“Am I OK financially?” 5 Steps to Feel More Secure in Uncertain Times + Be More Recession-Proof || with Elizabeth Pennington from Fearless Finance

Does talking about money make you a little bit sweaty? Navigating the choppy waters of financial uncertainty can feel overwhelming, but my conversation with Elizabeth Pennington from Fearless Finance provided invaluable, clear-sighted guidance. In our conversation she laid out five crucial steps to ensure financial stability, emphasizing the importance of a stable cash flow and the necessity of building both a rainy day fund and a full emergency fund.

Whether you're anxious about a potential recession or just seeking better money management practices, Elizabeth’s insights provide a roadmap towards financial security and peace of mind. I'm so grateful for her guidance and encourage everyone to consider these powerful strategies in their own financial planning journey.

Use code ‘PROGRESS” for $50 off your first session at https://fearlessfinance.com/

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Past Episode to support: https://www.aboutprogress.com/blog/how-i-ve-saved-major-money-thousands-on-groceries-the-last-18-months-how-you-can-too

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TRANSCRIPT

 ​[00:00:00] 

Monica Packer: Elizabeth Pennington from Fearless Finance. Welcome to About Progress.

Elizabeth Pennington: Thank you so much for having me, Monica. I'm excited to be here.

We're gonna start with the couple disclaimers. Mine first is this episode itself is not sponsored, but you have been a sponsor of the show in the past, so we will have an affiliate code for them at the end. That lets them know. found you from me and you have your own disclaimer as well. Do you mind sharing that with us right out the gate?

Okay.

Yes. Um, I am a financial planner. I am not the listener's financial planner. So while we're talking about these topics, from an educational and entertainment standpoint, none of this should be taken as personal investment advice.

Monica Packer: Okay. Really important. And with that being said, there's gonna be so much here that people are going to be able to use to change the way that they are navigating these uncertain times when it comes to the economy and our own finances and what's coming up. And that's why we're here today. Because I [00:01:00] mean, times do feel uncertain and they feel that way. In terms of our finances too. And finances are already tricky. They're already very layered too. It's not just the how to, it's the relationships that are involved. It's the old patterns and the ways that we were raised, the ways that we view money, and also there's just so much to do money wise.

There's so much to save for. There's so many moving parts. And now that we're all fully overwhelmed, let's start with what you think. We need to prioritize the most in terms of right now where we're at and the climate we're in, connected to what we need to be aware of financially.

Elizabeth Pennington: All of the time I get clients who come in and say, I just wanna know. I'm okay. Tell me I'm okay. Whatever that means. And I think that's a relevant question in normal times and uncertain times. And so I wanna talk through kind of the, the five steps that I look for with clients, , when answering that question of, are you okay or not?

The [00:02:00] first is that you have to have a stable cash flow. You have to spend less than you earn, because if that's not happening, you can't say for goals, you can't make progress like nothing else is going to move forward. The second is that you have a rainy day fund for the next time you have to go to the er or you need new breaks for the car, or the water heater gives out, right?

I'm usually looking for around 3000 bucks here. The third is that you have a full emergency fund, which is different. This is for you lose your job, you get divorced, you're disabled. You need at least three to six months of your expenses in that emergency fund. number four. is that you have no consumer debt.

I'm talking about high interest debt like credit cards or some predatory personal loans. Those are just eroding your cash flow overall, so we need those fully paid off, paid off [00:03:00] every single month so that you're not accruing interest. The fifth point is that you need to be saving enough for retirement.

Monica Packer: Okay.

Elizabeth Pennington: retirement is a hard one for people 'cause it feels like there's so much going on in your normal life that like that'll happen in the future. But let me tell you, the hardest planning I do with clients is when they come to me at 55 or 60 and they're behind and they do not have enough time to catch up.

So then we have to have hard conversations about your retirement's not gonna look the way you thought it was.

Monica Packer: Got

Elizabeth Pennington: Or you're going to have to work longer. And I don't wanna have that conversation with my clients. I, I do. And also, the more we can do to avoid that conversation, the better. So what does it mean to save enough for retirement?

That means that as long as you are starting in your thirties with retirement savings, you're saving at least 15% of your income annually. Net income. This includes your employer match. If [00:04:00] you're starting in your forties or later, you're gonna have to save more. And we probably need to do more detailed planning to figure out how much more

Monica Packer: Okay.

