance, but the argument can be, well, if I pulled the money out to fund an expense, it may not be going in and then I’m losing not only those dollars but the tax-free compounding on those dollars. I can appreciate the comments there, but I still stand strongly that it can be a multitasking type of account, when and where appropriate.
Joel Dickson: But there are other ways besides just financial accounts too. I mean the importance of insurance, for example, and various things. Again, this is kind of the best-laid plan approach. When you’re working, while there’s always some risk of unexpected job loss and income hit and so forth, there’s also the risk that your plan of when you want to retire or that you’ll be able to continue working in the same way, at the same level, for as long as you plan to, may not occur. And, as you and I have talked about many times, disability insurance as a key sort of risk mitigator for workers and so forth.
Maria Bruno: Yes. I think many will focus on life insurance when you think about insurance and protection and that’s viable, but you can’t discount the need for disability insurance. There may be a greater likelihood that someone could get disabled as opposed to potentially needing life insurance. So you need to think about both, absolutely, but it’s not one or the other.
Joel Dickson: Yes, exactly, but how do you mitigate the risks of something going bad? Everyone loves to talk in the investment world about tail risks—the really, really bad catastrophic outcomes from a financial markets’ perspective—but these things that we’re talking about are tail risks within your personal financial experience. A disability that doesn’t allow you to earn income any longer is a tail risk, and mitigating that could potentially give you a better chance of meeting your other financial goals because that component is taken out.
Maria Bruno: Joel, I think that segues into our guest for today’s podcast. We recently sat down with Sharon Epperson. Sharon is CNBC’s Senior Personal Finance Correspondent, and she might be a familiar face to some of our listeners because she’s often in media channels, both television as well as written. And Sharon, in her professional career, covers many financial planning topics ranging from investing, to managing debt, to estate planning. Her story is interesting because in 2016 she suffered a brain aneurysm. So, a lot of what she talks about she actually went through with her personal experience. We had the pleasure of talking with Sharon recently, and we talked about some of this in terms of her personal experience and how she relates that into her message to investors. It was really good to talk with her. We had a very rich discussion, and we’re going to share a portion of that discussion with you now.
Maria Bruno: Sharon, I want to thank you for being on our podcast today.
Sharon Epperson: Thank you for having me.
Maria Bruno: Both Joel and I are just thrilled to have you. Before we start, I want to personally say how happy both Joel and I and the team here are at how well you’re doing.
Sharon Epperson: Thank you.
Maria Bruno: We are just so thrilled that, one, you’re doing well, but also that you are so open in sharing your personal experiences as part of your professional role. I think that is just absolutely wonderful. So, thank you for that, and happy to use that as the basis for our discussion today.
Sharon Epperson: Excellent.
Maria Bruno: So, for those who may not be as familiar with your story, can you share? In 2016 you suffered an aneurysm. Again, you’re doing well, and we’re all grateful for that. But can you give us some background in terms of your experiences and how we got to be talking about this conversation today?
Sharon Epperson: Well, in September of 2016, I suffered a ruptured brain aneurysm. And for those who’ve never heard of it or don’t exactly know what that is, it’s basically, in the very simplest terms, an explosion in your brain, literally. So, one of the arteries, one of the main ones in my brain, it ruptured. It created a hemorrhage, bled everywhere, but I had no idea that this was happening. What I knew was that I was having a very strange sensation that I felt when I got up from a stretch that I was doing in an exercise class. And I knew it was a sensation I’d never felt before. It was painful but not like a migraine, not like a headache. I just knew that it was something that I needed to deal with right away. But my view of dealing with it right away was calling the person I knew would come right away—who was my husband. So, he came and he got me from the parking lot. I made it that far, and then I sat on my car and I realized I couldn’t turn my head. It was probably not a good idea to try to drive myself home, so he picked me up and brought me home. I went to my house and put my feet up and thought maybe it’ll pass. And it didn’t. He said, “Contact your work, let them know you’re not coming. We’re going straight to the doctor.” So, he took me to my primary care physician, who was not available to see me at the time, but another primary care physician did see me and happened to have been an ER doctor in the past. And that emergency experience really made him, I think, jump to the worst-case scenario before just—as some physicians have done to patients where this has happened—send them home with high-strength pain medication. He sent me directly to the emergency department of the closest hospital. When I was at the emergency department, they did some testing and they did some imaging of my brain because, in addition to having this sensation and not being able to turn my neck, I also was feeling nauseous, and all of those signs—vomiting and all of that—is a sign that something is terribly wrong. So, they did a CT scan, and that’s when they found bleeding on my brain. And so, in the course of three hours, I went from seeing my kids off to school—they’re now 13 and 16—and sending an email with a schedule for the week of all the different activities and where we had to be for parent-teacher conferences and school events that were just starting, thinking about what my day was going to be for work, and having a spinach smoothie and exercising. I did all that by 9, and by 11:30 I was in an ambulance being rushed to another hospital to have an emergency surgery on my brain. It all happened very, very quickly and, frankly, after I heard the Emergency Room physician say that I had bleeding on my brain and I called my sister to let her know—she lives in Washington—I don’t really remember much else. I was kind of unconscious at that point. So, at that point my husband and my sister by phone—eventually she took the train up and was there by the evening—were making all the decisions for me because I was unable to do so.
