In this week's episode of #TheAmberStittShow, you will hear from the author of this book Kyle Christensen.
We talk about Principles-Based Planning, and how to be more accountable with your money. Kyle is a repeat guest on the show for good reasons.
He talks about how the purpose of planning is not to predict. The purpose of planning is to prepare and adjust.
Since I met Kyle's team, we have implemented their strategies in our home as well as in our clients' lives if they need Financial Planning.
This episode covers why we don't always follow the "Traditional Planning" methods we have learned over our lifetimes. By doing so, we have more opportunities to have control over our own money today, be more mindful of taxation as well as create more passive income.
With a mindset shift, this is very doable!
Check out the episode here to see if you follow the Traditional model. We would love to hear from you!
You can learn more about Kyle and his team here:
For anyone: https://uniqueadvantage.biz/
For Advisors: https://fiveth.co/
#AmberStittShow, #Fiveth #UniqueAdvantage #Principles, #Financialplanning #personalfinance #insurance #FocusonMoney #PathwaystoPeakPerformance @AmberStitt #SamStitt #TakeActionToday #PrinciplesBasedPlanning
Opening Introduction with Music 00:11
Hello, and welcome to the Amber Stitt show. I am your host, Amber Stitt, and I am obsessed with helping people get their financial and personal lives in order. Every week, my guests and I explore the fundamentals and practices that will help you stay on top of your game in business, but also at home. I believe we all have different pathways we have to take to reach our peak performance so that we can live up to our peak potential. And this podcast is dedicated to helping you get there. I'm excited to share the insights and habits that my guests and I have cultivated throughout our lives so we can help you on your journey towards a happy, successful and fulfilling life. Let's jump right into today's show.
Amber Stitt 00:59
Hello, and welcome to the Amber Stitt show. I am your host Amber Stitt. And today we welcome back my friend Kyle Christensen. How're you doing, Kyle?
Kyle Christensen 01:07
Doing great, thanks, Amber. Thanks for inviting me back.
Amber Stitt 01:10
Well, I'm always happy to have you back. And I don't want to play down your expertise, but I love the common sensical approach that you have. Which doesn't mean it's easy, but I always like hearing how you think about things because I feel like you bring a really good third party and, I say common sense, just like going back to the basics, keep it keeping things simple, and within our control. So, I just love the topics that you bring. So, I think today you're going to share a little bit about traditional approaches to planning but you know, I feel like we could even go more foundational just to begin with, go back in time, at least 10 years for me, maybe 15 for you, I can't remember exactly when you got in the business. But if you're going to explain today about planning -- traditional versus kind of your concept, I think we could even tell the audience what is financial planning, what is cashflow planning, just kind of some of the vocabulary because I think there's a lot of head nods with people, but I know when I got into the textbook studying, to me it kind of...when you're not sophisticated in this finance, you know, background, it can call it kind of all flow together. So maybe we start there, and then we can roll into what are we seeing, what did we grow up with, and what do we consider traditional?
Kyle Christensen 02:25
Yeah, that sounds great. So, I did, I started in 1999. So, this is my 24th. year, this year. So, time goes by fast. But yeah, I mean, I feel like I can speak pretty authoritatively about what traditional planning is. I'm a certified financial planner. I've been a Certified Financial Planner since 2003. So, I know what the traditional planning approach is. And I've seen it enough, right? I mean, it's just a constant beating drum out there. I like what you said, like it's a different language. And so, it's important that your audience kind of knows what different things mean. And there's a lot of industry speak, right? And I think if they don't know what certain things mean, then they don't know what they're getting into.
Amber Stitt 03:13
Often times, yeah, it can be kind of exhausting, it almost just, you can be very smart, but you don't feel that way. And that's where I think sometimes people just do nothing, I call it take action today with the Pathways audience. I'm always, "Take some action today." And I know you talk about personal investing in yourself and just treat their homes and their personal lives like a business, take it serious, it's your life and you can do so many things within your control to be more successful, and then financially free. It kind of starts within. But it doesn't feel good if you don't feel smart as you're trying to approach some of these basics. So, I think you'll be helpful for the audience to really break it down. I always like hearing how you explain this approach. So financial planning, maybe the traditional, I'll let you kind of take it from here and break it down.
Kyle Christensen 04:00
Yeah, I mean, so. So traditional planning is what I call the accumulation theory, right. And its companion philosophy is something I called “needs based planning”. So, accumulation theory is, essentially, "I'm going to go to work, I'm going to have a nice job, and I'm going to set aside some of my money into retirement accounts over time." And supposedly, and we can talk more about this later, but supposedly that the money will compound in interest over time, and therefore I need to get in as early as possible. And then at some point in time, hopefully by the time I want to retire, which normal retirement age, is 67 for us, for other people if they were born in you know, prior to 1960 that might be an earlier date, you know, they're going to compound and they're going to build a nest egg and I'm sure like, again, industry speak, right, -- a retirement nest egg. What their meaning by that is you're gonna have an amount of money somewhere there, that supposedly you can live on the rest of your life, right? So, you can stop working.
