226 | Automating Your Savings to Secure Your Best Financial Life with Anne Lester

Hilary Hendershott: Alright, here we go. I am here with Anne Lester. I’m really excited. Anne is someone I’ve been following for years and is a media commentator and a speaker who’s on a mission to help Americans of all walks of life achieve a safe and secure retirement. Her new book, Your Best Financial Life, will be published by HarperCollins in March of this year, 2024. Anne is hailed as a pioneer and an innovator by Morningstar. She’s worked on all aspects of retirement for the past 30 years. She spent 15 years at JPMorgan doing Asset Management. She traveled the country, spoke to tens of thousands of investors. And she is a regular contributor on news outlets like CNBC, Bloomberg TV, The Wall Street Journal, New York Times. I don’t know how you upgrade from there, but apparently countless industry publications. Welcome to Love, your Money, Anne.

Anne Lester: Well, thanks so much for having me. I’m excited to be here.

Hilary Hendershott: Yeah. You have published specifically and forgive me if I’m wrong, but for Gen X and baby boomers for years, why now the focus on millennials and Gen Y?

Anne Lester: Well, for me, it really is about trying to help people when, I don’t want to say it’s easiest to help them, but when you’re young, time is such an incredibly powerful tool. And I think when you’re young and certainly, when I was young, I didn’t feel like I had any money to save. And I think if I could help people understand that the decisions that they don’t realize they’re making when they spend instead of save or don’t invest, right, are going to have huge consequences. So, how do you help people understand the trade-offs in that moment and help them save? And it’s going to save them so much heartache down the line. So, that’s why I wrote the book. I also have two sons in their mid-20s and, I guess, I’m thinking about them, too.

Hilary Hendershott: Right. So, have they already read the galley? Are they already up to speed on what they should be doing?

Anne Lester: Okay. They were my initial focus group of two. They read the galleys. They provided extensive edits. They said, “Mom, that is so lame. You can’t possibly write that.” So, yeah, it was very helpful.

Hilary Hendershott: Good. Good market research.

Anne Lester: Oh, absolutely.

Hilary Hendershott: You’re prolific, but I think this is your first book. Is that right?

Anne Lester: It’s my first book. It’s my first book, I’m so excited. Oh, my God, I’m so excited. Nervous too but excited, obviously.

Hilary Hendershott: I don’t know if you’re excited about the publishing machine you now have to turn on because you’re going to be doing it from morning till night. So, what led you to consider a book after years of publishing successfully?

Anne Lester: Well, I always wanted to write a book. I have an unpublished novel I wrote in my 20s. I am a super, super voracious reader of just about anything. And I guess, I like to write. I like to speak. So, this just felt like a very natural thing for me to do at this point in my career. I spent 15 years as the head of retirement solutions at JPMorgan, almost 30 years there overall, and I felt like I’d done a lot to help people as much as I could sitting in that seat. But what I really want to do is get out and talk to people and kind of have individual conversations like this to really help move the needle if I can. So, let’s see if that works.

Hilary Hendershott: Good, good. Well, it’s exciting. So, going from exciting to depressing data points that you include in the book, you say in 1989 when baby boomers were about the same age as millennials today, they owned over 21% of national wealth. Millennials today own just under 5%. Why do you think that is?

Anne Lester: It’s so funny. I have a master’s degree in economics and the classic joke about economists is that they say, it depends, in answer to every question, right? So, I think it depends. But certainly, the median cost of a house today is a lot more expensive as a fraction of the median salary. So, I think baby boomers were able to buy houses relatively early. And there was a huge explosion in housing developments and new housing was just being built crazy to supply this huge demographic wave of people that was coming along in the baby boom. And they were just more affordable. Interest rates were still low. And so, I think that median salary bought a median house.  So, that formula worked a lot better.

Something I think, it’s really easy to lose sight of today and I think that partially explains why housing is, relatively speaking, more expensive compared to that median salary is houses are a lot nicer now than they were in 1960, right? They’re just nicer houses. Or 65, whenever that generation was starting to buy their first house. So, we’re getting more space, we’re getting nicer fixtures, we’re getting granite countertops, we’re getting stainless steel appliances, we’re getting air conditioning. And so, if you try to do an apples-to-apples comparison, I don’t think housing has actually gotten a lot more expensive, but it’s gotten a lot nicer and bigger. Now, that doesn’t make you feel any better if you’re still trying to get your first place, right? It still is a horrible, horrible, horrible thing. But I think, a lot of it is explained by real estate, frankly.

