THE Cambridge Connection - Episode 48

We’re giving to the public all kinds of information on all kinds of topics. We’ve had crypto experts on here. We’ve had Millie Potter, who is in our networking group, to talk about reverse mortgages, even mortgages before she became certified to do that. Good to have you guys on here, because this information is helping the world. We’re in really bizarre times, and we’re going to get really deep into that, but let’s tell the listeners about you, who you are, how you got to where you are today, what you do with your family.

John’s background and exchange student story

Sure. Sure. Yep. I’m a financial advisor and an investment advisor representative for one Boston financial group, and my broker dealer is Equity Services Incorporated. Most of my clients, the folks that I help are people that are approaching retirement or in retirement, although I’ll talk to just about anybody.

What I help them do is just align their assets with their goals and make sure that we’re taking care of their biggest concerns. When people are approaching retirement, they think differently than when they’re working and accumulating assets, because you hit retirement, and it’s really like a psychological shift. Up until this point, I could just go out and earn more money if I need it, but once you go to retire, this is what I have. Absolutely. Right?

So there’s two big concerns that my clients express to me that I help them solve, and I tell you, once people hit 70, then these concerns really solidify, but the two ... Number one is what’s going to last longer, me or the money? Speaking of that, I’m going to interrupt you for a second. You lasting longer, I know we were talking before we got on the show today, you right now the kids are getting ready to go back to school, and you have some guests staying at your house too. Isn’t that correct?

We do. We do. Can you talk a little bit about that? Sure. Sure.

Because I want, when people hear how knowledgeable you are and how busy you are there, and how you also do these kind of things, managing the family, it’s pretty incredible. You try to give back to society in more than one way, right? And so when COVID hit back in 2020, my children go to a local school where half the population is international students, and they have a two week break in the middle of March. And COVID hit, and of course, no airplanes were flying. So we had a few, about 150 students at this school that had nowhere to go during this two weeks, and with a whole bunch of uncertainty after the two weeks, right?

We didn’t know what the heck was going on. We didn’t know what this COVID thing was. And so the school reached out to a lot of the local families and asked if they could take on a student and have them live with them. And we weren’t, it was going to be at least for the two weeks, but we weren’t sure how long it was going to last. So my wife and I talked about it, and we decided that we can accommodate two students.

So we took two boys from China under our wing, and it’s really been an incredible experience for us. They really benefited from having some stability and a home to live in. Their families have expressed incredible relief to us, my wife, Sandy, and I, because they just knew that their children were in somebody else’s home. And I thought, you know, geez, if my children were overseas during a global pandemic- They couldn’t go there. They can’t come here.

I’d be freaking out, you know? And I’d want to know that they were with a family that was caring for them too. And that would just mean the world to me. And so we’ve, a lot of gratitude has been expressed from across the ocean. And I’m sure you have gratitude in the fact that you’re learning from the process, and again, giver’s gain.

You’re giving to help others out, and that’s the philosophy that you live by in both personal and business. And that’s why it’s been a pleasure knowing you. You’re a great man, and I’m sure their family appreciates it. I know you know I officiate lacrosse, so I do a lot of these schools where they have the multi-cultures, right? And it’s challenging at some point.

I’m sure you’ve gone through some adjustments, but it’s an incredible example to hear all the negative things that happen during the pandemic, when you hear inspiring things like this, like people coming together and working for a common purpose. This is something that, yeah, for our family, this has been an absolutely incredible experience. For my kids, my wife and I, it’s hard to express just how wonderful it’s been, how much we’ve learned, you know? And just, you know, you really get to kind of get a little insight into other cultures, and people from around the world. It’s really been a, you know, for a terrible pandemic, this is one very positive thing that for our family came out of it.

Break and sponsor message

The world needs more stories like this, so we could talk about that all day long. Yes, we could. Obviously, we’re going to take a really quick break, and we’ll get into all the things that people like spin their heads about, about inflation, about investing. So we’ll get into that when we come back from the break. This is Gordon Oliver with The Cambridge Connection.

We’ll be right back. Are the rise in prices for gas and other expenses crushing your budget? Cambridge’s typical clients save $140 per month while paying down their credit card debt at much lower interest rates. Call 1-800-CAMBRIDGE. Welcome back, everyone, to The Cambridge Connection.