Elizabeth Pennington: note that if you have a pension or anything kind of else happening there in terms of income and retirement, that 15% target may not be as relevant.

But even for my clients with pensions, I'm looking for 10 to 15% most of the time. , Those are the five steps. The other thing I would kind of flag given some of the uncertainty that we're all feeling is just focus on what you can control. Like, I know there's a lot of noise and a lot of stress out there.

Things have been a little rocky in the economy this year, but there's no point in borrowing trouble. Focus on what you can control. Try to , ignore the rest of it. And those five steps are a really good place to start. Once you've hit the five steps, then we can talk about like extra credit goals. We can talk about saving for college or buying a house or renovating, but all of those things take second [00:05:00] chair to the five steps.

Monica Packer: Okay. I love those five steps and those, for those listening, we will make sure we include that in the graphic for this week so they can refer back to it easily, but I love how going through those five steps is going to help you answer the common overarching question.

Am I okay? Because I remember in our first meeting with you, that was my main question, we okay? And being able to answer those questions helps me know that and to what degree we're doing. Okay. Because we all have some improvement. I'm sure. You brought up the need for, uh, retirement and even college or renovation. I know that we're gonna focus on what we can control, but there are some uncontrollable things or maybe potentially uncontrollable things happening, like a potential recession. Some people are saying we are already in one and they just don't quite know it yet. Uh, can you tell us what are some things, um, that they should be maybe aware of potentially happening in the near future in terms of those bigger life things that they need to be aware of?

Elizabeth Pennington: Yeah. [00:06:00] Um, so recessions specifically, look, I hope that this next statement ages poorly and I'm wrong, but it does feel like a recession is coming. I'm seeing a decent number of my clients losing their jobs or feeling uncertainty with their employment, um, more than I would normally expect. So also, it's hard to know, I've been doing this for about six years now, and if I went back I could probably find half a dozen articles every single year that said, recession's coming like this is it.

A broken clock is. Right Twice a day. Um, and some of the recent kind of tariff stuff is going to make a recession more likely, so it does feel like it's coming, and I think it's a good idea to be braced for that. And if I'm wrong, then you just saved extra money, and that's never a bad thing. What I would do if we're worried about recession is you might [00:07:00] want a larger than normal emergency fund.

I said three to six months of expenses as a minimum. Maybe you want more than that, especially if you are worried about your job in particular, if you think layoffs are likely or you're in an industry that's going to be particularly affected. The other thing is I would consider deferring optional purchases

Monica Packer: Okay,

Elizabeth Pennington: if you think that you're going to lose your job.

This is not the time to buy a new house or do a major renovation or commit to, uh, an all out expenses like Disney cruise situation. Maybe don't stretch yourself financially. Pull back, wait and see. Then we can make some of those larger decisions. If all of this blows over.

Monica Packer: Okay. Those are great, um, ways they can take track. Um, take action on that. Can we go back to the word recession? there are people like me that were English majors and teachers and, you know, they did an an econ class in college one day. But even though I lived their [00:08:00] recession, technically I, and I knew, knew the ramifications that we faced as a family during that time.

I'm not entirely sure what it means.

Elizabeth Pennington: Yeah, so the. The economic definition is that we have to see kind of a fall in GDP for two quarters. Um, there's different definitions we could use, different kind of measures we use to tell if we're in a recession. I also think that the official definition of a recession is not that helpful.

Monica Packer: Yeah.

Elizabeth Pennington: what we actually care about is the feeling is the impact on our lives.

So in terms of like everyday finances, what matters about that recession is not that the GDP is down or the stock market is down, it's that the stock market is down at a time where we might need the money or the stock market or GDP being down means that we lose our jobs or that it's harder to sell our house when we're moving like.[00:09:00]

I don't actually care about temporary changes in the stock market. Market volatility is a normal thing, and we also see market recovery.

Monica Packer: Hmm.

Elizabeth Pennington: The scary part about recession is the uncertainty

Monica Packer: Okay.

Elizabeth Pennington: the way that economic downturn affects all of these other aspects of our lives, and that's what we have to pay attention to.

Monica Packer: And so the market responds to that uncertainty in a couple ways. That might also affect our finances, like a potential job loss or change the job market in general. But are there other kind of things that may impact their wallet if a recession does hit, even if they don't lose their jobs?