Hilary Hendershott: Is that right? I think a lot about the impact of the Great Recession in 2008 and 2009 on young people whose first investing experience was like, “What? Mom and dad, why would you have me do this? My 401(k) turned into a 201(k),” right? And that being their first impression of stock market investing, it’s like, that’s sort of unfortunate. And I’m truly hoping that us who are out here educating can kind of get the point across that that was a really anomalous experience and unlikely to happen again to that extent.

And I do have more questions for you about the stock market, but economics is, of course, about the allocation of scarce resources. And I think that’s a hard lesson for people to learn, that there might never be enough money to do everything you want at one time, right? And a lot of financial success is about rewiring your brain to like saving over spending. So, what lessons can listeners take from the findings of the Stanford marshmallow experiment, which you talk about in the book?

Anne Lester: Delayed gratification, which is what that marshmallow experiment is all about. Waiting to double your reward, which is getting two marshmallows instead of one, if you wait, is so painful. It literally causes most people pain, like the part of their brain that lights up when they think about having to delay gratification is the pain part. The pleasure part is what lights up when you get to do what you want right now. And so, as you say, rewiring that habit, or maybe one of the things I explore in my book is not rewiring it so much, it’s just creating guardrails for yourself so you don’t eat the marshmallow. Lock it up in a cupboard, make it hard to touch.

Hilary Hendershott: Put it on ice, just freeze it.

Anne Lester: Put it out of sight. Yeah, well, all those things, right? But for me, the big aha moment for me because I’m a spender. I like nice things. I have terrible impulse control when it comes to money and food, frankly. So, what do you do with that? Well, a huge first step for me was letting go of some of the shame and the blame I felt because I felt like, well, I’m smart. I should be able to do this. There’s something wrong with me. I’m bad. I’m lazy, right? I’m all these things. This whole talk-track in my head about I should.

And just accepting that I’m kind of wired like this is a huge relief and it lets me– I think society has come so far in understanding our own brains and how we behave around this stuff. But it’s so much easier to go, “Oh, I’m going to do that thing if I put temptation in my way. Let me figure out how I can create an environment where I’m just much less likely to fall into temptation.” And then once you start doing it, as you say, it becomes a better habit. You rewire your brain, right? You’re able to live with the discomfort that you feel, that pain.

If you say, “Actually, I’m not going to eat that marshmallow, I’m going to wait. I want two marshmallows tomorrow,” but it takes a long time to build that muscle and to build that rewiring. And some of us may be more or less successful getting there. But for me, too, the guardrails are really important because that keeps you in a better place. And I think if you understand why your brain’s doing what it’s doing and have a better understanding of some of the consequences of those choices, it’s a little easier in the moment to say, “Whoop, where are my guardrails? I got to find my guardrails.” And stick to the plan that you’ve got.

Hilary Hendershott: When I was digging myself out of umpteen thousand dollars of debt, I literally froze my credit cards. I mean, I could have cut them up, but I’ve literally frozen them in Dixie cups and put them in the freezer. And the other thing about guardrails, I love having one account that I spend from that profit first kind of multiple account system. I just only let myself spend from one account, and everything else is like auto transferred elsewhere, so I can’t see it. It just really works for me. Have you ever tried that?

Anne Lester: Automatic everything, like automatic savings. I mean, it’s one of the reasons if you’re lucky enough to have workplace savings, a 401(k) plan, some kind of pension that sucks the money out of your account. It works for savings, like emergency savings too, a brokerage account, right? But if it sucks it out of there, you can’t see it. And the scary thing about putting your money into something like a 401(k) plan is it’s locked away forever, or at least until you turn 59, which, let’s be honest, if you’re 25, is forever.

Hilary Hendershott: A lifetime.

Anne Lester: Well, it is a lifetime, right? It is exactly what it is, a lifetime. But it also makes it kind of hard to get to. So, in the moment when you think, “Oh, my friends are going on vacation. Yeah, I can’t because I can’t really get it out.” Or I have to thaw my credit card if I want to use it. Like, I mean, those are great tricks, right? And I think some of this process for a lot of people involves, there are a lot of great tips out there. But some tips may work better for you than others and, like, figuring out what’s your bumper guard? I always used to love taking my kids bowling when they were little because they put those things in the gutters and I couldn’t miss.