And I learned later, much later as in weeks later, really the significance of what had happened to me—having a main artery in your brain that controls your balance and your walking and your speech and basically everything. Your cognition is a very serious occurrence, and the fact that I was within 48 hours able to wake up and speak was great. But I was not able to stand up or walk or anything for several weeks, partly because when something like this happens there is a great chance—even if surgery was successful—that complications that arise in the days and the few weeks after can be life-threatening as well. So, it was a touch-and-go situation for the first ten days or so, and I was just very happy to be alive at the time. I knew that something bad had happened, just because of the people who were in my ICU room when I woke up that had come from different places. And I knew it was serious. But I didn’t really understand the full extent of it—or the full extent of what a recovery from something like this would be—for many weeks later. I was in the hospital for over a month—in the ICU at one hospital for two weeks, and then in a rehabilitation hospital for two weeks where I literally had to learn how to walk again and keep my balance and also go through speech therapy. Again, I was able to talk, but making sure that I was communicating what I was thinking with what was actually coming out—that took some time and occupational therapy too. I didn’t really understand how I would have to maneuver when I got back to my house, and for the better part of a month, I really lived in one room because getting up and down and going to different places—I just didn’t have the strength or didn’t feel comfortable in terms of my balance and stability to be able to go many places.
But after at least a month or so at home, I started doing outpatient therapy as well several times a week, and I did that for several months. It will be two years this September and I still go to the rehabilitation hospital on a weekly basis to work out at their fitness center, just because I like to be somewhere where everyone knows what’s happened to me. And I feel like the people there, many of them, have had some type of issue, so there’s a lot more attention from the trainers and such to what I’m doing. I realize now how very fortunate I am because as I started to feel better, I started to do more research. I’m a journalist—that’s been my career—so reporting and finding out more about this was something that was very important to me. I learned that four out of ten people never even make it from a ruptured aneurysm. They die almost immediately. And of those that survive, more than two-thirds have significant neurological deficits. I see this in the support groups that I go to and people that I talk to in terms of what work they’re able to return to, if any, and how they’re able to resume their lives. And it’s very different often than what they were doing before. Even in my case, I feel very different than I did before in many ways. One of the ways is that I’m much more present, or at least I try to be, when I’m working on something—not trying to do ten million things at once, which is what I did that morning. I’m much more mindful of what I’m doing and more attentive to it, and when I have a minute to not be doing something, just be happy to just be. And I’m grateful continuously. I’m constantly grateful that I’m here and that I’m able to do what I can do—and maybe not the same way that I did it in the past—but even better because I am more present. I am more mindful about these tasks, and I’m just grateful to be doing them. So now it’s just something that I talk about frequently because I think, in general, many people are going 100 miles an hour all the time, and the last thing they think about is themselves or their health. And when you are thrown a curveball, and when it comes to your health, it not only impacts you, it impacts everyone around you. It can be devastating—not only to you physically, not only to you mentally—but it can also be devastating to you financially if you’re not prepared. So that’s why I think it’s so important to talk about it, and that’s why I talk about it a lot in light of what I’ve been doing.