Elizabeth Pennington: Well, so in terms of kind of the feeling of uncertainty right now, um, our firm is founded and based in the Washington DC area, and I can tell you that my clients in DC houses are staying on the market longer and are selling for less. And so while that may be a DC specific thing, we don't know if that's going to ripple out other [00:10:00] places, but I'd argue we're seeing that where I live in Des Moines, Iowa right now, so.

Whether or not your job is okay. It could also have an impact on real estate.

Monica Packer: Okay.

Elizabeth Pennington: could have an impact on, how much you're making in your job. If you're in an industry where bonuses are really common, um, it might mean that you don't see a bonus this year, and that might affect your planning if that was money you were counting on.

So we have all of these other pieces that are also affected.

Monica Packer: And I, you know, we talk a lot about grocery prices in our just like day-to-day lives. I feel like I'm talking about it with even the cashiers I'm checking out or a neighbor in terms of like, how much food is costing, is that related to a recession Two, or even other things like, uh, gifts that we're getting or school supplies at the store, clothes.

Elizabeth Pennington: Yes and no. So inflation is different from recession. You can have inflation without a market downturn. And you can have a market downturn without inflation. I think right [00:11:00] now is particularly scary because we have to be braced for both.

Monica Packer: Got

Elizabeth Pennington: had just recovered from some of the really high levels of inflation during COVID,

Monica Packer: Mm-hmm.

Elizabeth Pennington: and we all remember what that felt like, right.

Um, I think we're all still kind of having a little bit of whiplash from that. And now if we have tariffs against major trading partners. It's gonna get worse again. And so when you have higher prices paired with a recession, with job loss or uncertainty, keeping kind of the baseline minimum that you need is harder.

'cause everything's more expensive.

Monica Packer: Mm-hmm.

Elizabeth Pennington: And so I wanna acknowledge that like this is particularly scary because of those two factors being combined.

Monica Packer: Okay.

Elizabeth Pennington: And again, there's only so much we can do about it. Um, I always think it's a good idea if you are directly feeling impacts of things like this. I think it's a good [00:12:00] idea to make that known to your representatives, on both sides of the aisle.

They wanna hear when their constituents are hurting. So like, not to put in like a, a political like activism plug, but. You have constituent services offices, um, like it's a good idea to reach out and make yourself heard when you directly are affected by these policies. ' cause even though there are times where some of these policies could have good impacts, they could have a good purpose and a good reason for being.

If it's hurting you, that's cold comfort. So other than that, though, there's only so much we can control. And if things are more expensive, it might mean that you're doing without on things that are more optional so that you can save up more. As hard as that is,

Monica Packer: So the tighten, tighten, the belt feeling that we're getting is actually to lean into

Elizabeth Pennington: and I wanna, I wanna say though, [00:13:00] that it's. I'm not saying don't spend any money in your lives because it's also not healthy to be like, we can never eat out again. A recession is coming.

Monica Packer: Yeah.

Elizabeth Pennington: don't, don't do that to yourselves. Like if you have already lost your job, you're gonna wanna scale way back. But if you're just trying to save up more and you have kind of a relatively normal cash flow situation overall, what I would recommend is look at your overall spending, where your money is going month to month, and in a couple places, just pull back slightly.

Monica Packer: Okay.

Elizabeth Pennington: So one, one example is that when I'm talking about spending with clients, because often I go through cashflow with my clients in most cases, and one thing I like to do is for all of the discretionary expenses that you have monthly, the eating out and buying stuff for the kids and household purchases, clothes, entertainment, et cetera.

I don't like to track those as individual line items. I like to track them as one bucket. [00:14:00] And we call that bucket your flex dollars.

Monica Packer: Okay.

Elizabeth Pennington: And so I'm not saying even when I have clients who come in and they've lost their job,

Monica Packer: Mm-hmm.

Elizabeth Pennington: put their flex dollars at zero, they're still going to need to buy shampoo,

Monica Packer: Yeah.

Elizabeth Pennington: but their flex dollars cut back significantly.

So if for a family of four, it's normally at 2000, um, when things feel comfortable and secure and normal. I would say two to 3000 is pretty typical if you've lost your job. We're going all the way back to a thousand bucks a month, and that'll get you the things that matter the most to you. But it's basically cutting out everything that's extraneous.