Returning to talk about inflation

I’m your host, Gordon Oliver, without my co-pilot, Tina Marie, but with my incredible friend, John Mayock. John, thanks for joining us once again. It’s fantastic to be here. I appreciate the invite. Yeah.

And I think that’s what we’re going to talk about. And I know the sponsor of this show, Cambridge Credit Counseling, they’re seeing an uptick in people that are having problems with their budget right now because the cost of goods have gone up, they’re using credit cards, they’re not paying them off month to month so the balance is growing. In the beginning of the pandemic, banks were lowering credit limits because of risk, so that automatically affects people’s FICO scores without them having any control over that whatsoever. And we’re nearing those times again because banks deal with risk. They do.

And inflation causes all kinds of risks. So the price of everything’s going up, it seems. Everybody knows it, but that doesn’t mean people’s incomes are going up. And we’re in challenging times on both personal levels, even on business levels. So from your viewpoint, helping people that are nearing retirement, how does this inflation recession potential look to you?

Understanding inflation’s history and causes

Well, I think the first thing that’s important to do is to put this into perspective. So to kind of understand where we stand historically and what’s happened in the past in similar situations because this isn’t the first time we’ve had a little spike in inflation. We’ve seen this before. So a few things to keep in mind when you’re... I help folks with long-term planning.

And so when we’re doing that, you really have to have a long-term perspective. And so what we want to look at is we want to plan things like inflation into your financial plan. And to do that, we want to kind of understand some of the history of it. 26%. So inflation’s always with us.

We don’t talk about it a whole lot lately because over the last 10 or so years, inflation’s been around 1%. And there’s been some months we’ve actually had a small negative inflation. So when inflation’s floating around 1% a year, you really don’t notice a whole lot of it. There’s something we call the rule of 72. And the rule of 72 states that you divide the number 72 by the inflation number.

This works in reverse for investments too, but we’re talking inflation here. And that tells you how many years it takes to double prices. 26%, we need about... Prices double every 22 years. So you think back to 22 years ago, 2000, what were we buying gas for?

What was a gallon of milk? How much did your car cost? And it probably was about half of what it actually... It’s probably a little less than or a little more than half to what it is today. Because inflation has been relatively low over the last 20 years or so.

But you still get the... For those of us who’ve been around and remember the 80s and 90s, you think about... I know when I started driving, it was 1989. 95 a gallon. So that’s inflation, that’s what happens.

So we know that’s going to happen. Inflation isn’t this big mystery. Where it comes from, it comes from... It’s built in Washington. It’s built by the Federal Reserve System and the open market committees and stuff.

And it’s basically when they put too much, too many dollars into the economy, chasing the same amount of goods and services. So I’ve heard other explanations for inflation that just don’t work. There’s the corporate greed explanation. If that was true, then we’d have big inflation all the time, because corporations, their job is to kind of be greedy and make a profit. And they need to maximize their profits.

So that’s where it kind of comes from. It’s funny. I had a conversation with a friend. And because things... I think we went through a period where rates were low.

Everybody got comfy cozy. Then we had this mortgage spike again in overvalued homes. People three, four, five, six people bidding on a home. Homes turning around in a day. We got comfortable.

And then as a result of the pandemic, we’re having a backlash, it seems now, right? That’s what it feels like to everybody, that all of a sudden now, supply chain problems, cost of goods going up. I mean, chicken has gone, not double, but it’s been doubled a couple of times now since the beginning of the pandemic, where it’s just gotten outrageously expensive. And that’s just one item. So I think people are trying to pay attention, but they’re feeling it more in the wallet, at home.

And you and I know very well that many people don’t budget. So they’re just trying to figure it out day to day, week to week, paycheck to paycheck. You got it. So, yeah. So things like chicken, right?

That’s a sector, right? You’re not going to get a full systemic inflation because we have a shortage of chicken, right? That’s a direct economic supply and demand issue, right? When supply is down and demand remains the same, prices are going to go up. This is why on this show we unpack things like this, because it is headlines like that.

People recognize it. It’s true. But headlines like that. And now the other fear mongering is your investments are all going to be worthless. That’s the fear mongering that goes on at the same time as we’re feeling the pinch from all the expense that’s risen from energy to groceries to everything it is to live today.

