In this episode of Retire Your Way Radio, I interview Maggie Klokkenga (clock-en-gay), who is a financial coach and owner of Make a Money Mindshift, a financial coaching and planning firm in central Illinois. We talk about her firm and some of the money mindset topics she discusses with her coaching clients.
Maggie is a CFP® and CPA and has been in the financial services industry almost 25 years. She thoroughly enjoys helping people put the pieces of their money puzzle together, not only solving the ubiquitous question of “Where is my money going?” but also helping her clients identify and set achievable goals, including that tsunami of saving for college, which anybody around that dynamic can probably appreciate.
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Tim: I'm happy to have you here today. I think you are my second interviewee on the podcast, so welcome.
Maggie: Thank you. I enjoyed the podcast that you did with Scott Witzig (Donor Advised Endowment Funds at Morton Community Foundation).
Tim: Thank you. I appreciate that.
Can you briefly talk about what you do as a financial coach?
Maggie: I like to teach my clients a little bit about the psychology of money. So I first share with my clients why they have made their past spending choices. There is so much that happens in our subconscious that affects the financial choices that we make every day. So I believe my role is to first teach my clients some of those "whys," and then together we will use tools that will show them how they've been spending.
Being aware of those "whys" may have them choosing to redirect how they've been spending or maybe direct it toward savings. That's going to help them achieve those "whats," those ideas that they thought were just daydreams. Those are really goals they can work toward achieving.
Tim: It is absolutely amazing how many different people you can meet with and get their different perspectives on finance, even couples within the relationship. It's very interesting to see how the split might be between couples. Then everybody has their own, like you mentioned, emotional involvement with money. It's very interesting to see how people have a connection, or lack of connection, to finance in their comprehensive situation.
How do we know if we need to "make a money mindshift?"
Maggie: First, if you find that you don't know where your money is going, or you do know where your money is going, but you can't seem to get off that hamster wheel. You just keep spending and spending, and you might not have very much in savings. That's when I would say let's start diving into those "whys." Why have you been spending in the way you have been?
For example, let's say you had someone come to you, Tim, and they want to see if they were able to retire in the next year, but they don't know how much they've been spending on a monthly basis, and they haven't really checked their account balances in the last year. Then they tell you, their kids ask them for money and they might give them $200 here, $200 there, or they may give them $1,000, it just depends.
I like to work with this couple first and share with them why they have been making past spending choices. Then, once they have this awareness, that gives them the opportunity to shift their mindset. We can work together on those "hows" and they can see their numbers so they know where their money is going. Then they can start making adjustments so they can work towards their "whys," and then I bring them back to you to help them reach those "whats."
I've heard that some people are natural spenders and some are natural savers. What are your thoughts on that?
Maggie: I actually don't think there are natural savers. I think there are only natural spenders, and here's why. I think that savings comes to us because of something that we saw or experienced that very well could have been in our childhood, and it just stuck with us in our subconscious.
The spending actually goes back to early civilization. Early humans would have been hunting and gathering and they would eat it that same day. The same thing with when they're hunting and gathering, they would share their resources that same day. They were doing that to survive. So consuming quickly and sharing our resources, those are natural spends to us.
The problem is that we are no longer an early civilization. We have deep freezers. We have savings accounts. So, it really doesn't work in today's society, and it certainly doesn't work when we are told that we need to save in our own accounts, so we're not supposed to be sharing. We're supposed to be basically just putting it in our own accounts and then saving it, not spending. That totally goes against the whole YOLO - You Only Live Once - that is our natural spending tendency.
Tim: Also, a little tangent here, but most people don't even really sit down and think about this, but as humans in this country, we've only really been able to retire since about 1900. Before that it wasn't really even a thing. So you're taking thousands of years of human history, and like you said, scarcity mindset, hunters and gatherers, and all of a sudden we've kind of changed into thinking "We've got enough. Maybe we can retire." That whole concept, that whole mindset, it's totally not ingrained in us at all.
What do you think about the difference between an abundance mindset and a scarcity mindset when it comes to money?