So if you're worried about job loss, that it hasn't happened yet, and you are normally spending 2,500 a month on those flex dollar expenses, maybe you track for a few months and try to get to 2000 a month. Because that's 500 bucks a month that can go towards extra [00:15:00] savings, and that's a big deal.

Monica Packer: Okay. I love the not all or nothing approach, but still making traction towards being prepared for something that could happen. And like you said, at the end of the day, you're okay. At least you have more money at, at the end of the day, which is great to count on. Uh, you know, you're bringing up something that was originally why I wanted you on the show because I, I, I, I came to you like my husband and I paid for sessions too, because we've.

Just loved working with you so much, but one of the biggest takeaways I got personally was how you look at budgeting and you brought up the flex dollars as a whole bucket. What would be the other bucket? Like, what do you call that?

Elizabeth Pennington: Yeah, so I separate expenses into a few different categories. There's the ones that I want you to track, which are flex dollars.

Monica Packer: Okay.

Elizabeth Pennington: because we all overspend on groceries if we're not watching it. And annual expenses, the things that come up less frequently. The travel, the Christmas presents, [00:16:00] the insurance that comes twice a year.

Um, vet bills, things like that. I want you saving on a monthly basis for annual expenses and tracking overall spending in that category.

Monica Packer: Okay.

Elizabeth Pennington: Everything else in your cash flow. Doesn't involve active decision making. It's your mortgage or your rent. It's buying gas for the car and paying your utilities. And yes, you might see some fluctuation in those numbers, but it's not because you went and like splurged on electricity that month.

Monica Packer: Sure.

Elizabeth Pennington: you didn't spontaneously buy extra gas for the car or for fun.

Monica Packer: Yeah.

Elizabeth Pennington: I don't care about tracking those things because there's not a whole lot you can do when your car is out of gas, you buy gas. So I would see kind of that broken down then into four main buckets, the three different things that you do track, and the one big bucket that you don't have to track as long as your cash flow is stable.

Very [00:17:00] rarely I do have clients who come in and enough of their money is going to fixed or stable expenses. The mortgage daycare is a huge one.

Monica Packer: Hmm.

Elizabeth Pennington: tuition can be big. Insurance, debt payments, things like that. Enough of their money is going there that no matter what we cut, they are never going to get to a stable place.

And then we have to think about bigger shifts to the stable expenses. But barring that, for most people, those are expenses that we can safely put on autopilot and not worry about,

Monica Packer: So that's nice to have those buckets. I'm just gonna review them for people. We've got the, um, gosh, what, what would you call the bucket where you don't have active decision making? Like the, the cash flow that

Elizabeth Pennington: I call it kind of.

Monica Packer: it?

Elizabeth Pennington: I don't think of it as a bucket so much as what's left over, but I'd call it fixed and stable expenses.

Monica Packer: Okay.

Elizabeth Pennington: Fixed and stable monthly expenses.

Monica Packer: Okay, so fixed and stable monthly expenses, the kind that you don't have to [00:18:00] actively make decisions on at each time you pay the bill or it gets paid for you. and then you've got flex dollars and, uh, groceries and annual expenses that come up. Is that right?

Elizabeth Pennington: Yep.

Monica Packer: Okay. And you want us to track the last three? What do you mean by tracking? I know I'm doing like basics 1 0 1, but it's just so nice to pick your brain.

Elizabeth Pennington: Yeah, so I want you tracking the last three buckets proactively. That doesn't mean that you check your credit card statement to see the damage at the end of the month. It's too late to do anything about it at that point. So I want you tracking proactively so that the next time you're thinking about spending money.

Okay, you go and check your flex dollars. I just did this. There was a sale and I wanted to buy a new dress, and I said, okay, I am halfway through the month. I've frankly used about half of my flex dollars. If I buy this, which is an unexpected expense, I'm going to have to skip eating out next Friday. I'm going to have to [00:19:00] choose to give up something else.

If I had checked my flex dollars and I had been two thirds of the way through them, halfway through the month. I would've skipped that sale. So you have to track proactively and use it to influence your spending. 'cause if you're watching it and you see yourself go over and you don't change anything, then that tracking isn't accomplishing anything.

Same with groceries. If I'm at the end of the month, I got like a week left and my grocery budget is gone. I am eating the random stuff I have in my freezer and my pantry. 'cause I know that we all have it. Right? The, the things that I've been avoiding 'cause they just didn't sound that great. That's my cue.