Hilary Hendershott: You love the bumper bowling.

Anne Lester: I love that. I love that, right? Yeah, I love that.

Hilary Hendershott: Right. Trial and failure. It’s about getting out there and seeing what works for you in my head. But speaking of being 59 and a half, my husband turns 59 and a half this year and he cannot understand why I’m so excited about, he can take money out of his IRAs. And I said, “You don’t understand. It’s been a lifetime, a lifetime for me of putting money in. I finally get to take it out.”

Anne Lester: You get to. Have to. We can have a chat about that later, but…

Hilary Hendershott: I know, I know.

Anne Lester: Actually, it’s funny, I turned 59 and a half as well this year. And I’ve got a teeny tiny little bit of money in this sad little IRA I set up ages ago that I kind of forgot about, and I got a statement in the mail as I go, “Oh, you know what? I’m just going to pull that sucker out.” It’s such a small account that the fees are killing me, but it is just like I’ve been waiting, right? So, I don’t get the tax penalty.

Hilary Hendershott: I mean, right after your book tour, you probably deserve something really nice.

Anne Lester: Thank you, thank you. Yes, thank you.

Hilary Hendershott: A reward for a work well done. And so, to take the conversation about trading pleasure today for more pleasure tomorrow and, like, gratitude that you did that kind of one step further, your book talks about why it’s so important to invest your money so that it outpaces inflation. Can you talk a little bit about that?

Anne Lester: Absolutely. If you sock it away in a savings account, maybe right now, a high yield savings account actually is paying you a little more than inflation. But historically, that’s not been true. And typically, putting your money in a safe place in a savings account is going to lose you money if inflation and sort of even goes back to normal and those interest rates go back to normal. So, the power of time and saving early is compound return. And I talk about the magic effects of compound return in my book. And if your money grows by 7% a year, which is, I think, a reasonable, maybe slightly conservative assumption if you own some bonds.

Hilary Hendershott: Yeah, historically, we’ve said 8 to 9, so yeah. I think that’s a conservative estimate.

Anne Lester: And how do you think about inflation? And I mean, so I think 7% is like if you’re planning, a 7% number is going to keep you out of trouble. I do worry when people are like, “Whoa, 12.” It’s always going to go up 10.

Hilary Hendershott: That’s unlikely. That’s not born out by data.

Anne Lester: I think that’s a high number. But 7%, your money’s going to double every 10 years. So, any money you save today, if you save 100 bucks today and you’re in your 20s, it’s going to be 200 bucks in your 30s, it’s going to be 400 bucks in your 40s, it’s going to be 800 bucks in your 50s. It’s going to be 1,600 bucks in your 60s. And if you do that every month or every week, like, just imagine how much money that’s going to be. It is literally magic. And I know a lot of people, especially when they’re young, say, “Oh, I’ll have more money later. It’ll be easier to save.” And I think that’s so dangerous. Because of that, you’ll have to save five times as much in your 50s as you did in your 20s, okay? You’re not going to have that much more, I can promise.

Second, even if you aren’t able to put away very much, just starting starts to build that habit. And if you just keep it up and to save, I talk about just saving 1% or 2% of your salary. That sounds like nothing. It is maybe very little, but you look back in a year or two and there’s going to be real money there, and then that’s going to grow, right? So, to me, it’s partly about building the habit and biting off small bites. You don’t have to get to the 10% to 15% we all say is like the right amount to save in one blow, right? You can get there over five years. It’s okay.

Hilary Hendershott: I’m always surprised when I see large cash balances sitting around when I meet people in the beginning, right? Because I get to see their account statements and I’m going, “What was that?” And it’s always like, “Well, we put it there. I didn’t know what to do with it. It’s been six years,” right? But I know, everybody knows this is how I make money. So, I love it when my listeners get to hear it from my guest, to reinforce the message of no, stock market investing is the thing you need to do.

Anne Lester: So, I’ll tell you a slightly embarrassing story for me.

Hilary Hendershott: Tell me.

Anne Lester: I used to manage when I left JP Morgan, like $125 billion of other people’s retirement money. Billion. And you get a bonus in financial services and I get that bonus or I get company stock and I go, “Oh, do I sell it now?” I don’t know, maybe the market’s going to go down and it’s a bad time to sell. I know I should sell it now, but do I reinvest it? And I get trapped in exactly the same, well, I don’t know if it’s a good time to invest the money.