Maggie: Let me just explain a litte about abundance and scarcity. So abundance mindset was coined by Stephen Covey who wrote The 7 Habits of Highly Effective People. What he said was abundance is a concept in which a person believes that there are enough resources and successes to share with others. On the opposite end of the spectrum, you have a scarcity mindset. That's founded on the idea that if someone else wins or is successful in a situation that there's always going to be somebody to lose.
I think the thing where I really see this play out, and maybe it's because we were coming out of a pandemic, is the term of just having enough. You can feel grateful because you know that you have enough. If you're looking at social media, which always seems to be the villain, but really when you're comparing yourself to others and you're seeing all those smiling pictures, you're not seeing the crying kids posted on Facebook or Instagram.
That's where you say, "I'm never going to have enough, I want more." The tip here is that if you keep thinking like that, you're always going to be reaching for that next weight goal, the next income raise, and it's never going to be enough. Abundance is really, then, asking yourself what is it that I value, and how does money get me there? Because money is a tool. We think of it emotionally, but really money is a tool to get us to what we value the most.
Can you describe Kinder's Questions and how they can help with financial decisions (referring to George Kinder, founder of the Kinder Institute of Life Planning)?
Maggie: George Kinder is well known in our industry as the father of the financial life planning movement. These are known in our industry as Kinder's 3 questions. So the first question is:
- 1. Imagine you are financially secure, that you have enough money to take care of your needs now and in the future. How would you live your life? Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is completely yours.
Really just think about what is it that you've been putting on the sidelines. Maybe it's talking to your partner about wanting to work part time or be a stay-at-home because you really want to spend more time with your kids. Or maybe it's that business you wanted to start that you really have a passion about, and maybe you can start working it on the side. So that's the first question.
Tim: I've only used these questions a few times, but it is really something to ask them. Maybe they subconsciously thought about some of this stuff and when you make them verbalize it, it's like a whole new maybe epiphany, for lack of a better word. But it is something, and if you sit down and do this yourself and really think about these questions, it makes you think.
Maggie: Absolutely. And I think the biggest thing is that you have these 3 questions, and when people ask you, what is it that you want in life, that is so big. That is such a big question. That's why I like using these 3 questions when I'm coaching. It really helps to drill down and help my clients get crystal clear on what it is that they're really wanting in their lives.
So that first one, kind of narrows the funnel a little bit. This next one usually has the clients gasping a little bit. So the second question is:
- 2. Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining?
This is with your current finances, so you have your current finances, you've been told you've got 5-10 years, and you don't know when you are going to die. I've seen my clients with their eyebrows raised and the movements in their body. It just surprises them, and then they really start to open up even more.
Tim: That question reminds me of the Tim McGraw song Live Like You Were Dying (click link to see the music video).
Maggie: Absolutely. Then the third question is:
- 3. Finally, imagine that your doctor shocks you with the news that you only have 24 hours left to live. What feelings arise as you confront your very real mortality?
Do you have any regrets? Is there anything that you wish that you would have done? Is there anything you wish you could have been? That, again, really drills down into what is most important to my clients.
What I found very interesting when I'm talking to husbands and wives and they have children anywhere from littles to teenagers, the wives will say, I want to make sure that my kids have the experiences that I want them to have. I want them to experience all kinds of different things: vacations, sports, extracurricular activities, family experiences. The husbands say, I really want to make sure that my wife and children are provided for after I die. I just think that's so interesting. It's been very consistent from those two demographics, so to speak.
Tim: The protector in the nurturer. If you really do sit and think about those questions, don't go too deep into them, it'll maybe raise some things that you may not have even thought about in your own lives.
Can you describe the fight or flight response and how it relates to money?
Maggie: This is a little bit of brain descriptions. The fight or flight response is a physical reaction to what we think is a threat. Our brains are made up of different parts, and the parts of our brain that collect sensory information and release hormones are quicker to react than the rationalizing parts of our brain, of course. For example, how do you feel when you read the news that the stock market has just plummeted?
