Podcast: Rising Above the Money Fog with Mikelann Valterra

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Steve Chen:

Welcome to the NewRetirement Podcast. Today we’re happy to have Mikelann Valterra, an author, speaker, and master money coach who was dedicated over two decades to helping people around the world rise above the money fog, transform their relationship with money and design their ideal life. Mikelann’s work is grounded in financial psychology, and she has been a thought leader in developing powerful practical ways to reduce money, anxiety. Join us as we delve into the concept of money fog, its impact on financial decision making and how to navigate through it to reach your financial goals. So with that, Mikelann, welcome to our show. It’s great to have you join us.

Mikelann Valterra:

Hello. And I’m happy to be here. Hello from Seattle.

Steve Chen:

Yeah, it’s great to see you. My oldest is living in Seattle right now, so he went up there to start a business and I’m learning all about it. I think he loves it in the summer. It’s definitely a little bit, a lot darker than California.

Mikelann Valterra:

Yeah, we’re six months of gorgeous beauty and six months of overcast. And there you have it.

Steve Chen:

Right. And I think you have longer days during the long season and then longer nights.

Mikelann Valterra:

It’s true. I mean, I love, love Seattle, but I get it in the winter. It’s just the overcast days are endless.

Steve Chen:

I grew up in Rochester, New York, so I appreciate the West Coast, no matter where I’m at, upper down. Well,

Mikelann Valterra:

You’re in such a beautiful area. You’re one of the most favorite areas of the whole country, the Bay Area in the north. It’s just gorgeous.

Steve Chen:

Thanks. Yeah, no, I’m definitely grateful to live here and appreciate it. So Mikelann, I would love to get your backstory and just have you spend a few minutes sharing with our audience your journey to becoming a coach and building a practice.

Mikelann Valterra:

Yeah, who the heck am I? That’s a great question. Right. So 25 years ago, which is when I started my coaching practice, money coaches, financial coaches, we didn’t exist. I spent years explaining to people what I did because no one had ever heard of what’s a money coach. And even now I get that question still a fair amount. It used to be that people could see a credit counselor with debt issues, they’d see a financial planner with investment issues, and neither of those fields was well equipped to deal with the emotional side of money. And the truth is people do need to build net worth and investments and a lot of people are struggling with debt. It’s like everything. So money coaching arose from this place of you could say financial literacy, but really teaching people how to manage their cash flow and really look at it.

My undergrad was economics. I just loved looking at and thinking about money, but get this, Steve, when I went to grad school, my master’s is in psychology. I finished grad school and here I am at this bright shiny master’s in psychology, transpersonal psychology. Let’s even get crazier. And I was still fascinated with money. I debated becoming a financial planner, but I also debated becoming a psychotherapist. Talk about two fields that, oh my gosh, there’s so much energy between them. They often feel it at opposite ends of the spectrum, particularly 25 years ago. Long story short, I met a money coach by the name of Karen McCall, one of the pioneers of financial coaching in the United States. She was looking at the psychology of money deprivation issues around money, people’s true needs and wants and why they spend differently than what they say they value. I mean really good stuff that no one else was talking about. And I said, Ms. McCall, I want to do what you do. Can you train me to be a money coach? And I was the very first person she trained. And so that was 25 years ago.

Steve Chen:

How many coaches do you think existed when you first got started? I

Mikelann Valterra:

Don’t want

Steve Chen:

Five versus now. Yeah,

Mikelann Valterra:

That’s a good question. Part of it is the coaching industry isn’t really regulated. It’s all over the place. It’s like the wild west in coaching. And so the term coach is sort of an ubiquitous term. There’s a lot of different types of coaches. Money coaching is only now sort of gaining in popularity, if you will. So it’s definitely increased by at least a hundred fold for sure. It literally was invisible. It didn’t exist 25 years ago. It really didn’t.

Steve Chen:

How did you meet Karen?

Mikelann Valterra:

I got this interesting master’s in transpersonal psychology and I was fascinated still with money. So I went to work at a think tank called the Institute of Noetic Sciences in Sausalito, basically in the Bay area of California. And we started studying, it’s a think tank, what do you do you think? And so they were looking at alternative forms of thinking about money. I met Lynn Twist who went on to write a very famous book called The Soul of Money. Bernard Leonar was a very famous international economist. We were looking at alternative currencies, really fascinating things at this think tank around money and again, 25 years ago. So everyone thought everything was kind of weird. And we had a conference to look at alternative thinking around money. And we invited this woman. I’d never heard of her. I didn’t know anything about the field named Karen McCall to talk to us about financial psychology and needs and wants and deprivation issues around money. And so she just was a speaker and I was working at the think tank and it was one of those lightning moments in life because I was just so fresh out of grad school and I didn’t really know yet what I wanted to do. What I realized very quickly was the only way to be a coach, a money coach was to be self-employed. No one was hire me because the field just did not exist.

Steve Chen:

It’s interesting. I mean now it’s becoming more accepted, but I agree it’s still kind of the wild west out there. Even financial advice. Lots of people can call themselves a financial advisor. You can be a CFP and a fiduciary or you can be a salesperson with a suitability requirement. So it’s interesting that it’s out there, but I think it’s good. I mean, I’m glad that there’s more people approaching helping people with money with different perspectives. Now the flip side is folks need to know who to trust, and we should dive into that. How do you find a reputable coach? How do you know that they’re good?