So it puts people in panic. But yeah, there’s something to be concerned about. But still, to your point, over history, these things have come and inflation will continue as a normal byproduct of being on the planet. Right now it’s just been a little bit aggressive and people are feeling a little uncertain. You got it.

Inflation has been going up for the last year and a half, two years. Actually, it’s actually been going up. We’ve been seeing a little over 2% kind of, which is an adjustment from the 1% since about 2015 or 2016. So we’ve actually been seeing an increase in inflation for about the last five or six years. But it was more gradual.

What we just are getting in with now is- You didn’t feel it. It just was like the frog in the slow- The frog in the boiling water, yes. So now the water got turned up real fast all of a sudden, right? So yeah, what we can do though, it shouldn’t come as a surprise because we know it’s going to happen. We just can’t always predict when it’s going to happen.

So when we’re looking at our own personal situations and how it affects us, there’s things that we can do in order to mitigate the effects or at least prepare for the inflation, right? I think what we can do, because I know this is going to be a good ending of the show conversation wise, we’ll take a quick break right now. Then I want to get into what you want to talk about, about how to deal with it and what we can do. And as a coach, as a person that helps people plan for their retirement, what advice you’re giving to the people that you’re helping right now that just puts it in perspective that this is just historical, we have to deal with it, it’s part of our life now, and what do we do? Yes, that sounds perfect.

Station break and podcast reminder

All right, we’re going to take a quick break. This is Gordon Oliver, The Cambridge Connection. We’ll be right back. Well, Tina Marie, here we are already in our mid thirties. Have you checked your license lately?

You’re a far cry from being in your mid thirties. No, no, not me. Our show, The Cambridge Connection. We’re already more than halfway through our first year of great guests and need to know topics. Oh, I thought you were talking about your age.

Well that would take a lot longer than we have in this message. What only takes a moment to share is that if you miss any of our shows on Saturdays on WHMP, don’t worry. com, click on podcasts. And all of our shows are listed there. Plus, listeners can find us on all the podcast sites where they listen to their favorite podcast.

Well, when I get home, I’m going to listen to my favorite episode. And what’s that? You know, the one with me in it. Ha! Welcome back, everyone, to The Cambridge Connection.

Client concerns and planning starting age

I’m your host, Gordon Oliver, here with my special guest, John Mayock. And we’re talking about inflation and, of course, the different things that we’re dealing with mentally. Everybody knows everything’s gotten more expensive. And in summary, we’re talking about inflation happens organically. But right now, it happened very quickly in a short period of time because of multiple factors.

Yes. So now, all of that said, these emotions are in every household right now. I don’t care how much money you make. People are panicking. They want to protect their nest egg.

They want to protect their investments. If they don’t have some, now they’re trying to figure out, how am I going to start investing when everything costs more? So the sponsor of the show, Cambridge Credit Counseling, helps people in that position with debt problems, very tight budgets. You’re at the point where when you’re helping customers, I would say what the average age you’re looking for, 55, 58, 60? Yeah, I mean, the earlier I can get introduced to somebody, the better, more help I can be to them.

OK, so what is it if you were going to get a client for the type of advice that you give and strategies that you give? Yep. What’s a great starting age, in your opinion? Great. Well, from getting introduced to folks when they’re around 50 is a great time for me.

I’ll talk to anybody. You know, I work with a lot of folks who are well into their 70s. I have a few clients in their 80s. And so the nice thing is I’ve seen the mistakes folks have made, even the successful folks. Sure.

And I can coach my younger clients on working around those mistakes. So I don’t mind working with folks that are younger than that. And how great you are. We’ve had this conversation where if it’s someone really young, it’s not necessarily your sweet spot, but you’ll coach them up a little bit and find someone that is maybe a little bit more apt to help them at that time in their life. We can get them pointed in the right direction, make them aware of where the pitfalls and the landmines are out there and help them with an approach to their overall financial, you know, their financial security that they can use to move forward with.

OK, so 50 years old, we’re starting at 50. I’m going to turn it to you right now to talk about what your clients are saying. How are you helping them strategize? Sure. So, you know, there’s here’s the nice thing about the financial planning world, right, is regardless of the conditions that are going on today, whether or not we’re experiencing, you know, nine percent inflation, you know, we can argue over whether or not we’re in a recession.