And I finally learned that. I just have to be mechanical about it because the amount of emotional energy and stress, forget the market returns that I’m losing because that’s real too, especially if you’re out of the market for six years, but just the mental space that worrying about this stuff takes is not a good use of your time. Dollar cost averaging is a beautiful thing to say, “I’ve got this money. I’m going to put it to work over the next six months or year.” Just do it. Give it to a financial advisor if you work with one. Let them do it, right? Automate it, get it out of your hands because there’s never going to be a moment that feels good. And if it does feel good, it means the market’s doing really well and you’re buying too high.

Hilary Hendershott: And you missed out, right? I know, moreover, that thought process, which I’ve heard probably a thousand times from other people in your same situation. We work with a lot of Silicon Valley folks. You get a lot of stock. It’s like, well, what should I? Should I now? Should I later? That thought process is never going to get you to the happy outcome, right? It’s like because you don’t know if your crystal ball is cloudy, I promise you. So, agree.

Anne Lester: Well, people hate to invest when stuff’s on sale because it feels bad. And they want to invest when everything’s going up because it feels really good. And that’s like the opposite way that you make money. You’re not supposed to buy high and sell low. You’re supposed to– right? And it’s behavioral. And what’s funny is, I worked on an investment team that made tactical calls. We were really good at doing this with other people’s money. I don’t know if I was uniquely bad at doing it with my own personal accounting. Sometimes, I was. But it’s really hard even if you know better not to do it.

Hilary Hendershott: Is it heavy to manage $100 billion?

Anne Lester: It’s humbling is what it is because you don’t always get every call right, you really don’t. You can look at our track record and see that. And even when you do get it right, it’s an awesome responsibility. And when I was running the target date funds at JPMorgan, I used to make a point of trying to find a delivery truck of our very first target date customer every day and I would find the delivery guy for packaged goods. You’d see him in convenience stores and stuff. And I would look for that truck and I would look for the– always a guy. Never saw a woman doing this with one of those dollies with this big crate of stuff they were hauling into the store. And I would just go, “Yep, literally, you are my customer. If you are in that 401(k) plan, I’m investing your money for you.” And it was so important to me to remind myself that these are real people with dreams and hopes and worries and concerns, and I found it very humbling and very gratifying.

Hilary Hendershott: Well, we’re not going to get into gender stuff, but I imagine not many of your male counterparts had that same thought process. But it’s true. They kind of hired you when they’re…

Anne Lester: Maybe not.

Hilary Hendershott: I’m just going to guess that they hired that person with the dolly and the crates, hired you sight unseen. So, that’s really powerful. Let’s see. And you already mentioned kind of the similarities between money and food or, I mean, I see a lot of them. And of course, that’s been…

Anne Lester: I think a lot about that personally.

Hilary Hendershott: I know. I have spent a lifetime trying to master my own food intake. I’ve learned, for me, my body is like a little bit hypoglycemic fasting. That intermittent fasting thing does not work for me, no matter how many Instagram celebrities recommend it. Your book introduces money types, so I know something about my body type. Let’s talk about money types. How can we determine our money type? And what kind of positive outcomes can listeners expect from uncovering this?

Anne Lester: Well, at the risk of sounding hopelessly self-serving, you can take a little quiz at my website.

Hilary Hendershott: Oh, good.

Anne Lester: AnneLester.com, Anne with an E. And people don’t fall into neat little buckets, right? And especially with money, I don’t think we’re all one thing, but I do think that there are some really common types, right? The big ones are savers and spenders. If I get a windfall, if I was a kid and had $5, my immediate thought would be, “Oh my gosh, what could I spend this on?” And that’s immediately how my brain works. Oh look, goody, I can do this with the money.

Some people, I think they’re in the minority, kind of think, “Wow, I can sock this away for the future.” Whether it’s because they worry, whether it’s because they were taught good habits, whether their brain wiring is just a little more rational in that sense, able to understand that trade-off in the moment. Maybe they just don’t care. Like, I’ve got two kids, one of whom literally doesn’t care. He just doesn’t like nice stuff.

Hilary Hendershott: Doesn’t care about money or about buying stuff?

Anne Lester: Doesn’t care about the stuff money can do for him, right? He doesn’t care if he’s eating rice and beans every night or going out to dinner every night, except that’s kind of a pain in the butt. He just seems to cook rice and beans. He just is very unmotivated by material things, which is good because he’s a musician. And he’s very unlike me, right? I have this unerring instinct to be able to walk into any store and immediately fall in love with the most expensive thing, even if there are no price tags, like it’s a gift.