Mikelann Valterra:

Well, it’s part of the reason why many years later I decided to become an AFC, which is an accredited financial counselor. But I didn’t even have that option when I started coaching because the designations just seriously did not. They just didn’t exist. Will the finance industry continue to become regulated and yeah, I absolutely believe so. I usually recommend that people work with someone who’s a CFP certified financial planner if they’re looking at retirement planning. But there’s a lot of really good people out there that absolutely can help you get a handle around your money, and that’s why people are often confused about where to go.

Steve Chen:

You find this industry before it really exists and you’ve had your career in it. You’ve written this book about money fog. Can we dive into what that is and how that manifests itself in the work that you do with your clients?

Mikelann Valterra:

Yeah, thank you. So the book was published recently. It’s called Rise Above the Money Fog, the key to Confidence, clarity, and Control over your Life. What it looks at is this concept of money fog, and it’s what I see as a financial coach that a lot of people, and I know I’m speaking to the choir here, but they don’t know for example, how much they spend. They don’t know how much they need to earn. What money fog is is a little bit more interesting than what I just said. It’s the feelings of stress and anxiety that come about from being vague about your money. I would say, and actually you’ll find this interesting fog, FOG stands for something because every good acronym’s got to have that in your book. It stands for when you are in fear around your money or when you feel overwhelmed over your personal finances or when you feel guilty around your spending.

Those are signposts that you may be in a money fog. And so just a couple of good questions for your listeners. If they’re going through and trying to diagnose, do they think they’re in a money fog if you don’t know where you spend your money, absolutely. That is a signpost of being in a money fog. Likewise, if you don’t know what you need to earn to live the life you want, that is a sign of being in a money fog. But I would also say if you do feel fear and anxiety over your personal finances, that’s a sign of being in a money fog. If you don’t have a good system for tracking where you spend your money, that’s a sign of being in a money fog. The number one thing I hear, Steve when people call me is it’s about control. People say, I don’t feel in control of my money.

I don’t feel in control of my finances. And that’s usually because they’re in a money fog. And the last one I’d throw in may sound a little bit odd, but it’s actually my favorite. Do you feel like money is a sacred tool to help you live your best life? And some people hear that and they go, well, that’s kind of weird, like sacred tool to live your best life, but it is a tool to live your best life. And if you’re in a fog, it’s like driving in a car in a fog. Usually people don’t realize how deep the fog is when they’re in it. They just drive very slowly to avoid hitting something.

Steve Chen:

I like that acronym and of the three, so fear the sense of overwhelm and guilt in your practice. Is there an order of prevalence that you run into these things? Is fear number one or is overwhelm number one or guilt?

Mikelann Valterra:

Yeah, boy, that’s a really interesting question. The funny thing is it’s actually in the order of the word and I just got lucky on that part. I work with a lot of people in what we call midlife, kind of that 40 to 70 in there. And there’s a lot of fear. One of the fears is fear of the future. I see fear more than anything because I work with a lot of people between 40 and 70 and there’s a lot of fear. And one of the big fears is fear. I’m not going to have enough. So there absolutely are fears about retirement, but I’d say the fear is broader than that. There’s a lot. I have people that say, listen, I have a financial planner. They tell me I’m fine. And then they pause and they go, and I don’t feel fine. I don’t know, can I go to Hawaii?

And that goes into the guilt around the spending that goes into I’m overwhelmed. It’s really interesting because even when people get a handle supposedly on retirement, they still don’t feel like they’re in control of their current spending. There’s this general message they get that says 30 years from now, you should be okay if everything goes according to plan, so don’t worry about it. And they’re like, oh my gosh. And there’s a lot of fear that comes up that says, well, what if I want to remodel the house? I want to buy a car, I want to go to Hawaii. There’s so many smaller spending decisions that are not necessarily related to the retirement conversation and yet everything’s related.

Steve Chen:

So it’s interesting that people will have a financial planner that is telling ’em that they’re fine and then they still find their way to you and they say, am I really fine? Or how else can I think about this?

Mikelann Valterra:

Yeah, isn’t that interesting? I mean I’ve had it happen for years and years and years, but I think it’s because a lot of planners are very focused on the big picture and they’re focused on retirement. I mean, let’s just say the obvious. And so they’re looking at your investments, but they’re not looking at your annual or monthly budget. And sometimes they will say they are and they’ll look a little bit at, they’ll say, well, let’s look at cash flow. But really when you work with a money coach, the centerpiece of our work is really engaging in a spending plan process where you’re literally feeling in control of money and learning how to plan your spending month to month, year over year. And so as an example, I had a client recently say, okay, I’m working with my financial planner. He says, I’m fine once I retire, but I’m afraid I don’t have the skillset that once I retire, I can’t spend more than x. I don’t know how to do that. I’ve never really thought about it. I mean, I always pay the credit cards off. I think everything’s okay, but once I retire, I actually have to manage my money and my cashflow week in and week out. I am freaked out by that. How do I do that? I don’t want to feel like suddenly I can’t do what I want to do.