I'm eating those that week. Um, in terms of how you track,

Monica Packer: Yes.

Elizabeth Pennington: there's a few different options for this. We have our own app, as a firm that is free for anyone to use if they link three accounts or less. To the the platform and it pulls in your transactions and tries to automatically [00:20:00] categorize them and sometimes it's wrong and you just correct it.

So that is an option. It works really well for some people. It doesn't work well for other people, and that's fine too if you are already using a more traditional budgeting app. . YA or Monarch or Rocket money, all of those can, and I would say, should be customized to match this flex dollar concept because the biggest mistake I see with clients who come in and they're already tracking their spending in one of these apps is that they have like 30 different categories.

Monica Packer: Yes.

Elizabeth Pennington: And it's exhausting. And it's like, well, I went to the bar and is that entertainment 'cause I was with friends, or is it eating out and is it eating out alcohol or is it eating out takeout? I'm like, don't do that to yourself. Please. Like you, you have one wild and precious life. Don't spend it with 30 different budget categories.

So if you wanna use one of those options, [00:21:00] streamline it.

Monica Packer: Okay.

Elizabeth Pennington: Lump all your flex dollars together, lump all your fixed stable expenses together. Your mortgage and your student loan payment and your internet bill can all be in one line on that budget.

Monica Packer: Got it.

Elizabeth Pennington: Finally, sometimes clients are just not going to use a budgeting app.

It doesn't work for them. It doesn't work for their brain or their life. The bare minimum you have to do is tracking the flex dollars. And you could do that by putting all of your flex dollars on one credit card and watching that credit card total. You have to be pretty rigid about making sure your expenses are on the right account and that's hard.

But if you're able to save kind of the predicted amount that we think you should be able to save every month, 'cause that money moves out automatically and the rest of the math works, that might be okay. But I would say that very few of my clients fall into that bucket because I see more overs spenders than I do over savers.

And I think as a [00:22:00] society we tend to be overs spenders more than over savers.

Monica Packer: So you've already, um, pushed against the many reasons why I stopped tracking so diligently, and it really was because there were like 40 categories and you could never win, and it was so impossible to know ahead of time what exactly you should be budgeting for something like entertainment when you know, all of a sudden you have. birthday parties and gifts to get, you know, stuff like that. So I love the idea of having bigger buckets, as you say, with fixed and stable that you don't even necessarily have to track because you just already know what that's going to tend to be. With a little bit of fluctuation, but then the flex dollars, groceries and annual.

I'm curious, is there a percentage that they should have in mind of what they. their income is, that would be wise to budget for those three flex categories. Like what, what should they be thinking of for groceries? Um, the, the just flex ones, like where it's everything else that goes in that [00:23:00] bucket and then the annual kind of things.

Elizabeth Pennington: I. Think a percentage is hard because it very much depends on where you live. I wanna acknowledge that like my clients paying rent in DC are just going to spend a lot more of their income on rent than my client in a cheaper cost of living area. So let's talk about kind of overall targets though. One thing I will say is that, going back to that category, we don't track the fixed and stable and not even the stable, but just the fixed expenses, which I would say is housing.

Debt payments, childcare, and debt payments would include student loans, credit card minimums, personal loans, things like that. If all of those add up to more than about 40 to 45% of your income, everything's going to feel tight, guarantee it.

Monica Packer: Okay. Okay.

Elizabeth Pennington: So that doesn't mean that you have to change those things again.

In some areas you may not have a whole lot of choice, [00:24:00] but you're just gonna have to live with the tightness and know that it's not your fault. Like, hear me 2.5s say that it's not your fault. 2.5s In some areas, if it feels like there's never money left, when you have 42% or more going to fixed expenses, that doesn't mean you can't change it though, and it's worth trying to change it if those aren't like a location specific problem that everyone is facing.

Outside of that, I think it's more helpful to think of it less as a percentage and more as kind of a a dollar target. So what I do with clients when I go through cash flow is I say, well, average for this category is X dollars. If you're spending more than that, you're spending above average, which tells me either you aren't.

Paying attention to your spending. It's not intentional spending, or this is something you value and you're okay spending more than most people here 'cause that can also be the answer as long as the cash flow is healthy. So [00:25:00] for reference averages, groceries, I normally expect to see spending somewhere between 300 to $500 per person per month.