Joel Dickson: Sharon, I think that the point that really resonates with a lot of us is—and you mentioned it early on in describing what happened—you had the whole week planned. You had that particular day planned; you were going about your day. And then all of a sudden, out of the blue, something happens that is not part of the plan and that requires immediate adjustment or unexpected contingencies; that throws a curveball and really impacts, as you said, all parts of the different life piece of it. Because, ultimately, I think that when we think about the financial part of this we have our plan—we’re saving long term, we’ve got the retirement piece taken care of, we’ve got our different goals and so forth—but there are a lot of assumptions that have to hold for that to actually come into place, and oftentimes we find that doesn’t happen. Could you expand on that a little bit more—about the kind of financial uncertainty and why you, even now, see that as more important in terms of being able to preplan to the extent that you can?
Sharon Epperson: Well, when I was in the hospital for a month, that meant I was—well, I am me, so I did try to pay a bill from my phone—but, for the most part I could not do any bill paying. I could not, and I should not have been, doing any bill paying. I could not make any financial decisions. I couldn’t really, early on, make any health care decisions either. So I needed to make sure that I had someone in place, and also had things in place for family members who would take that over but might be overwhelmed worrying about me or taking care of me and my children. I think one of the things that’s so important is we talk a lot about automating your financial life as much as you can. And there are many people who—whether generational or just cultural or you’ve had your identity stolen—don’t want that. They don’t want to do online bill pay or they don’t want to have any of the parts of their financial life automated. But I will say in my case, if I had not done automatic bill pay, if I had not had my mortgage directly taken out every month, if I had not had things direct deposited for the pay that I was getting through disability insurance, if I hadn’t done these things—I don’t know what would happen to my family financially. Eventually, we would have caught up and my husband would have taken it over and all of that. But having those things done automatically was really, really helpful. And, frankly, for the period of time that I was able to get disability from my company, I believe—and I would have to double-check this— I was still able to contribute a little bit to a retirement plan. So I was still getting payroll, but it was disability payments. But it was still out of my payroll, and whatever the percentage was, it was still able to come out.
Maria Bruno: You know what’s interesting is that I think many of us—if you’re going away on a long trip, for instance—might plan, “Oh, okay, these bills are coming in. I need to make sure that XYZ’s done, the pets are taken care of, the plants are being watered” and all that, but you don’t think that at any given point in time your life could just change in an instant.
Sharon Epperson: It could change in an instant.
Maria Bruno: Yes.
Sharon Epperson: It really could. And, obviously, if I’m going to have a list of activities for the kids and where people are going to be written out that morning, I am a planner; and I definitely had a plan for my financial life. I just never thought I would have to test it out, and thankfully most people don’t. But the things that I talk about, and I’ve talked about this for many, many years—and when I was talking about it in my thirties, I think people thought I was crazy—but I do think that estate planning is the greatest legacy you can leave your loved ones. And making sure that, even if you don’t have a lot of money, you’re leaving them at least without a lot of financial liabilities. It’s very important. So you don’t have to be a multimillionaire to think about estate planning, and estate planning is not just for if you die because you’re much more likely—and I’ve reported this so many times and I can’t believe it actually happened to me—to become disabled while you’re working than you are to pass away. Making sure that I had disability insurance—thankfully through my company but also on my own—because there was a period in time I was doing a lot of freelance work, and I wanted to make sure I was covered. It helped that I had my own private disability insurance policy as well; it did not cover my full salary, but it helped to cover a lot of the household expenses that I’m responsible for and that needed to be covered. Making sure that I had people in place—not just because they loved me and I’m married to one of them and one of them is my sister—but legally. They are my power of attorney for any medical decisions that have to be made if I can’t do so, or any financial decisions that have to be made if I cannot do so. So, my husband and my sister—my husband being the power of attorney and my sister being the successor—had to take on those roles. That was important to also see: Do they really like taking on those roles? No one probably likes it, but it’s good to see what it really entails. So it was very important to make sure that I had someone to do that. And they were both in touch with my estate planning attorney and my financial advisor, just to make sure that everything was running and let them know that they were now on point for that as I was recovering. The other part is just understanding that when you’re ill, it’s so hard to not only plan for these things or be responsible for them, but it’s an emotional drain as well.