Hilary Hendershott: Oh, I love it. I love it.

Anne Lester: So, when you think about the spending type, there’s an ostrich that just doesn’t want to think about it. If they don’t think about it, maybe it’ll go away because it’s so painful to actually look and see it.

Hilary Hendershott: Get real with the numbers.

Anne Lester: Get real with the numbers because it involves acknowledging perhaps. Maybe not, like, maybe things aren’t nearly as bad as you worry about, right? It doesn’t necessarily mean it’s bad, it just means that you can’t look. I talk about crypto pros a little bit. I think that’s maybe a little less common now than it was when I was defining some of these, but I do think there’s a…

Hilary Hendershott: I think it’s coming back. I think it’s coming back, Anne.

Anne Lester: There’s a type of person, right? And maybe like they’re high risk seeking. They’re really in it for the big payoff. And it’s always going to work next time. History is littered with people like this. And they’re the ones who build amazing new companies, right? So, let’s not diss them. But you’ve got this belief that something’s going to work and I’m going to get this big payoff. I think when you’re building a company as an entrepreneur, that’s maybe a more reliable way to have that work than to fall prey to the latest buzzy thing that you see on the internet or whatever or somebody telling you a great story. And I think for people like that, it’s really important to think of all the stupid questions you can ask and then ask them. And if you feel stupid asking them, it’s a sign that you shouldn’t do it.

Hilary Hendershott: Whoa, that’s like a life lesson. It’s good.

Anne Lester: Right? If you feel stupid asking the question, don’t do it.

Hilary Hendershott: All right.

Anne Lester: Just don’t do it.

Hilary Hendershott: And so, once people go to AnneLester.com and figure out their money type, are you going to tell them what to do about that?

Anne Lester: Yes. You get a little form back. It has some tips and hacks on how to manage that. Another kind of spender that I talk about is the over subscriber, which I think, like many of us these days are, right? Just did it myself and I was like, “I didn’t know I was still subscribed to that app. Oh my gosh, I haven’t opened that up in a year.” Swipe right, turn that one off. But it’s really important to keep an eye because we all get alerted. I just put a calendar, flag it. I signed up for something and I was like, I put a calendar note saying, cancel this subscription before this date. Otherwise, it’s going to convert and I don’t want to do that, right?

So, it’s so easy to say, “Oh, that looks cool. Let me try it.” I’ve got a whole bunch of tips in there. One, that a girlfriend of mine who’s a financial advisor actually said, “Wow. I never thought about that.” If you happen to have more than one credit card and do not get a second card just for this purpose. But if you happen to have more than one, use the card with the closest expiration date on it to subscribe to anything because it will expire ideally within a year, and then you’ll have to put your information back in. And that’s just an automatic, like, do I really need this again? So, that’s like a silly little hack, right? But to me, it’s a really powerful one.

And I think, there’s some free apps you can use that will keep you on top of this. I think if you’re, I don’t know about Android phones because I have an Apple, but you can just go in and look at this stuff, but you kind of need to go look at your credit cards too and see what’s not in an app, but what if you just subscribe to that you maybe don’t need. I’m a watcher of a couple of TV shows that come out once a year. Like, do I really need the subscription service all year if I only watch it for two months? I don’t think so.

Hilary Hendershott: Wow, you really turn off like Netflix and Prime?

Anne Lester: Well, I turn off one. I’m not going to name any names, but I do turn off one.

Hilary Hendershott: Kudos to you. That is my downtime. So, good on you. You know what I found? I’m good at not subscribing to things for myself. I bought an iPad for my five-year-old at the time, which is really always on babysitter. The iPad is always available, right? And I just turned on the flow of subscriptions for her. So, I’m paying for, I’m like, do you still use this piano app, right? It’s been six months. So, I was overconfident in my own unsubscribing ability.

Anne Lester: It’s a thing, right? And they just disappear into the background of your life and you stop thinking about it. We got this amazing thing during the pandemic, which was this flash-frozen Alaskan seafood that was really a great deal compared to buying that quality stuff at the store. And I looked in my freezer, and there was three months of stuff stacked up. And then I was like, “This stuff is delicious, but I’m just not cooking it fast enough.” Like, stop the subscription. I’ll buy it when I want it.