Depending quite a bit on where you live and how you eat.

Monica Packer: that number's up from? When we talked last year, it was last year. You said 200?

Elizabeth Pennington: I think you guys do a good job with your groceries, though.

Monica Packer: but that was like, so, wow. So, but that's nice to know though, because that

Elizabeth Pennington: It has gone up.

Monica Packer: impacts that it has gone up. Okay.

Elizabeth Pennington: And I would say when I first started with clients, I probably, that range was probably two to $400 depending on the area. Um, and it's just crept up. Do I have the occasional client who spends like two 50 a month on groceries? Yes. And also I don't need everyone to be that. It's hard in some, in some cases it can be hard to get there.

Um,

Monica Packer: So

Elizabeth Pennington: overall.

Monica Packer: maybe 500 per person per month in the household.

Elizabeth Pennington: I would love it if [00:26:00] you're closer to like three to 400 per person, but in some very high cost of living areas. I do see up to 500,

Monica Packer: Got it.

Elizabeth Pennington: so that's groceries. Flex dollars can vary wildly depending on how you live your life and what you value, but I would normally say that I don't worry about it for one person.

If you're between 500 to 1200. More than that. And I wanna make sure you're spending intentionally,

Monica Packer: Okay.

Elizabeth Pennington: again, may not be a problem, but like I guarantee you that $800 a month at Amazon is not bringing you joy. So that's one person for a family. I mean, no one should be shocked by that, right? Like,

Monica Packer: we all know it. At our

Elizabeth Pennington: we all know it.

Yeah. Um, for a family I'm looking, I generally expect to see flex dollars. Like I said before, between two to 3000 a month. Yes, you can be lower and it, you can [00:27:00] easily be above that. But if you're in that range, I'm not that worried about kind of that disconnect between intentionality and where your money's going.

Monica Packer: Okay. what about the annual expenses?

Elizabeth Pennington: That varies a lot. Um, insurance costs are gonna depend on where you live. My client in. Florida is gonna pay double what I'm paying for car insurance. That just is what it is. Um, travel is also gonna vary a lot. 'cause it depends on how big of a priority that is for you, how many people you're traveling with, what types of trips you're taking, what type of accommodations you're staying in when you're there.

I don't tend to have a set rule of thumb for travel where it's like, if it's more than this, I'm worried. I pay more attention to how travel fits into the overall cash flow because if you come to me and you tell me that you're spending 15 grand a year on travel, but you have a healthy amount left over every month to [00:28:00] save, and you have a fully funded emergency fund and you're saving enough to retirement, I don't care.

Your money is making you happy, and that is its primary purpose. Happiness and stability are

Monica Packer: Yeah.

Elizabeth Pennington: the points, right. If you're spending 15 grand a year on travel and you are drowning in consumer debt and you don't have an emergency fund, I'm gonna have to be the bad guy and tell you that that's not okay.

We have to cut back temporarily at a minimum until you're in a more secure place.

Monica Packer: Okay. I, I know that's really hard to nail down like a specific percentage, but it's nice to have at least some targets in mind, even within that range so that we can just again, answer that question. Are we okay? Am I okay with money? And I think. Everything you've come back to is the point of money is that stability and that happiness and the cash flow is gonna be the answer to that.

And seeing, you know, where things are going and knowing how much is even in there, which is, I think a lot of people avoid even looking, which is [00:29:00] understandable too, but know the knowledge is power here and seeing where your cash flow is. Um, I have just a, a random question for you.

Elizabeth Pennington: Hmm.

Monica Packer: Where would like piano lessons for Timmy go?

Is that a flex bucket or is that more of an annual thing?

Elizabeth Pennington: It depends on how you're paying it and how stable it is. So if Timmy has just started piano and we're not sure that this is gonna stick, I'd call it flex dollars.

Monica Packer: Okay.

Elizabeth Pennington: If. Timmy's piano teacher knows that Timmy is gonna probably bail after week two, and they want stable income, so they charge you for a year's worth of lesson upfront, then it's annual needs.

Monica Packer: Got it.

Elizabeth Pennington: But if Timmy's been in piano lessons for two years consistently, and we don't see that changing anytime soon, I would stick it in the stable bucket. I'm not worried about it

Monica Packer: Oh, okay.

Elizabeth Pennington: as, again, as long as you can afford it, but it's not something we have to actively track If it's an automatic payment every month.