Maria Bruno: So, Sharon, how do you suggest getting started? I think many may feel like, okay, yes, I need to do that, but I’ll do it tomorrow. I won’t do it today. So, I think there are two things. One, to actually to do it; and when I say do it, I mean getting the important documents in place—be they a living will, the power of attorney, for instance, as well as the other estate planning documents. But how do you start? It’s not only important to have those documents but to make sure that you share that—in your case with your husband and your sister—and the role that they play in the event something were to happen. They’re not easy discussions to have, but they’re so important.
Sharon Epperson: Well, I think the first thing is what you just said—discussion. You have to communicate. You have to have the discussion, first and foremost. And when you start having the discussion, ideally, it won’t just be you realizing something needs to be done—but other people will be informed and know that something needs to be done as well. I find it very, very helpful to talk to someone. There are plenty of online tools such as nolo.com—you can look up information about estate planning and documents you might need. There are LegalZoom and other places you can go to get the actual documents and do them online. I need to speak to someone, and I think there is so much value in speaking to a financial advisor—someone who has been vetted, perhaps, through the CFP board, the Certified Financial Planning Association board, or the Financial Planning Association or the National Association of Personal Financial Advisors. But someone who has worked in these situations many times over and can suggest to you the things you need to have in place and perhaps can also suggest to you an estate planning attorney that you can work with. You can certainly go to the American Bar Association and find an estate planning attorney as well. But I think having someone speak to you about the documents that you need and work with you is important, because everyone’s situation is slightly different. And when something happens … having that piece of paper would have probably been fine for my sister or my husband to know that it existed somewhere, but more than likely, they wouldn’t have remembered at that moment that it existed. They may not have pulled it out and looked at it, but this way they knew there was a real person that they had a relationship with already, that they knew about already. In my sister’s case, she had never met my estate planning attorney, but I told her to call him because I knew I was in a very precarious situation. And I think that was a difficult call for her to make, but she did make it and with my husband knowing that she was doing so. So I know what I’m saying means it’s going to cost a little bit more, and I’m fully aware that some people may think, “I’m not spending whatever it may be, $1,000, to do all the estate planning that I need to do with an attorney.” That might be a stretch for some—for a lot of folks—and I get that. But I do think if there’s some way that you can speak to someone and get some type of advice—
Maria Bruno: Sharon, I would agree. When I went through my documents initially … I was a practitioner at the time, but I had a friend who was an attorney, so I sat down with him and I talked through it with him and asked exactly what does this mean. I had him go through the documents with me and then explain things so that I felt so much more comfortable coming out of that. So, can you do it online? Yes, you can, and Joel’s probably going to give a counterview on that one. But I’m in the camp with you in terms of, when you think about walking away with that and feeling like you have a good holistic plan that you feel comfortable with for both yourself and your family, for some of us there’s value in talking through that with someone and validating that.
Sharon Epperson: Exactly. And the other thing to keep in mind is even though everyone’s situation is slightly different, I mean it’s your family, it’s your life, it’s you. Often people who have worked in the industry have heard it before. If not exactly your scenario, something similar. So, there’s some context and some perspective that I don’t get when I try to do things myself online.
And what I do, actually—again, because I am a reporter—I will double-check by going online or seeing if the calculator tool, or whatever I can find online, says what my advisor has said. I will do that, and I do that quite often. But I still need to talk it through with the advisor, and sometimes what it says and what it spits out based on the information I’m prompted to give is fine for that. But my advisor knows the four other things that would impact this in another way and is able to tell me that perspective.
Joel Dickson: Well, and that’s the point, Sharon, that I think is really important as people are thinking about this in the context of everything else. If we think about the financial health, it is not just that investment portfolio or not just that savings piece of it. But these elements, too, are necessary in order to have good financial health, and I think oftentimes we just tend to look at all of these issues one at a time. We separate our taxes. We separate our portfolio. We separate our savings decision. We separate our health. We separate our insurance. But it all really needs to work together and be thought of together to be a powerful road to be able to help people.
Sharon Epperson: Exactly.
Maria Bruno: Sharon, I wanted to get your thoughts. You had touched upon this earlier in terms of knowledge is power. But can you give me your thoughts in terms of—is it different for women versus men? Or young versus older? Or single versus married? The issues and the challenges are there. They may be personalized a bit, but I think knowledge is power, and you may have a situation with a married couple where one may be the CFO of the household. But it’s just as important to share and empower the other spouse or other family members to play some role in this. So, I wanted to get your thoughts, more in terms of as a female professional as well, and thinking about this in the lens of gender, for instance.