Steve Chen:

Do you see people constructing retirement paychecks? This is what some of our users do, but they can be planning enthusiasts. They go through this, you’re accumulating wealth. It’s simple but not easy. And most people are unsuccessful, but for a lot of our users, they’re 401k millionaires, they’ve been working saving steadily, investing in low fee index funds, building wealth, and then yeah, they get to the space of, okay, well now I might need to live to 20 or 30 years easily and I have to manage this money myself, and that’s a scary proposition. I want to be tax efficient. I don’t want to blow myself up. And our users are actually, a lot of them manage this themselves, but you can quickly get over your head. Do you see folks saying, okay, I want to buy bond ladders or I want to annuitize, I want to get an annuity or things like that to kind of provide some guaranteed income as a part?

Mikelann Valterra:

Well, I think that that’s the line between financial coaches and financial planners. I’m not going to give investment advice. Now I do a lot of financial literacy and I help people look at net worth and track net worth and all of that good stuff, but that’s in my opinion, a specialist function to go to a planner and look at those questions just like you’re going to go to your accountant, just like you’re going to go to your mortgage broker. Whereas the analogy I would use is money coaches are like family doctors. We are sitting in the center of a lot of specialists. When you work with a money coach, you’re looking at a lot of subjects around money. You’re learning how to manage your cashflow month in and month out. You’re learning how to work with an annual income and spending plan, but you’re also doing things like looking at your story around money and looking at why and how you spend, because again, you know better than anyone, money is so emotional and people hit the deaccumulation phase, they freak out.

That’s a clinical sum up. They’ve spent their whole life accumulating. Now that we’re at this precipice, they’re like, oh my gosh, I have more money than I will ever have in my whole life and now I’m going to spend it down. It brings up a lot of old stories, a lot of old fears. And the other thing that I hear a lot is people will say, listen, if I screw up and make a bad money decision and overspend, I can handle it during my working years. I can catch up, I can work extra, I can save more, but I’m afraid of making a mistake once I retire. Once I’m in my deaccumulation work optional years because I’m used to having this paycheck income, it’s fuel into the system. And once I’m not adding all this fuel, this money, it’s like money starts to feel like it’s more precious and people want to become more and more thoughtful about how they use it and all the old gremlins come up.

Steve Chen:

Yeah, it’s so interesting how when we’re young, we’re kind of like, oh, get a job. The future seems far away. Who cares? And I have friends that have drained their 4 0 1 ks because they were like in their thirties. They’re like, ah, who cares? I need this. I want to start a company or something. I’ll rebuild it later, but they don’t realize the effect of compounding. I want to share one story for our listeners where to kind of frame up how it almost doesn’t matter how much money you have. So I have a friend, and this is going to sound ridiculous, but they have accumulated 10 million of investible assets. They have a lot of money. The husband’s like we’re fine. I mean they live nicely, but they’re not necessarily extravagant and they’re both very well educated people. They both have MBAs and they’ve been highly paid.

That’s why this wasn’t a windfall. They made this money through a series of wins. They’re calling their fifties, but his spouse who’s actually contributed making most of the money is worried about this and cannot let go of it. She’s very concerned as they downshift and they’re both working a bit less, they’re still working and making money, but less money will they have enough and having that sense of safety and it’s just that is way more money than 99.9% of the world’s ever going to have and touch. And they’re not irrational people. They can just throw in the bank and be spinning half a million here. It shows you that the emotional side of this thing, even for very well educated, very wealthy people is front and center.

Mikelann Valterra:

It’s huge. And it goes to money, personalities and childhood upbringings around money. It also goes to different brain chemistries. I mean all of that comes into why we do and feel the way that we do around money. And it’s interesting in particular with couples, and you’ve probably heard this about half of all long-term relationships or partnered relationships are made up of opposite styles around money. I mean, the classic simple example is the spender marries the saver. And in a lot of these relationships, and now you’re not describing this as their dynamic, but I’ll just bring it up. So common, it doesn’t have anything to do with money when couples initially get together, it is a natural attraction pattern. People that are very, they call themselves savers or the super savers out there are very motivated by security. Whereas people that are more of spenders actually it’s about freedom.

I want to do what I want to do when I want to do it right. It’s about what is the point of life? The point of life is to enjoy life. And so these people come together. It has nothing to do with money. You could say, oh my gosh, she seems so secure and her head is on so straight and she knows where she’s going and he’s so vivacious. I’ve never had so much fun at the drop of a hat. I’ve never picked up scalped basketball tickets the night of whatever. Just awesome fun. It’s a juicy, beautiful chemical connection. Opposites attract and then they get married and the fund ensues because the different money personality styles around this. When money comes into play, that’s a different dynamic because bottom line is the more a person who’s the spender, the more who’s freedom oriented. The more they spend, the more their spouse saves as a reaction. The more that person saves, the more the spender’s like, you can’t tell me what to do with my money. Oh my God, you’re so frugal. You a miser. You can kind of hear the words. So they spend to prove that, hey, it’s enjoying life. And so they end up doing what’s called polarizing. And so there’s so many dynamics with couples and ultimately they’re all dealing with and reacting very, very often to how they were raised around money.