Monica Packer: Got it. Okay. So this is where the [00:30:00] flexibility is actually key. I think people like me who want that certainty, but they get stuck. in tracking and managing because that certainty is just so out there and not relevant to their lives. Like, this gives us back the power to be like, what is stable? What can

Elizabeth Pennington: Yeah.

Monica Packer: sure is fixed?

And you put it in that bucket. There you go. You don't have to track it anymore. Um, because it's covered. And that goes back again to the cash flow. You know, we didn't intend to start this with a budget breakdown, but again, that was the thing that I love so much personally in our sessions together, is that way of.

Knowing where your cashflow is, where it's going, um, and also how to manage it in a way that feels more doable. So I really appreciate that. For people who are like all of us, I think feeling the uncertainty of, um, potential if not inevitable recession that's coming and how we can save for that. So thank you for breaking down both for us.

And I do wanna go back to one other thing too. You

Elizabeth Pennington: Mm-hmm.

Monica Packer: for savings.

Elizabeth Pennington: For retirement specifically.

Monica Packer: you. [00:31:00] Okay. So 15% purely for retirement, for rainy day and the emergency fund, that's a separate thing. That's like, you gotta just do more on top of that until you get to a, a certain amount that's gonna cover your expenses for at least three to six months.

And like, oops. The, the cars transmission. Hopefully not that, that's a really expensive

Elizabeth Pennington: Yeah.

Monica Packer: The tires need to be replaced.

Elizabeth Pennington: Right.

Monica Packer: the, the rainy day fund. Okay.

Elizabeth Pennington: So keep in mind that that 15% is pre-tax. If it's going into a 401k, for example, it won't feel like 15% coming out of your paycheck. It'll probably feel more like 10 to 12%.

Monica Packer: Oh, okay.

Elizabeth Pennington: And that 15% can include your employer match. So most employers, I mean, if you're self-employed, you're out of luck, but most employers give a 3% match.

I see. Most commonly, if you have a really generous employer who gives like 10%, then all you have to do is five. And that's no problem at all. Um. I don't [00:32:00] see that all that often, but three percent's pretty standard, which means you only have to do 12, which means it's probably gonna feel more like 10. And also if you can't afford to do that, you can't afford your life.

You can't afford the way you're living your life. And sometimes I have clients who come in. And they can't get to 15% right away, especially when they have like two kids in daycare in dc.

Monica Packer: Mm.

Elizabeth Pennington: And if we have to like do slightly under 15% for the two years of overlap, fine as long as we're all on the same page, that as soon as that big expense leaves, we're gonna jack up retirement contributions.

We have to make sure that you get back to 15%. ' cause it's very easy to say, well, I know retirement's important, but I really do wanna fix that deck. And we've been meaning to take that big vacation and then suddenly it's been a decade, you never increased retirement. And now I have to tell you that you're behind [00:33:00] and you're either gonna have to work till 70 or give up a bunch of things you enjoy to save more aggressively Now.

Monica Packer: Okay.

Elizabeth Pennington: So you don't wanna have that conversation make the 15%, uh, a no brainer. And if anyone listening is like, just outta college in their twenties, or if you have loved ones who are just out of college in their twenties, set it to 15% from day one. 'cause if you never see the money, you can never rationalize spending it instead of saving it.

Monica Packer: And I, and I love that point to make it automatic so that way it doesn't even land in your account,

Elizabeth Pennington: right. You don't wanna see it in your checking account. And like the other thing though is that if you. Can't get to 15% now, but you get annual cost of living increases in your salary. You can often set it to increase your contributions by 1% a year. And so then it's again happening automatically. You don't really feel it.

If it happens at the same time as your raise, it's not a big deal. So that would be my recommendation. If 15% isn't achievable, now you've cut where you can, you've made [00:34:00] adjustments, but you wanna get to 15% in the near-ish future.

Monica Packer: Okay. Fabulous. All right. I know that I am full of all kinds of curiosities. You've just answered so many though, and I think the most important right now in terms of the five steps to answer, if you're okay, what a recession is, if we're if or not it's coming, what to do now to prepare for that, and also what it looks like in terms of budgeting to help you help you do that and savings.

So, Elizabeth, thank you for being both so helpful and exhaustive in this. I do want to tell them more about. Fearless finance, but I actually want you to tell them what is fearless finance and what can they expect if they use your services?