Sharon Epperson: There have been many studies that have shown that women are often not the CFOs in their home, but I have to say, anecdotally, in my friendship group, many of them are. So, whoever is the CFO in the house, it really should be a co-CFO role. And maybe someone has the name on the accounts and is doing a lot of the manual part of making sure things are paid or what have you, but in a partnership, in a marriage, both should be involved in knowing what is coming in and what is going out in the very simplest terms. And I think that so often that does not happen—where the conversation is, “We’re okay. I’ve got it. Don’t worry about it.” Whether it’s worrying about it or celebrating it, both need to be involved. And I think the way that happens is to communicate, have that conversation. Again, not an easy conversation to have, so having it with another person is very important and an easier way to get the conversation started. When we first met with our financial advisor—and I wrote this in my book, The Big Payoff—my husband fell asleep as he was talking about annuities, which many people would do, other than the three of us that report on it and research it and tell clients about it. But that was not interesting to him, and I was so upset. I said, “This is about our financial health and we need to hear all the different options of what this advisor’s talking about.” And then I realized that, when it came to the goals that we had and what we wanted to do at that time financially, we were on the same page. We just had different ways that we were going to go about it. He’s never going to go to a calculator and double-check what a financial advisor said about something. He’ll say, “Well, I heard something different on the radio, or something that I watched, or something that I read,” but he’s not going to get into the minutia of trying to do that. But that’s not a bad thing. We just have different ways that we handle it and that we approach it, but we’re both very interested in it. So I think that’s something really important to come to terms with and make sure that you are both on the same page and that you’re having a discussion—even if the way that you execute whatever you decide to do may be a little bit different. As long as it gets you to that goal, I think that’s a good thing. But being completely in the dark, one person being completely informed, that is not going to work. In terms of generationally, I think that younger adults are so much more used to doing so many things online and not having a conversation, and definitely not having the kind of conversation that their parents would have with an advisor across a mahogany desk. That’s not going to happen. But there are still ways to have that conversation. There are ways to find advisors that will speak with you via Skype or do some type of virtual advising. You may never actually sit in the room with them, but you’re sitting in the room with them every time you talk to them over your computer, and you’re still having a face-to-face discussion.
Joel Dickson: Yes, I couldn’t agree more, Sharon. As we close this, one of the things that we try to do from our podcast standpoint is summarize the actions that clients should think about regarding this particular topic that we’ve been talking about today—financial preparedness.
If you could list the five things that you feel people need in order to be prepared for the unexpected, in this case a health emergency—can you give a sense of what those action items would be that are most important for people in being prepared financially?
Sharon Epperson: Well, the most important is the emergency savings that we never think we’re going to need—that I definitely needed. And saving more than you think you’re going to need. Trying to live within your means, and living below your means when you’re able-bodied, is a very, very good thing to do because when that emergency strikes, you’re going to need more money than you thought. And once you’re depleting that, you’re not making it back. Another thing, of course, is to make sure you get disability insurance—get it through your employer if it is offered. And, yes, it is expensive to get privately if you don’t have it through your employer, but it’s a very, very important investment in yourself. I think it’s critical for people to have disability insurance. And then, doing the estate planning that you need to do is very important. I have two children that are teenagers, so I need to make sure there’s a guardian. It’s my husband, of course, but having a guardian to care for your kids, as well as having the power of attorney who will handle the financial decisions and the power of attorney who will handle the health care decisions. And they may not be the same person. I have a very dear friend who, at the time when she did her estate plan, was single. She said, “You’re not the health care power of attorney because you’re going to weep, you’re not going to do what the doctor says to do, and you’re not going to follow my living will.” And she knew me very well, and I probably would have wept and not done what she wanted me to do. But finances, that’s what I’ve been focusing on; I can do that. So I’m the durable power of attorney, for instance, for my mother; my sister’s the health care power of attorney for my mother. We figured out how to have roles that really suit what our strengths are. And then the other thing I think many people do already is to make sure that your finances are automated as much as you can—put it on autopilot. If you are doing your savings and paying yourself, investing in yourself just like you would a bill, automate that. Put that in the IRA, the Roth IRA—you already have that money going into your 401(k). Put some money into a savings account that you’re not going to dip into to buy a discretionary item, but that’s really going to be for that emergency savings. Make sure you do that, and then put as many of your household expenses on an automatic bill pay if you can. And let someone know that you’ve done this. The one part that I did in terms of automating things was great, but if I hadn’t been able to, when I woke up, tell my parents or tell my husband the password … so that’s one thing I would add to it—a password manager is a key thing to have. And then cluing in the important people in your financial life, whether it is your spouse or a power of attorney that you have, or your financial advisor, someone who knows those things, so that if something happens to you they can get access to the things that you’ve automated. That’s also an important thing to do.