Amber Stitt 05:04
So, it's a heap of money, it's going to be timeless in the sense that once you have that X factor, this is always going to be the treasure trove that we have. And so, we have to hit that goal, and then we're safe, right?
Kyle Christensen 05:18
Yep. And there are a lot of predictions that go into that, right? And, financial planners might use really complex, complicated software to try and figure that out, right? There's a ton of money that goes into financial planning software, and they'll do projections, and they'll use historical rates of return and a lot of different scenarios. And they call that Monte Carlo simulations, right? So, they'll, they'll go through, you know, hundreds, maybe even 1000s of different scenarios to see what are your chances of success, you know, to reach the nest egg that you have to have in order to be able to retire and provide for your needs. Now, this companion to that is...oh, go ahead, I'll let you ask a question.
Amber Stitt 05:58
Well, the Monte Carlo is almost like they're trying to say to the client, or the...yeah, we'll call it "the client," with all of these assumptions, we're coming out with an average rate of success based upon historical data, so it sounds really fancy and very technical, to give you, you know, a really good idea. However, there are so many other factors that can go into it that we haven't even seen yet in our personal lives, especially with technology. We can't forecast some of these future events, right?
Kyle Christensen 06:28
Oh, absolutely. I mean, if we can learn one lesson from the pandemic, it's that we can't predict the future. I mean, how many of those amazing scientific models were just totally wrong, like over and over again, projecting, you know, the rate of spread and how many people were going to die and all these kinds of things? I mean, they were just wrong over and over again. There's a really good economist that was kind of a mentor of mine as I was getting started in the industry, his name is Bob Castiglione. And Bob Castiglione would say that there's only one thing right about all projections and that's that they're all wrong. And I love that. I mean, it's just a good thing to keep in mind, right, the projections of the future. I'm not saying they don't have a use at all, but they're probably not going to be that way, right?
Amber Stitt 07:18
Yeah, I feel like scientists...back to what you're saying about the spread, it's like we understand they have to test things and they have to see how things play out in order to come to new information for, say, the community. So, as they go through their testing, we're okay with the fact that oops, you are wrong. Okay, here's the new thing. And we just kind of keep going with the flow. So, it's interesting that we do that every day that we're okay with getting new information and making adjustments. So, if you apply that to what you're saying, we have to consider the fact that there are going to be things we don't know about yet.
Kyle Christensen 07:50
Yeah, and I think that's really the purpose of planning, the purpose of planning is not to predict. The purpose of planning is to prepare and adjust, right? I just think of like a ship at sea, you know, if we wanted to go from Fort Lauderdale to London, England, you know, we couldn't just set the rudder and expect to make it to the destination, right? I mean, we couldn't just pick an average speed and make it to the destination, we actually have to turn the rudder, right, we have to make adjustments, and there might be weather and there might be another ship that crosses in front, you know, we have to slow down whatever...have to speed up...there's gonna be things and that's really how planning is, right. That's really how planning has to be. And think about, like, you know, the prediction of the amount of money that somebody needs in order to retire. What if you got on a ship and they said, "You know, we've calculated exactly the amount of fuel we need", or you get on an airplane to go somewhere, "We've calculated exactly, based on the averages, we've calculated exactly how much fuel we want on this plane and we don't have any more than that so if any if any of our predictions are wrong, then we're just not going to make it." Would you still get on that plane? Would you still get on that ship? I mean, no, you wouldn't.
Amber Stitt 09:04
Yeah, I think a lot of planes have been grounded for lots of reasons these days post-pandemic. Where they're just, there are all kinds of issues with logistics. I mean, that's evidence in itself that, gosh, you buy that ticket, and you might not even be going. That's happening all the time lately, just with understaffing and other things that are happening. So, yes. And so, what you're saying is you're planning is...you're not going to start a plan, say this year, and it's going to last for the rest of your life. It has to, you have to keep evolving it so I don't know if you've read "Atomic Habits" I think you have. And so those of you that wanted to just grab his information, he's got downloadable information online. I think jamesclear.com, but you're reminding me of the ice cube because if a frozen ice cube is on the table, I won't say it right, but you know, you're changing the temperature, nothing's happening until it happens, and then "whoosh" that's all water. So, or even there was a part about flying and if you just change, just like we're talking little changes, and they're talking about going for good habits and building great habits. But if you apply that to what you're saying, you're absolutely right, that we can look at history, we can look at our historic...I mean, I know you read a ton about what other successful people have done, I know you do that. So, you're not dismissing history, but you're saying we have to have a good reality check that we don't know what the future holds. So, part of my Pathways five steps is to really build out and prepare while you're healthy and well, so that you can handle these obstacles that are coming, they are coming, we just don't know when and who in our team, or family is going to be involved. But we want to have the ability to bounce back and hopefully as clear a mind as possible, less stress, and have some resilience. And so, looking at it in this way, with your approach, I feel like that, again, makes sense to me. This goes back to the common sense kind of viewpoints here, even though it's not always easy to digest it because again, we're not trained, growing up to think this way, right?