Hilary Hendershott: I know. Let’s circle back to when you were at JPMorgan. And you share this in the book. You didn’t have a plan for your own retirement. You were probably contributing. But you want to think about your retirement. So, that’s the cobbler has no shoes kind of fable or theme. And I can definitely relate to that. Can you say a little bit more about, like expand on what it took you to really grow through that, to kind of walk through the painful emotional experience and align with what you’re doing now?

Anne Lester: Well, I remember this vividly, right? It was after our second child was born, and I literally remember thinking, well, I’m a mom, I’ve got two kids. I’m now a grownup and I have to take this retirement thing seriously. And the industry has come so far in the last 20 years, right, 23 or 24 years now. It has come so far, like you got this paper. Sign up, kid. And it was just so you were asked to make all these choices and you had to opt in. And it was really, really dense and off-putting. So, I think, a lot of innovation has happened that makes this just much less painful in general.

So, this was kind of the bad old days, but I actually had to fight through finding my login, finding the online system on the dial-up modem right from home. My husband was upstairs giving the kids a bath. And I log into the thing and it starts asking me these questions. And the question that just sent me over the edge was, how much money did I think I needed in retirement? I was like, “I don’t know.” How much am I spending now? I have no idea, right? I’ll make something up. And then it said, what did I think inflation was going to be between now and when I retired? And I was just like, “Oh my God.” I do this for a living. I have no idea how to even begin thinking about this stuff. And I literally shut the whole thing off and went upstairs, did the dishes, and didn’t think about it for another couple of years. I think I was maybe saving 5%. Not enough, right?

And about four years later, I was asked to help my team think about how to build investments for 401(k) plans, which turned into the target date funds. And as part of that, I did a whole bunch of research into how people save and started learning a lot more about behavioral economics. And for me, it was like, “Oh, this is what people do. Oh, this is what I do. Wait a minute, we can fix this,” right? So, it really was a very intellectual understanding of this is my brain and this is what I do wrong. And all these guardrails that we’re trying to build into the 401(k) system, like automatic enrollment, automatic escalation, automatic investing, defaults are all things I can do for myself. Wow. So, I did.

Hilary Hendershott: How long did the process take? In other words…

Anne Lester: Oh, I mean, it was years. It was years. I mean, it was years of, and we’re serial money pit home buyers and remodelers. So, we did some of this to ourselves, but it was years of juggling and not really being unwilling to say, “We just can’t do this now.” I have to say we bought this. We live in a Victorian house. It’s about 120 years old. And we were much more sensible remodeling this. And it took us 13 years and 17 projects. We just bit off a little tiny project. When we had the money, we did it. We had the money, we did it.

But it took us a long time, me maybe more than my husband to really say, like, we just have to be ruthless about what we can and can’t do. And it was understanding that my impulse to do it didn’t mean I had to do it, and that I could live with the discomfort of not doing it, and that I could also set up some guardrails and take some of the decision making away from myself, like just saying, as soon as my stock vested, I would just sell it. I wouldn’t think about the timing. If I got money in, I would invest it without thinking about it. I wouldn’t try to be smart because all I did was cause myself stress, and the amount of money that I could have theoretically made or lost if I’d done that perfectly wasn’t worth all the emotional energy I was spending on it because it wasn’t that much money.

Hilary Hendershott: So, the piece that cemented your name in my brain was about the migration of American savings from pension plans, which are guaranteed benefits to 401(k) plans, which are, what they call defined contribution. But let’s say, America goes through one more mega transformation, and now, it’s rare to get your hands on a job where your employer offers a 401(k) or a 401(k) with matching. How can people inoculate themselves? What would you say to someone in that kind of world?

Anne Lester: So, (a) I hope the pendulum’s going the other way. And I think there’s a reason to be optimistic about that. But let’s also be honest, we’re not there yet. And about a third of all Americans who work for an employer do not have workplace savings today. And anybody who’s working for themselves, digging whatever, is not going to have a 401(k) plan. So, you have to set one up for yourself.

And if you are working for an employer who doesn’t offer a 401(k) plan, you really have to go through the hurdle of setting up an IRA, and that IRA can be set up in any name brand financial institution, whether it’s a bank or a mutual fund company or an online brokerage platform can offer if you sign up for monthly contributions will give you the option of a very low cost. Just have it transferred, maybe from your paycheck, actually, from your payroll feed, but also, it can just come right out of your checking account the day your paycheck hits and it just goes poof and you never see it. And that’s an absolutely fabulous way to get yourself going.