None of that really matters a ton because we use processes and and techniques and, you know, strategies that really are there to defend against those things over the long period. Again, a little satire. They’re arguing over the definition, right? Right. That’s the new hot topic.

Now, what’s the definition? Does it matter what we call it? Does the household kitchen table doing the finances care about the definition? Actually, no, I care about how they feel and how they’re dealing with it. That that’s that’s that’s for politicians.

Right. Exactly. You know, politicians and academics can argue over that. The rest of us have to live with it. Right.

Four cornerstone approach to finances

So so to live with it, there’s a few things you can do. Right. I follow what we’d call a four cornerstone approach to financial advice. And the first two cornerstones are really playing defense. I think my first job as an advisor is to make sure my clients don’t go poor.

Yeah. Right. There are things you know, what what what threatens your financial independence? Right. It’s it’s not the the economy usually.

It’s actually a lot of times your own well-being. Sure. Right. You know, think of the people that you know that are going through the toughest financial times. Oftentimes it’s a result of, unfortunately, a death in the family.

You know, or an event or an event of some kind of disability. Some sort of disability can’t work for a long period of time or, you know, in retirement, you need some sort of care. Right. And then the other thing that threatens people’s financial ability that nobody thinks about is you live a really long, happy, healthy life. Yeah.

Right. What’s going to last longer? I mean, you’re the money. Right. So, you know, so we take this this four cornerstone approach and it really kind of prepares you.

It builds a house, a financial house that will help weather this storm. That’s what you really want to do. You know, the storm’s coming, so we need to build a house that’s going to weather that storm. Absolutely. So we start with the first cornerstone, which is cash reserves.

Right. Cash reserves. Make sure that you can handle any emergencies that come your way without going to debt. Right. Cambridge is very keen on that.

Do you have a threshold like a lot of advice that we’ve given in the past is having six months of your bills in savings? Is that that’s a great goal? That’s a great goal. Think, you know, if you lose your job or you get sick and, you know, and you don’t have disability insurance and you can’t work for a while, how are you going to pay the bills? Yeah.

Right. So you want to make sure that you’re prepared for that short term kind of storm like that with and cash does that. The other thing cash does is it put you in a position to leverage opportunities. Right. So when we do hit a recession, you do see the stock market tank.

You’ve got some you know, we want to buy low and sell high. Sure. Right. Sure. Cash allows you to do that.

Yeah. Right. It allows you to jump into the market when it’s down and leverage and get more shares of whatever it is you’re buying. So that way, when it does rebound, you’ve got more shares to rebound. So so cash allows you to take care of or a business opportunity presents itself.

Right. Or a dream vacation, whatever it is. Cash puts you in a position to leverage opportunities and handle handle emergencies. I’m going to jump on that real quick. And that’s why the pandemic, when everybody was released from being locked down, we’ve had two seasons now of people applying for record levels of credit cards, charging record levels of amount on there to pay for these vacations, which were cash when you’re paying it.

There’s no interest. You’re not paying for more than what you did on your vacation. Right. Where with credit cards now, unfortunately, people are using them and paying high interest. And they’re done that.

Yes, sir. Paid that price. Yeah. Yeah. And I learned from those mistakes.

Right. And now, you know, we can coach others, people not to do it. Absolutely. Maybe we did. Yes, I did.

Yeah. Right. So we. Yeah. So that that second cornerstone is protect what you can’t afford to lose.

Right. So that’s your life, your income, your home. And that’s your insurance program. Right. Making sure that you’ve that if something happens to you, you die before we expect you to, that the people that you care about are taken care of.

Right. If you can’t work for a long period of time, want to make sure that your income can be replaced and you can maintain your lifestyle. And, you know, so that’s why we you know, so between cash and insurance, you can avoid a lot of bad situation, you know, or you can make a bad situation, not a financial catastrophe. Right. It might be an emotional catastrophe.

Sure. It’s a shift. Yeah. But we can avoid financial catastrophes. Right.

And that impacts the people that you really care about the most. And then we start playing offense a little bit. Right. So the third cornerstone is your fixed assets. Those are things like CDs or bonds where, you know, you’re going to earn a fixed rate of return over time.