Maria Bruno: Sharon, I think I can sum it up by saying thank you. I think these are very good, practical tips for all of us, whether we’ve done our plan or not, and I talked to Joel about this as well as we were preparing for this. It’s something that you need to revisit throughout time as well because your needs change, your family situation changes. So, certainly, this is one of those things that you need to go back and just make sure that everything is current, and it reflects your wishes and your situation.
Sharon Epperson: Yes. I would add one thing—situations do change and relationships change. People may no longer be here that you thought were going to be here for you, so I think it’s really important to revisit it every few years. And, also, laws change, frankly. Federal laws change and state laws change as it applies to estate planning. I think it’s really important as we were talking about gender differences too. For those who are married and then are not married, I think the estate planning part—everyone’s so worried about negotiating settlements in other ways of what is currently existing—but what could happen in the future needs to be looked at as well. I think that’s one aspect of financial planning, as it pertains to divorce, that some people do not pay attention to. So, I would definitely urge people to look at that. As relationships change, I think it’s really important to make sure that you look at that part of your financial life as well, and what’s going to happen if the people that you thought were going to be in place to do certain things for you are no longer with you, for whatever reason.
Maria Bruno: Very sage advice, Sharon. Thank you. We wish you continued health.
Sharon Epperson: Thank you very much. Thanks for having me.
Maria Bruno: Thank you very much.
Joel Dickson: Thanks, Sharon.
Sharon Epperson: Bye, Joel. Thank you, Maria.
Joel Dickson: A very powerful story from Sharon about the challenges generally and then how they link together. The health challenges can lead to financial challenges, can lead to the interpersonal challenges of how do you deal with these situations, and so forth. Having that preparation in advance just allows that to … I don’t know if easier is quite the right word, but—
Maria Bruno: No, it’s not easy, but it’s not only doing it, but making sure that you communicate it to your friends or family members, the people that need to know, so that if you do need to put a plan in action, you have those steps already taken.
Joel Dickson: Yes, and so many people—I’ll include myself in this—just kind of hate or avoid talking about that potential or those issues in many ways. I did take away a couple of things. Although we could talk about other elements where I may be falling short, in terms of automating my financial life, as Sharon was saying, I’m actually pretty good with that. I’ve got that pretty well automated.
Maria Bruno: Well, that’s not a surprise.
Joel Dickson: I have a spreadsheet for everything, right?
Maria Bruno: I’m not as automated.
Joel Dickson: You’re not as automated.
Maria Bruno: No!
Joel Dickson: Shocking.
Maria Bruno: I still send cards.
Joel Dickson: Do you send paper checks?
Maria Bruno: I do. I have checks, yes.
Joel Dickson: Wow!
Maria Bruno: And I still send cards. Sometimes they’re on time. Sometimes they’re not. I do. I’m not as automated as I potentially should be. But even that, whether or not you’re automated, you still need to make sure that things are in order in the event something were to happen.
Joel Dickson: Oh, absolutely. And that people know where those documents or where those things are.
Maria Bruno: Yes, Sharon talked about that in terms of a password manager, for instance. Perhaps, Joel, if you don’t have one of those, you might want to think about that.
Joel Dickson: Oh, I have a password manager. I’ve got a pretty funny story about that one. My daughter figured out how to hack my AT&T cellular account because she had been misusing it, if you will, and so I had turned off the cellular access. Well, she figured out how to hack my password, so she went in and reestablished her password access. So, I have no doubt that my daughter can get into my computer and all my files at any point in time.
Maria Bruno: You better watch those bank accounts. In terms of documentation, there’s one thing that I want to share with our listeners. We have a handy form on vanguard.com—it’s a personal financial inventory. Just go onto vanguard.com and type “financial inventory” into the search field. It’s a form that you can fill out that can record your assets, your liabilities—
Joel Dickson: A checklist.