Steve Chen:

I definitely want to dive into that, but I think that’s right. When you ask people how do you want to understand yourself better look at your parents, right? Understand your family dynamic, how you’re raised. I think that’s right.

Mikelann Valterra:

People don’t want to hear that. But yeah.

Steve Chen:

For money, for your emotional outlook on life and all that stuff, this whole idea of the relationship dynamic is really interesting. I think mostly we think about our own situation, especially probably more and more, I bet more couples, they are our partners. They come together and they keep their money a little bit separate or they don’t necessarily commingle things as much and they have more control. So when you work with couples or individuals, how do you measure success? What’s a good outcome? How do you assess their progress?

Mikelann Valterra:

Half of it’s going to sound very practical and half of it’s going to sound very emotional. So part of it is people come into financial coaching, generally speaking, pretty stressed. There’s a lot of stress and there’s a lot of anxiety around money. And so part of it is you’re measuring our stress and anxiety levels going down and you could use a good old 10 point scale, give me the number when you start versus where are you over time? But anxiety is big and women suffer from financial anxiety more so than men do, and that’s kind of well-documented. There’s a lot behind that. But as you know, men suffer greatly from financial stress and anxiety as well. So it’s out there. The practical step that you’re measuring tends to be around debt reduction and savings. Increasing financial coaches work with a lot of different types of savings. For example, a piece that’s often missed in a lot of financial planning is saving for smaller expenses that are non monthly that are going to happen this year. Where’s the cash fund for travel?

Steve Chen:

Property taxes or whatever.

Mikelann Valterra:

Yeah, exactly. Property taxes is a perfect example. People feel like, oh my gosh, everything’s going fine. And then bam, fill in the blank. Something happens and that’s not really handled at the level of a retirement plan. It’s like everything’s fine. And then why do I have three grand on my credit card debt from the trip to Hawaii when these expenses happen? Generally speaking, a lot of professionals, they will either put the extra expense on the credit card and then feel bad that they’re dragging debt around or they will suck the money out of an account that it wasn’t intended for and maybe it’s an investment account. Those are on the one hand, easy things to measure, but it’s a big deal because there’s so much, we’ll use the heavy word shame. People come in with a lot of what they feel like is almost financial secrecy.

People only knew that I’m carrying credit card debt if people only knew that my net worth is this, and everyone probably thinks it’s that. If people only knew that I threw that trip to Hawaii on the credit card, they probably thought I had all this cash laying around. As adults, we tend to think that everyone else has it figured out. It depends on what the goals are when people come into coaching, because it’s generally half around the emotional side. People are just tired of not feeling good around their finances. And then the other half is, yeah, I want to build savings and I want to reduce debt. And then from there, there’s a long list of other goals from college to retirement.

Steve Chen:

I would love to get your insight into how men and women show up differently in terms of what they’re worried about and maybe what they’re good at. I mean, I’ll say this on our side, our user base biases, male biases, married, we see more men engaging in planning, at least so far we’re intentionally trying to pivot towards get more women on the platform. But I’m curious what you see across the genders, like how they’re thinking and what they’re good at and what they’re worried about.

Mikelann Valterra:

That’s a really, really good question, Steve. So money fog affects men and women equally. Women are no more likely to be an overs spender than a man is. It may look different. Male overs, spenders are very into toys and gadgets as an example, right? But women’s spending may look different and male savers and female savers may look different, but there’s just as many, but women do carry more anxiety around money, more stress, and the more anxiety and stress you’re under, the more that blocks vision, the more that blocks our ability to plan. And that’s true regardless of what the subject is, but we’re talking about money and the other thing is, God, they did this study so many years ago in divorce, but I think this makes a good point that the differences between men and women is the focus is different both in time and also in what you’re focused on.

So in divorce, men are focused on themselves in the future, worried about their future retirement, which is this is totally makes sense and women are focused on their children in the present. There’s a different time focus and there’s a different person focus, and that’s why a lot of the conversations around post-divorce are just a mess and it’s all important, present and future and children and ourselves, women need to be more focused on themselves in the future. Men need to be more focused on the present on their kids. I mean that’s all fair, and this goes deep into brain wiring and history and culture and like, oh my gosh, this is a huge kettle of fish. The other piece that we haven’t touched on is men are still out earning women and there’s also different career trajectory between men and women. And so that has a huge impact on net worth. And so part of women’s stress is they have half the assets that men do, and I’m not exaggerating, half single women have half the assets that single men do. 

Steve Chen:

By the way. I have to imagine that is changing rapidly just because in college now it’s 65% female, so women are entering and graduating college at a much higher rate. They’re entering the workforce at a much higher rate.

Mikelann Valterra:

This is what’s interesting, Steve. It is, but not as much as you think because what we know is my first book was written on women and earning issues. This is why this is something that I know more about than I probably even want to know. The income disparity has reached almost par for young women entering the workforce, young women and young men, they’re 22. You’re totally right. Not the issue. The issue is go out 10 years, go out to when women are between 30 and 40. That’s the problem. They’re still off ramping at very, very high levels that a lot of women are leaving the workforce to care for children at much greater rates than men are. And by and large, it’s still more women than men. And this goes into an even bigger discussion than we can have because part of it is US corporations are still not really great at supporting both parents around work-life balance and childcare.