Kyle Christensen 11:05
I think that people don't realize a really important factor, right? If I could tell your audience one thing, it would be that you are in a battle over the control and use of your money over your lifetime. You're in a battle. And if you don't know you're in a battle, then who's going to win, you know? The people who know that there is a battle, right?
Amber Stitt 11:28
If you plan, you can't sit on your map, like Game of Thrones, and look at your kingdom and say, "How are we going to plan for...?" (Laughter)
Kyle Christensen 11:35
You know, I mean, if you don't know you're in a competition, right, you don't know you're in a race, you're probably not going to win that race, right? And I think what people need to realize is, look, financial institutions are valuable, right? They provide really great products. They provide really great services, but they have a conflicting agenda. I was just reading it last night, Warren Buffett's biography, "The Snowball", and he talks about like, how, when he first started doing stock brokering, right, he didn't like it, he says, and I underlined in his book, he said, I realized there was a conflict of interest between what financial institutions wanted and my clients. So, I...
Amber Stitt 12:23
For them to be successful and make money.
Kyle Christensen 12:25
That's right. Yeah. And, and I think that's, you know, you look at traditional planning and we just talked about what that essentially means, right, the accumulation theory and building up a nest egg and leaving your money in there for a long time. I know. I mean, if you're 30 years old, basically, they're saying, "Look, we're gonna...we want to hold on to your money until you're 67. Right? So, 37 years, more than three decades." I think we have to look at things and say, "Why has the financial industry adopted this philosophy, so much, so wholeheartedly, right?" They're all in on the accumulation theory. And it's because of that battle, right, over who's going to have control and use of your money and you know who's promoting the accumulation theory? It's really the financial industry. And they're saying, "Look, the best thing you could do is just give us your money. And let us hold on to it for decades."
Amber Stitt 13:18
I've been a part of some study groups with you and other strategic partners and people that you affiliate with. And this is such a good discussion, I know you do a great job talking through a lot of this. And so really build in that application to really help people see kind of the timeline here, and how long do you have to go. And I think we always think that the compounding nature always sounds great but if we bring it to light this way, I think it makes perfect sense that we really have to look at where our dollars are going. And I know you teach a lot about opportunity costs. And again, we can leverage by utilizing our credit scores, or debt, or banking products, as needed. But we also have to have the goal would be to have more control, and not have decades go by and just not have access (to our money). And I think that's part of one of the things that are really valuable for what you teach is, "Where's your money?" And do you have any rights to it in the interim, to help, you know, dole out from passive income strategies, have some liquidity, etc? I don't know if you want to close with maybe talking a little bit about that, and just maybe something for them to think about.
Kyle Christensen 14:22
Ultimately, I think people want to be financially free. There's a difference between retirement and financial freedom, but financial freedom is having sufficient income from assets, right, that you can support your chosen lifestyle, right. And if you give up control and use of your money, you're also giving up cash flow. You're not getting any cash flow during that 37 years that you're supposedly compounding and building your nest egg. You're getting no cash flow. Well, that means you can't become financially free during that timeframe, right? So, people who are choosing that path of, "Hey, I'm gonna put my money into something that I can't touch for 30 years." They're saying I can't get cash flow, either for 30 years. And for the most part, people are also investing that money in things that they don't understand. They have zero control over the outcome, no influence over the outcome and, you know, there's a reason for that. We could probably have a whole podcast just about the natural tendencies of people. Yeah, you know, and how that hurts them long-term when it comes to money. So traditional planning focuses on, you know, you giving up control of your money to financial institutions for long periods of time. They're getting cash flow, they wouldn't wait 30 years, right to get cash flow from...
Amber Stitt 15:38
Yeah, they use our money all day every day to do other things. Yep, yeah. So, that's kind of silly, right? Why shouldn't we have access to that combination of, you know, having that control? So, I really appreciate it, Kyle. And we will have more episodes, digging into some of these-- we'll call them steps, or principles. I mean, we can always say principles, of course, given your foundation, and what you teach. So, I really appreciate you being here, again, and thank you to the audience, as well. And we'll link up all of your information as I do in the description boxes so people can find you. Thanks so much, Kyle.
Kyle Christensen 16:14
Closing Outro 16:17
Thank you for joining us on today's episode of the Amber Stitt show. For more information about the podcast, books, articles, and more, please visit me at AmberStitt.com. Until next week, enjoy your journey at home and at work. Thank you for listening!