Maria Bruno: It’s a checklist, but it’s very detailed and you can fill it out. You can print it off the old way. You print it off and fill it out and have a hard copy, or you can actually fill it out online and then just save it. It’s actually pretty detailed—insurance, the location of the documents, and things like that. It’s a handy reference sheet that if individuals have not—I’m looking at you—filled something like that out for both of us, that could be good.
Joel Dickson: For both of us! I’m going to fill it out for you? I’m not going to fill it out for you.
Maria Bruno: No, you’re not going to. I was just going say if you save it on your computer, make sure someone knows the password to be able to access that should something happen.
Joel Dickson: Yes. I could actually use that. I do have a whole set of documents, but they have not been updated in a while. And now that my children are both adults, it’s a different situation than when they weren’t, so that’s something I really need to go back and revisit.
Maria Bruno: Yes, I think there were two things Sharon said. One is that situations change, even laws change, so you need to go back and revisit the plans that you have in place to make sure that they still are current. And the other thing that I thought was very beneficial was the conversation we had around the co-CFO of the household, because I remember vividly in the conversations that I would have with clients, usually it was one spouse that was the primary financial decision-maker. And I would always encourage both individuals to be on the phone and talk through it. One may be more engaged than the other, and that’s perfectly fine, but there’s a certain level where both members of that household really need to know the essentials.
Joel Dickson: Yes. I think as Sharon had said, the answer that, “I’ve got this” or “I’ve got it under control; you don’t need to worry about it,” probably isn’t good enough.
Maria Bruno: No. Or “I don’t need to worry about it because he or she takes care of it, and then I take care of this.” And having this division of labor, if you will, is healthy to some regard, but not really. You need to have this balance and documents.
Joel Dickson: Not in this situation.
Maria Bruno: Not at all.
Joel Dickson: Yes. If somebody is in a case like Sharon’s—incapacitated from a health emergency—if that other person doesn’t have that knowledge, then it’s much more challenging.
Maria Bruno: She said it head on, “If only one is engaged, it’s not going to work.”
Joel Dickson: Yes.
Maria Bruno: So, there’s a certain level of engagement from both individuals. I completely agree with that.
Joel Dickson: I think the overall thing I have taken away from our discussion—especially from Sharon’s story—that we’re able to communicate, is that this whole idea of financial planning is not just about investments or how much you save. It’s about that entirety of being able to handle life situations and to meet the goals as they occur in the future. And a big part of that, if you think about financial planning, is also financial preparedness. Would you agree with that?
Maria Bruno: Oh, completely agree. As the planner and going through the CFP designation, when you look at the curriculum, it’s investments, it’s retirement—but it’s insurance, it’s taxes, it’s risk mitigation. So, you need to look at it from a household picture and think through all of that in terms of insurance, disability, life insurance, home owners, rental insurance, those types of things, because that’s all part of your financial wellness as an individual.
Joel Dickson: And do it now—not tomorrow.
Maria Bruno: Right. Then go back and revisit it as you would other things in life.
Joel Dickson: Exactly. Well, a little bit of a sobering and, in some ways, somber discussion, but—
Maria Bruno: Sobering, but it’s so good to see her doing so well and to be able to take this message and continue to share that with her followers, and then we’re able to actually chat with Sharon and share that with our listeners as well. So, it was great to have her and it’s great to see her doing so well. And I think the one thing that we can probably leave our listeners with is we’re releasing this episode in September and September, Sharon informed us, is brain awareness month.
Maria Bruno: All right, well, Joel, thanks. I think that wraps up our discussion for today. I would encourage our listeners to give us feedback on iTunes.
Joel Dickson: Comments would be great.
Maria Bruno: Yes, suggestions for future topics—team Joel, team Maria.
Joel Dickson: Oh, we could run a little poll there—team Joel or team Maria.
Maria Bruno: We could. And vanguard.com as well.
Joel Dickson: And, of course, subscribing on iTunes or listen to us on vanguard.com. We do appreciate the feedback.
Maria Bruno: We hope you enjoyed this episode of The Planner and the Geek. Just a reminder that you can find more episodes of The Planner and the Geek on iTunes and on vanguard.com.
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