And the issue you’re bringing up, women in the United States are very much lagging behind our European counterparts, and this goes to the working environment in the United States. So I wish it was changing more than people think it is, and it’s because people don’t think it’s an issue anymore because young women coming out of college are coming out at much greater rates right now than young men. You’re absolutely right. We’ve all seen the stats, but they’re still off ramping more than men are, and so is it changing? Absolutely. It’s just not changing as much or as fast as we wish.

Steve Chen:

Well, I know we see this in the data that women, if they have children, there’s a penalty for social security and saving money. They’re not aggregating wealth during that timeframe and they lose all the future compounding and everything else.

Mikelann Valterra:

Well, and actually you just brought up something really interesting that this is such an interesting topic. I work with a lot of people in midlife and women are powerhouses in midlife. The women’s career trajectory starts later than men’s, but goes just as high and just as long. So women in their forties and fifties are starting businesses and are just kicking butt and doing amazing things, but the problem is the word that you brought up, they’re losing out on the compound interest because they’re starting all their investing in their forties and fifties, and so that 

Steve Chen:

Just don’t have the time.

Mikelann Valterra:

Yeah, I always say, yes, you can catch up because the thing that I get frustrated is when I read all the financial planning articles online, it’s a lot of fear mongering, a lot of, well, you’re kind of screwed if you didn’t start investing when you’re 25. And when people are stressed and in fear around money, they make no decision. They take no action. And so it’s not fear-based conversations around money. People think they’re trying to browbeat people into taking action. The research shows it doesn’t work.

Steve Chen:

Yeah, I’m a big proponent if you listen to our podcast of teaching personal finance in high school, we’ll give another shout out to next generation personal finance. I’m going to have Tim Ranzetta, who’s the founder, come on the podcast soon. Oh, I love it. They’re educating, they’re teaching teachers of how to do this and they’re pushing legislation to get it to be mandated in different states, and it’s starting to be mandated, which is good. But yeah, getting that lesson and starting to save and invest, it’s both. You got to save and you have to invest and keep at it. I think another big thing just between million men and that I’ve heard is men tend to have a larger appetite for risk. I think they’re less rational, but they will take risk and they can blow themselves up, but they can also like, oh wait, we had a one our guests on he yo load, he put all his money into Apple after he got laid off and basically 10 Xed his money and became financially independent in 10 years. I mean basically great, fantastic outcome for him individually, a super high risk move.

Mikelann Valterra:

Well, men enjoy gamifying money in a way that women don’t. And you were talking about the differences between the genders around money. There’s nothing wrong with gamifying money. In fact, if you know that that is part of your motivation and that’s something that you enjoy absolutely gamified and a lot of the platforms are built on gamification, and that appeals to men more than women. It just does. Whereas women are looking at what can I do with the money? I mean, there’s a lot of different things, and I’m obviously saying this in a fairly simple way, but you get the point.

Steve Chen:

Yeah, we’re going to have to spend some more time later talking about the whole gender thing. I know

Mikelann Valterra:

We could go for hours on the gender thing, and boy does it get controversial fast, so I appreciate you even bringing up the sacred cow. Right?

Steve Chen:

No, it’s great. I mean, Ellevest is doing some interesting stuff with totally female focused investing and coaching and support.

Mikelann Valterra:

It’s awesome. I love it. I love it

Steve Chen:

Gender specific schooling, especially for women, makes a massive difference. If you go to a women’s only school, your outcomes are way higher,

Mikelann Valterra:

And yet the subject is always controversial. I guess the last thing I would say in that subject, just because we can’t ignore it, is all of this wouldn’t be a problem if the divorce rate wasn’t so high. If couples got married and stayed married, the fact that one person made more or had a different investing style or whatever, things would be not that big of a deal. The reality is it’s 50% half of people divorce and it has a massive impact on your net worth and there we have it. So that’s where this stuff really starts rearing its head.

Steve Chen:

Yeah, a hundred percent. And that’s another big trend is great divorce, right? We’ve covered that where people are living longer, they’re married for quite a long time, have kids, and just my own life, they become empty nesters and then people are looking at each other like, Hey, is this really that great? Do I still want to be married here? Yeah,

Mikelann Valterra:

No, I think I’m that because I was married for many years, my son’s 24 and I just got married a second marriage, as you can imagine, two months ago. Congratulations. I’m in my mid fifties. So here we are. I mean, I’d like to think I’m not the full gray hair, but technically it’s exactly what you’re saying. Second marriage in the second half of life,

Steve Chen:

Well, we’re living longer lives, and so it’s changing the dynamic as people. It changes people’s perspective. We’re kind inventing new phases of life and you’re kind of born, you have adolescence and now we have this, I dunno what they’re calling it, but there’s this phase of life where you’re 20 to 28 that’s like a new thing where maybe you’re hanging out at home or you’re way more likely to be at home and kind of getting launched versus I think I’m a Gen X or in our generation was like, Hey, graduate college, get a job and you’re making money.