Tim: You're calling everybody and saying, oh my gosh, what are we going to do? Then we'll sit and talk about numbers and probabilities and everybody is like, what are you even talking about? I tell them basically, let's stick to the plan.
Maggie: What's happening is that sensory information is collected by our brain, by our brainstem and our cerebellum, and we have an instinctive reaction. We're calling you to say, Tim, what's going on? What do I do? This threat is happening. I need to protect myself. Then, what's going to happen is, we may recall a long-term memory that's tied in to some of the news. Lots of times, again, things go back to our childhood. And then, our emotions are released. So we get these hormones released, and we are just panicking, fight or flight, we're not quite sure what to do.
So the way this ties into money, similarly, when you see the stock market takes a dip, when you see you have $2 left in your bank account, you panic, your emotions take over. You have these instinctive responses, and the rationalizing part of your brain is left out.
Usually, when this is happening, even when we first start to talk about money, sometimes with my clients, I will first say, we're going to do a couple of deep breaths. Let's just take a couple of deep breaths, because that is going to calm our parasympathetic nervous system, that's going to help center our minds.
And really, if you do deep breaths throughout your day, you're going to be a calmer person because you center your mind and your system. So that has been something that I've been working on with my clients. I can literally see the stress come back out of their body, the anxiety come out, because we're just trying to calm everything down to let that rationalizing part of our brain come back in.
Tim: As you can probably tell with Maggie speaking about how the brain works, there's certainly a dynamic of being a counselor or somewhat of a therapist in our industry, and certainly in those highly emotional times with their investments going all over the place.
What other information do you want our audience, which is primarily retirees and those close to retirement, to know about their money mindset?
Maggie: It's never too late to change your thoughts. So, if they're not serving you anymore, it's time to change them. First, you're becoming aware of your thoughts. That, then, allows us to start making some tweaks that are incremental steps to making those changes in our thoughts, and then creating new neural pathways for new thoughts.
As you're approaching retirement, you may realize that maybe you have been thinking, I can never have enough money. Therefore, I can't come see Tim yet because I can never have enough money. But guess what, somebody really should come to see you, Tim, because you can help show them through different analyses that here are the numbers, and yes you can, and then you can start thinking, I will always have enough money.
Tim: That's the big thing, especially with what I do with pre-retirees and retirees. Everybody's thing is, I'm going to run out of money and die. So we help say, no you're not because we can do this and this and you have Social Security now. We can tie all these things together.
Everybody's always concerned about assets. Do I have enough assets, do I have enough this, do I have enough that? I always have to say, look, it's a matter of cash flow, how much cash flow can we get out of your nest egg or Social Security or pension or whatever it is, and then setting a budget, more with what you do Maggie, and then going from there.
Is there anything else that you would like say about your financial coaching firm, Make a Money Mindshift?
Maggie: It brings me soul-filling joy to help others take control of their money and make it work for them. I know for you as well it's just something that, especially coming out of the pandemic when there's been people losing their jobs, they're not quite sure what to do, they just need to get a grasp and handle, and there's so much overwhelming shame that can come with it.
I just like to let people know that I provide a confidential, safe space where they can just talk about their money, their money worries. If somebody in your audience is intereste, or a relative, I've had several relatives reach out to me on behalf of someone else because of that shame that they have. We together can take the steps to reduce those feelings and then get that person on track to start achieving those goals that they're looking for.
Tim: I always like to tell clients there are no dumb questions when it comes to finance, because our industry as you know has a lot of crazy different things going on. No one should be afraid to ask any question when it comes to their finances because even for us that are in it, we see stuff and we're like what is this, why did they do that. So don't be afraid to ask any questions ever.
Before we wrap up, I do want to say that if you are ever in Morton, Illinois, Maggie is obviously a wonderful person. But if you're a local listener, you'll know that Morton, Illinois is the Pumpkin Capital of the World, and occasionally Maggie is the Libby pumpkin. So if you see a pumpkin walking around Morton, stop by and say hi to Maggie.
Maggie: I might not be able to see you because of the eyes, but you can always come up to one of the eyeballs and say hi to me. I would love that.