Elizabeth Pennington: Yes, fearless Finance is a financial planning firm, but we are unique in how we do that financial planning. Um, I think a lot of people think of financial planning as something that isn't accessible to them. It can feel a little daunting. It can feel, um, like you're going to be judged or condescended to,

Monica Packer: Mm-hmm.

Elizabeth Pennington: that's not what we do.

We.

Monica Packer: of.

Elizabeth Pennington: Or taking advantage of [00:35:00] big one. And so we operate differently. We operate under an hourly model. So if you come in to work with a fearless planner, you pay by the hour for the time you use with that planner. And that means that it's accessible to someone just starting out, someone who has debt that they wanna take care of, and people who have plenty of money to invest.

We're not ever taking a percent of those investments. We're not selling you products that you may or may not need. We have planners all around the country. We work with our clients virtually, so you don't have to be in our area. And also important, we are regulated by the SEC. We have a fiduciary duty to our clients, which means that we are obligated to put your best interest ahead of our own.

Whenever you're looking for a financial planner, it's really important to understand how they're compensated, , how they get paid, where that money comes from, and how they're regulated, what that process looks like. . If you are working with a planner and you're feeling like it may not be a good [00:36:00] fit, it may just not be a good fit for vibes reasons.

And also, you should always check out a new planner on the FINRA broker check website, the SEC's, IAPD website. That's investment advisor, public disclosure, because if someone else has filed a complaint that can tell you that it's not the place you wanna go.

Monica Packer: Such good advice there. I mean, I, I, I long avoided finding a financial planner one because I'm like, we're not wealthy, so who's gonna want us? And two, we're gonna get taken advantage of by whatever percentage or products they sell and it spend. So helpful and also, um, confidence boosting to work with you, and we've loved it so much and, it's made us feel more secure in answering those questions.

Elizabeth Pennington: I'm glad.

Monica Packer: So,

Elizabeth Pennington: we're here for. And anyone who like any questions, we can tackle them. We have someone who probably specializes in that area and everyone else at the firm is lovely. We're a really good team and [00:37:00] this is all like, this is what we care about. We care about how people with their money and gaining that confidence and getting on the right track.

Monica Packer: We initially started with the Am I OK kind of session, right? And then we worked on how we could do better with retirement and shift things around and combine, which is so helpful. And, um, coming up next, we're gonna work on estate planning. So just as an example of what you can do and, and every time I say estate planning, I feel like I'm on Downton Abbey.

It's like, what's gonna happen if something happens to you?

Elizabeth Pennington: But you need it. Everyone needs it. Other things we help, other things we help clients with include, like I, I've helped clients with planning for a divorce and kind of what the finances of that look like. We help clients with student loan payoff strategies. 'cause student loans especially can be. Very convoluted and complex.

I've helped clients with how to buy their first house and how to start a family in a financially responsible way and getting out of significant consumer debt and retiring early, and retiring at a normal place and leaving a legacy. [00:38:00] And that there's all of these topics that we're equipped to help with and people can kind of bring whatever questions they have, and our model incentivizes us helping in a holistic way.

Monica Packer: Mm-hmm.

Elizabeth Pennington: I am not an investment manager who's only gonna talk to you about your investment allocations. I care about the rest of it too.

Monica Packer: I am such a big fan. I love you. I love

Elizabeth Pennington: Thank you,

Monica Packer: so, so much. I'm gonna direct them to fearless finance.com, and if they use the code progress, they'll get $50 off their first session. And just so we're clear, it's not an affiliate code in terms of me getting a payout each time they do it.

It just helps 'em know they learned about fearless finance from us. And again, this particular episode is not sponsored. We always let you know if it is. I have received some free sessions from you. We've also paid for sessions. Again, such a huge fan of fearless finance and all you're doing with Elizabeth. Thank you so much for being on the podcast.

Elizabeth Pennington: So happy to be here anytime you have random money questions. I'm here. Happy to help.

Monica Packer: Oh, there's gonna be plenty. There's gonna be [00:39:00] more. and I love that point to make it automatic so that way it doesn't even land in your account, uh, at least your cash, your, your caching. Well, is that the word? the word for the account? Your cash account.

Elizabeth Pennington: No.

Monica Packer: Checking.

Elizabeth Pennington: Right.

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