Mikelann Valterra:

It’s the adulting phase of the twenties.

Steve Chen:

Exactly. So you’re 60 years old or in your mid fifties and you’re like, well, I think about retiring or then I think that’s something people should be aware of is that very often people plan to work till their early sixties or mid sixties and then they actually get involuntarily retired in their late fifties.

Mikelann Valterra:

It’s so true. I know everyone has heard, well, maybe they haven’t heard, but the longer you wait to take social security, the more money it pays. But again, we know most people end up taking it earlier than they originally thought they would for all those reasons.

Steve Chen:

Well, and then you’re staring at if you’re healthy and everyone wants to be healthy, like, oh, well maybe I’ll live to 85 or 90, and then healthcare is getting, there’s all kinds of amazing things happening right now. We have fat loss in a shot soon. It’s going to be, I was just reading this morning, Larry, there’s pills now that you can take a little mimic exercise.

Mikelann Valterra:

Yeah, it’s crazy. The wonderful stuff that’s out there. I love it. I love it. And it means that we want to feel good about money for a long, long, long time. And part of that’s the skillset around money. Part of it is the mindset around money and you got to combine both skillset and mindset.

Steve Chen:

You deal a lot with people going through transitions, maybe some of the big challenges and things that people run into and how you frame up helping people or what that process looks like as they go through career changes, divorce, empty nesting, that kind of stuff.

Mikelann Valterra:

One of the things that I talk about is I call ’em the three key questions. I kind of thread it throughout the Money fog book and we always want to be able to answer the question, what can I afford? How much is enough and what would be possible over time? We get used to going, yeah, I kind of know what I can afford. I’m living my life fine. And yeah, I know how much is enough and my paycheck seems to match, it’s fine, and I know what would be possible. I want to go back to grad school someday. That’d be cool. But then transition hits and the big transitions are the ones you mentioned going through divorce is a huge transition. Retiring is a transition. Sometimes they’re voluntary, sometimes they’re not empty nesting, huge transition. And so what I find it’s a common time that people come into money coaching when they’re in transition because suddenly they can no longer answer those three questions.

The transition is like, oh my gosh, I don’t know anymore what I can afford on the other side of divorce. Everything’s changed. I no longer know how much is enough. I have no idea what I need to make. Am I making enough? I don’t know. And what would be possible, which is the most exciting question of all in money. We lose sight of what’s possible when we go through a transition because the money fog descends When you’re in a fog, it is like driving a car in a fog. So I used to live in the Bay Area, I went to grad school down there and for all your listeners that have ever flown in or out of San Francisco Airport, SFO, how many times have you been delayed for fog? Just raise your hand listeners. It’s like all of us. SFO is down in an area called daily city in that area.

I’ve never seen fog that dense when I lived down there where there’s a stoplight in front of a stoplight to tell you a stoplight’s coming because you’re driving in pea soup. That’s what the money fog is like when you’re in a fog that thick and you don’t know which end is up and how much you need and where your money’s going and am I okay, you don’t have vision. You’re taking every ounce of energy to keep your money car on the road. You’re driving slow and you can see three feet in front of you and it’s stressful and when you drive out of the fog, you suddenly go, oh my God, I think I knew I was in a fog. I had no idea it was that thick.

Steve Chen:

What are your clients doing to emerge from that? What changes in their life so that they feel that? So I totally get it. If you’ve got a good job and good income and you’re secure in your job, that gives you visibility or one thing, we see a lot of users that if they have pensions, they love pensions, they really understand when the pension kicks in and social security like, oh yeah. And in my family, there’s a guy teacher is like, yeah, I’m going to end up with 90, a hundred thousand dollars a year of income, which is plenty or maybe a little bit more lifetime income doesn’t have to think about and it rises with inflation.

Mikelann Valterra:

Yeah, we’re done. There’s our financial planning and it’s all handled. I know I have enough.

Steve Chen:

How do people that don’t have that situation get that sense of control?

Mikelann Valterra:

A big thing in coaching is really teaching people how to manage and plan their cashflow, and by that I mean I’m going to use the dreaded word ready listeners starts with a B. It’s called budget. Everybody hates that word, and I even hate that word, Steve. I hate the word budget because it sounds like diet. That’s why so many people don’t want to do it. What I would advocate is we use the word spending plan and teaching people how to plan where they want their money to go is life changing. People suddenly feel in control of their money. And when people come into coaching, we literally start at the month level. You could call it a forecasting plan, you can call it a cashflow plan. You can use all sorts of fancy words, but imagine planning where you want your money to go in April and looking at how to match up with the cashflow.

It is this, you feel and control in a way that you never have. I’ve literally had people burst out in tears when we finished their first cashflow plan. They’ve never seen money so clearly before and all of that sits within an annual spending plan. So that’s a huge piece for people. The other thing I would throw in Steve, is that one of in terms of quick tips for listeners that will help them rise out of the money fog, what I find is that a lot of people have two mini accounts and I mean they have too many credit card accounts, too many checking accounts, too many saving accounts. I’m not talking about investment accounts, it’s another subject, but people have so darn many accounts. Sometimes it’s leftover from relationships or it’s so easy to open an account nowadays people get caught up in what I call bucketing.