The second thing that’s important is to also turn on having that money automatically invested because just putting it in the account doesn’t do much for you. You also have to pick an investment for it to go into. I’m biased because I used to manage target date funds, but I think target date funds are great for retirees. You pick the fund that corresponds with your age when you’re going to be 65 or 70, or whenever you think you’re going to stop working, and then you don’t think about it again until you’re 50 or 60 and want to maybe check in and pay a little more attention. But for the first 20 or 30 years, just let it go. And that takes a lot of the places where having to make a decision stops you from taking any action at all because you get afraid that you’re going to make the wrong decision. And I will say, the only wrong decision you can make here is not to do it. Everything else beyond that is like a version of a better decision.

Hilary Hendershott: Agreed. And I do hope that the pendulum is swinging the other way. And as we know, America is made of small businesses, and it’s tough to get to a place where you can afford a 401(k). It took me five years in business to do it.

Anne Lester: They’re expensive for small employers. They sure are. So, I get it. But I do think that I’m on the board of a company that is working on fintech solutions that’s going to hopefully drive that cost down. There’s something called pooled employer plans, which are cheaper access points for a small business. So, I’m optimistic, but that’s another conversation.

Hilary Hendershott: It is another conversation. And I take the lesson of your book really to be, you can do this. It’s really an empowering book, right? And I really like the stories and I like the language. It’s very light-hearted and cute. What would you say– because who’s in my world, who’s in my sphere is, yes, wealth management clients, but I also work with business owner clients who are inevitably in their 30s and 40s and are terrified that they’ve waited too long, like it’s too late for me. What would you say to her?

Anne Lester: I think it’s never too late to make it better. It’s just never too late to make it better. You can do something today, no matter how old you are, that’s going to make it better. I think the longer you have waited, the more you’re going to have to start adjusting, right? Either your expectations for what that future is going to look like when you transition into that future, and maybe what your current life looks like. So, you’ve got time, which is one big variable. You’ve got how much you can afford to save, which is one big variable. And you’ve got how long that money has to last, which is another variable. And you’ve got some control over all those things, right? How long you keep working, how much you’re saving, and when you choose many people, especially if you’re an entrepreneur working for yourself, like when you choose to shift into maybe dialing back your income-generating years and shift into consuming some of what you’ve saved.

And those three variables kind of explain everything. So, time is that super powerful thing when you’re in your 20s. When you’re in your 50s, let’s say, it’s really not your friend anymore. It’s kind of not your friend. But even in your early 40s, I’d argue, like you’ll have to dig a little deeper and maybe make a bigger sacrifice in your current spending if you want to really start saving some money. But it’s really not too late to accumulate some, maybe a little luck from the markets, maybe some real discipline on the spending side, especially when you’re younger, but even if you’re older. One of the tricks that I talk about in my book is really getting into the habit of saving half of every raise, and that way, you keep increasing your savings rate without having your consumption slide up. You’re generally, okay, maybe…

Hilary Hendershott: I tell people to save their raises.

Anne Lester: I think that if you’re 25 years old and sharing an apartment with three people and your bedroom is like the divided living room, I think that’s a little harsh. That’s a little harsh. That’s a little tough.

Hilary Hendershott: Definitely. You have to get to a place where you’re comfortable with your current financial spend.

Anne Lester: Yeah, but you cannot do what I see so many people do, which is great. I got this size raise. That means I can afford that much more. And then your savings rate never increases. And that’s terrible for two reasons. One, you don’t save enough money, but two, your lifestyle, it gets richer and richer and richer. And so, cutting that back is really painful. So, not letting your lifestyle creep up with your salary, which you are even more aggressive about than I am, is a really great way to make sure people stay out of trouble.

Hilary Hendershott: Yes. Anne, thank you so much for being on Love, your Money. It’s been great to talk with you. Everyone listening, run, don’t walk, to Amazon and buy a copy of Your Best Financial Life. So, we’ve mentioned AnneLester.com, but after they buy the book, they should probably go take this Money Type test. Any place else on the internet you want people to visit?

Anne Lester: Yep. I’m on TikTok. I’m on Instagram. I’m on all the places. So, follow me there. Shoot me a note. We can start chatting. Yeah, it will be great.

Hilary Hendershott: Lovely. Amazing. Thanks for being here.

Anne Lester: Thank you so much.