That’s a great thing to look at for, especially anything like a five year or shorter timeframe. We want to put a down payment on a house in a little while. We’re going to put it in cash or CDs because we don’t want to put that into a some sort of stock mutual fund or something. And then six months before we want to buy the house, we lose 40 percent. Yeah, that’s not going to be helpful.

Right. So so for shorter term goals, we want stuff that’s more fixed, more something we can count on now to deal with inflation over the long period. That’s what we have our equity secure, you know, our securities. That’s your stocks. Even your home is an equity.

And those are going to outpace inflation over the long run. Right. The S&P 500 over the last 100 years is averaged somewhere in the neighborhood of about 10 percent. Inflation’s been three and a quarter. Right.

So so think about it if you have your long term savings. So if there’s anybody out there listening right now that’s been rolling CDs. He’s over year, over year, over year, and you’re getting one or 2% in your CDs and inflation’s at 3%. Well, you’re losing money safely, right? That CD, even though there’s more money in that CD at the end of the year, it can buy less than it could buy at the beginning of the year.

So equity investments in the stock market are really important over the long term, 10 plus year timeframe to combat inflation and make sure that you’re growing your assets and you can buy more in the future than you can buy today. I love how you’re positioning it with these four cornerstones because for our listeners and our family and our friends that pay attention to the show, it’s easy to listen to that and make common sense of it. The strategies, obviously, there’s much more to get into, but if you just look at those goals to set those cornerstones up, it’s a pretty easy place to want to put a goal to start. Not a bad format to get started on. You got it.

And it gives you purpose to your assets, purpose to your dollars. You can pick a goal, retirement or education or buying a boat or whatever the heck your goal is going to be. And by understanding what the timeframe of that goal is, it’ll help you understand how to invest your money in order to have it ready for that goal when it’s time to pull the trigger. And I would suggest in all of that, it’s get your debts paid down because if you’re paying high interest on debts and you’re trying to manage all of that, you could be losing on the interest on all your cards if you’re not paying attention to getting that down. So I would say also in times like this, try to get your debt levels as low as possible on unsecured debts.

There’s no question. No question. Because think about it. If you’re making unsecured debt payments and then we have inflation, well, those payments really could have been helpful. That takes your cash.

Yeah. They could have been helpful in putting more food on the table or gas in the car or making the mortgage payment. And so having that cash flow, one thing you learn working with a lot of retired folks is regardless what their assets are, cash flow is key. Key. It’s key.

Closing thoughts and contact information

John, the show just flies by so quick and you’ve given us such great information just to even start focusing on if people aren’t already doing that. And before we close the show down, can you please tell people where they can find you? Absolutely. Yes. Yeah.

We really kind of scratched the surface on stuff here today. Yeah. Much to talk about. Yeah. And really it’s every family and every person has to deal with this individually with their own resources, right?

And so giving blanket advice and stuff is hard to do. It’s pretty much impossible. That’s why I sit with clients individually and spend a lot of time learning about them before I start making recommendations on what the path forward is. Nice to have core principles to pay attention to though. You got to have those.

Yes. Yes. And my little motto is nobody cares how much you know until they know how much you care. Right. Right.

Right. And that’s really my business. And then once I understand my client’s goals, their aspirations, their desires, their fears and their situation, then the plan starts to lay itself out. Right. Yep.

So how can our listeners find you? So you can give me a call. I am happy to take phone calls at 413-896-5632. com. It is a mouthful.

One is spelled O-N-E, not the number one. com. Awesome. Great having you, man. Great friend.

My pleasure. My pleasure as well. I’m sure you’re an amazing host with your family and that special situation that you’ve taken care of. So thank you for that too. You’re an amazing man.

I appreciate the time here. Yes, sir. Wrapping up the show. Here’s the quote of the week. Inflation is when you pay $15 for the $10 haircut you used to get for $5 when you had hair.

Sam Ewing. Love it. So we’re closing the show up. A special thanks to our producers, Lisa, Leah and Alex, as a special sit-in. Thank you so much, sir.

m. com, click Podcasts and The Cambridge Connection or you can find the show where you find your favorite podcasts that you listen to. org or feel free to call 1-800-CAMBRIDGE.