So they think, oh, this credit card for trips, this credit card for emergencies, this credit card for eating out, it kind of works until it doesn’t and then people are transferring money all over the place. The other problem is it’s a lot of energy to look at your money that many places. You lose the big picture. So one of the big recommendations I give people is we prune accounts, we need one primary checking account, we need one or two primary credit cards. The fewer accounts, Steve, is actually correlated to higher net worth and it’s correlated to people feeling less stressed and more peaceful around their money. Now you can have a really high credit score and have 50 credit cards if you really want to spend that much time and energy managing that many accounts, go for it. Generally speaking, for people that have that many, no, that’s a silly number, but for people that have a lot of credit cards and checking accounts and savings accounts, it’s correlated to stress and anxiety and people lose the big picture of their money. So that’s a great go-to is like that’s a starting place. Starting place is simplifying your account structure.

Steve Chen:

That makes sense. Yeah, simplification. Some people get into automation, Hey, my paycheck goes here, it automatically splits here, this dah dah, dah. Bills are auto paid, but they have a way of wrapping it all back and I know that one budgeting tool I’ve wrote people love is You need a budget I have the founder on, and it’s more of like a methodology for building a budget, but it does require, I think a great deal of enthusiasm. But people,

Mikelann Valterra:

That’s a fabulous program. The tool that I recommend is called Money Grit, which is a spending plan program also, and it’s not that dissimilar. The difference is YA is very month focused, there’s no annual plan in it, and because it’s a different type of methodology, and so it works really, really well for some people and for some personalities it’s got a rabid user base and Jesse’s brilliant and amazing and just a lovely, lovely man. So you’ve got to find the right tool for different personalities because it doesn’t matter how good the tool is if you don’t use it and it doesn’t work for what you personally need.

Steve Chen:

Yeah, a hundred percent. Well, I think this idea of visibility is really important too. That’s something that we’d like to realize more and more and our users are forecasting, but it’s that sense of I have some level of visibility into, in a worst case scenario, I think that lets people take a breath If they can get there, having an emergency plan, I have six months or a year or I have access to credit, like a home equity line that lets me do that. So I understand the big levers I have and I don’t have to freak out. Unfortunately, half this country is paycheck to paycheck, even higher earners. Alright, well look, I want to ask you one more big question and then we can kind of move to wrap up. One thing we touched on was money personality types, and I would love your take on what those are and how those things come to life for people.

Mikelann Valterra:

Yeah, that’s one of my favorite subjects. I mean part of it’s what motivates people. Like I said, the two most common are we’re motivated by security or we’re motivated by freedom. How I would name them is people that are motivated by freedom. I call them the liberty personality type. The point of money is enjoy life. People that are motivated by security, I call them the safe harbor type and the point of money is be safe. But there’s also two other types I would put out there. There’s people that, their personality type I would call them and people that are the aid workers. And so mission-driven personality types. The point of money is move your vision forth in the world, whether you’re CEO or Mother Teresa, the point of money is bring forth what your vision is, right? It’s not money, it’s what you can do with it.

So that’s the mission driven personality type. And that last one I mentioned, the aid worker, that personality type is fundamentally motivated by love. What is the point of money help the world, whether it’s my family, whether it’s philanthropic giving, but underneath these four types, you can, I said it right? It’s like we have these motivations and we’re all a combination of all four. No one is a hundred percent any of them. We tend to be weighted in one of them. And so the aid worker types, those are our teachers and our counselors, I mean they tend to be drawn to helping work versus the mission driven type. The first two definitely are the most common. People really get like I’m a liberty type. It’s all about what I can do with my money and enjoy my life versus the safe harbor. I want to make sure no matter what I am, it is the safe harbor types that are most drawn to you and your software. And it’s like, it’s such a beautiful tool. I’ve used it. I love it. I just think it’s just beyond completely fabulous. And it’s because it gives people this sense of safety. I know I’m okay now and I can run some scenarios and I know that me and my family are going to be okay and safe 20 or 30 years from now.

Steve Chen:

Do you, well, I’m curious for yourself, I mean I would score you one way, but I’m curious how you self-assess on this.

Mikelann Valterra:

Yeah, it’s an interesting question. Mean, this goes to the midlife thing we were talking about earlier. People tend to balance out and shift in the middle of their life. So I used to be more safe harbor. I’m now tilt a little bit more towards liberty, so that’s a real common shift for people in midlife, depends on what they were. And I tend to be very mission-driven, right?

Steve Chen:

That’s what I was going to say. You’re mission and also aid driven. You’re out here educating people and writing

Mikelann Valterra:

Books. You don’t write a book without having that. It’s a power part of a personality. You need a lot of that to bring forth your mission in the world, otherwise you just don’t have the power or the energy to do it.

Steve Chen:

Do you have a test on your website so people can self-assess?

Mikelann Valterra:

I’ve got different blog posts at the high level, but full on money, personality typing, it goes beyond what people would do in a thing. I mean, I do it obviously with my clients, but there’s certainly some high level blog posts I’ve got that absolutely get into this, particularly the first two, first two around liberty versus safe harbor, which is that freedom versus security, and that’s very helpful for people.

Steve Chen:

How do you think the population divides itself broadly? Are most people in liberty and safe harbor or is it 25, 25, 25, whatever?

Mikelann Valterra:

I believe it really is 25, 25, 20 25. But the thing is, is that most people don’t talk about types three or four. If you think about what’s out there in terms of the financial psychology world, financial psychology is still a very young field and people still talk about are you a spender or are you a saver? Like it’s binary or you’re either the freedom or security driven. And actually you can be power driven, which would be either Mother Teresa or the CEO. The point of money is vision and mission or I mean, how many people are driven by money as love? It’s all about spending money on their families. Yeah,

Steve Chen:

A hundred Percent

Mikelann Valterra:

It really is all four and we have all four. You would be very out of balance around money. If you were a hundred percent one of those types, it would cause issues

Steve Chen:

For sure. I mean, given the level of anxiety around money, I’ve got to believe that a lot of people have a decent amount of that wanting to be safe inside of them.

Mikelann Valterra:

Yeah, a hundred percent. I agree. That’s human, right? I mean, money is connected to core survival issues. This goes all the way back to childhood and our childhood money stories. Very young children know that money is connected to this thing called food and bills and important things that mom and dad do. So you’re totally right.

Steve Chen:

Mikelann, this is awesome. Anything else you want to touch on before I wrap up for our audience?

Mikelann Valterra:

Yeah, I mean, we hit so much, man. I work with people all over the United States and my message to people is we’re all on a journey and you’re okay where you are. I want people to come out of fear, around money. If everyone told their money story, it would be like the most wonderful entertaining movie you ever saw. I mean, it’s normal to have twists and turns and ups and downs around our money story in our life, but we feel so bad about it. We don’t share it. We all have an amazing story and you are where you are on your journey. And the question is, where do you want to go and what are the tools and the resources to get you to a happier place? You can feel better about money. That’s the big message.

Steve Chen:

Yeah, that’s great. Actually, I have one more question for you, which is you’ve been doing this for 25 years. You’ve seen, I mean, how many people have you helped?

Mikelann Valterra:

Oh my god, I don’t know. Hundreds and hundreds and hundreds, right? Hundreds, hundreds. Hundreds and hundreds and hundreds.

Steve Chen:

And you’ve probably helped ’em for a long period of time. So how are outcomes? I think a lot of people are worried I’m going to end up in the poor house because the reality that most people end up fine.

Mikelann Valterra:

Yeah. I mean, what I say is I haven’t lost one yet, right? I mean that assumes that people stay in and engaged. Can you help everyone? No, of course not. That would be silly. Some people come into coaching and go, oh wait, I don’t actually want to do any work. I just wanted to talk about it a little bit. So no, you can’t help everyone. I would not want to put that out there, but I have seen amazing things. When people rise out of the money, fog, everything becomes possible. And part of it is tapping into their vision, learning again, skillset and mindset, and we need both. And when people get both, there really isn’t anything that they can’t do. They’re afraid to look at the future, but anything’s possible once you get clear, once your vision clears, things come up that you hadn’t even considered.

And I think that’s the exciting thing in coaching. I don’t always know how things are going to work out. And as people get clearer and clear things arise that help solve just about everything you could possibly imagine. It’s amazing. But answers do not appear as answers when you are in a cloud, when you become very clear and different answers and opportunities arise before you see them for what they are as potentially really helpful. So you will grab hold of resources that may have been there all along, but when you’re in a money fog, you just don’t see them.

Steve Chen:

Yeah, it’s super powerful for us. We’re very focused around helping people get this place of financial confidence through literacy. So understanding your situation, what’s possible, kind of where you’re today, what’s possible in your future, what are the big levers for you, and then helping them, and this is where coaches and advisors come in, but helping them actually affect those changes in their lives and stick with it. And the big point is if you get to a place of financial confidence like you’re saying, then you can look around. You’re not in the scarcity mindset like, I’m going to run out of money tomorrow, but what am I doing here? What am I going to do with my time? Which is really my scarcity resource, and how do I step forward boldly to kind of do what I want to do next? Mikelann, thank you very much for coming on the podcast. This is great.

Mikelann Valterra:

I loved being here. Yeah, I love your podcast and I’m sure all of your listeners just absolutely adore you. It’s such wonderful stuff that you’re talking about and you’re talking about stuff that needs to be talked about more. So thank you.

Steve Chen:

Thanks. Well, I think they adore are the guests. The guests are the real value out here, but appreciate your time and your insights into psychology and framing the issues. And I think this emotional side of it so important. We spend so much time thinking about the math and I think the perspective on men versus women, that dynamic and relationships, these are all things that new to me. So it’s fascinating. Mikelann, thank you for coming. We will point to your site, Seattle Money Coach and books and so forth. For anyone listening, if you leave a review for us, we appreciate all feedback as welcome and checking out our site at NewRetirement.com and Mikelann site at Seattle Money Coach, we appreciate that. So thank you and we’ll talk to you next time.