3 Vital Ways You Should Be Planning for the Future

In this episode of Motley Fool Answers, Robert Brokamp and Alison Southwick talk to special guest, New York Times reporter John Schwartz. Like many of us, the money decisions he made through the first few decades of his career were not the very best, but in his mid-50s, he made a concerted effort to get back on track, which he chronicled in his new book, This is the Year I Put My Financial Life in Order. And because it's far less painful to learn from other people's mistakes, the Fools brought him in to discuss five lessons that they took away from his tale of fiscal woe and redemption.

In this segment, he addresses a trio of takeaways on the subject of preparing for the futures we expect and the futures we don't.

A full transcript follows the video.

This video was recorded on May 8, 2018.

Robert Brokamp: Lesson No. 4 is to be prepared for medical emergencies. Few things can upend a family's finances like unexpected healthcare costs. In your book you cited a few examples, including expensive dental care for your son that wasn't covered by insurance. Fortunately, you had been participating in The New York Times employee stock purchase plan, so you had that as a resource. Unfortunately, when you had to sell, you had to sell at a 90% loss.

John Schwartz: Yeah, but it worked out.

Alison Southwick: That's the spirit!

Schwartz: His teeth looked terrific! Come on! And by the way, the stock has recovered really nicely, so all my friends who still own Times stock are in great shape. I'm really happy for them.

Southwick: That's so sweet of you.

Schwartz: All you shareholders out there. I love you. I hug you. I want you to be happy.

Southwick: That's so great. What's the German word for the opposite of schadenfreude? That's really sweet.

Schwartz: See, whatever it is, I've got it. I'm just nice, you know? This thing happened to me. I mean, look, in the financial world I am the inflatable clown punching bag. I get knocked down a little. Sand in the bottom just brings me right back up again. You can take another punch the world has. It's fine. I'll still be smiling. It's fine!

Brokamp: In the book you also point out that it's not just people, and that you ended up having to pay $5,000 for a weekend's worth of tests for your cat.

Schwartz: OK, so I'm not happy about that one, but thanks, Bro! Thank you very much for bringing it up because I had gone a couple of days without thinking about the cat.

Brokamp: For me, one of the saddest stories in the book is Jolie Solomon. I don't know if I got her first name correctly, but she was a reporter with The Wall Street Journal and other publications for more than 30 years. But now, as I understand it, she lives in virtual poverty due to health problems of both Jolie and her daughter.

Schwartz: Jolie is an immensely talented journalist. A gifted writer. A gifted editor. And her health problems really drove her out of the workplace and left her in really tough condition. And the poverty and the fear of her medical costs and of eventual bankruptcy were terribly traumatic to her.

I tell her story to say, as we've said in our many conversations, that this can happen to anyone. Anyone can get sick. Anyone can be incapacitated. And it's almost fashionable when people get sick and get forced off the work track to try to find fault with them. "What'd you do wrong?" Or "Poor people are lazy." People say that. They actually say it. There's nothing lazy about my friend Jolie. And when this hit her, I saw myself in her -- I saw anybody I know -- so she was kind enough to let me tell the story.

Brokamp: It's definitely a cautionary tale. Let's move on to Lesson No. 5 and on a happy note, because in the end you and your wife, [Jean], are doing fine, and part of that is due to Lesson No. 5, which is save at least 10% as soon as you can and "don't peek." Despite your claims of not really knowing a whole lot about money when you were younger, you did know enough to start saving 10% in the company 401(k) in your late 20s, and the "don't peek" part comes from your conversation with John Bogle.

Schwartz: That's right. Look, I didn't do everything wrong.

Southwick: Do you feel like we're beating you up too much?

Schwartz: No, I'm fine, but I had one good thought. I do some things well and some things badly. I'm good with paragraphs. But in that moment in my 20s, I got a nice raise and I realized that if I put 10% of my income into a 401(k) at that moment, it would be money I'd never see otherwise. I wouldn't miss it. I wouldn't lose it. So, I never felt the dip in my income that committing big to a 401(k) would cause.

Of course, I also explain in the book that you can start a 401(k) with 1%. You can start an IRA with 1% of your income, which shouldn't feel like much and then have it ratchet up every year. If you can stick with that, then you can get to 10% pretty quickly. But I was able to do it all at once, and I was able to stick with it.

The part that I did wrong was that I didn't do enough research to understand what the best investments might be, and so it's possible that I might have had, by now, more in the account. I made some adjustments in my year of looking at my financial life and moved into lower-fee funds. So, I could have done better, but I could have done a lot worse.

Brokamp: And despite your various jobs [your three main jobs], the 401(k) was with Vanguard throughout the whole period, which I think is part of why you ended up talking to John Bogle. Despite all of that, the analysis you got was that you're probably going to be OK. You have been saving. You are fortunate to have worked for a company that will provide that classic defined benefit pension and, as you already mentioned, you downsized, recently, your home from New Jersey that allowed you to pay off some of the debts that you had. So, in the end, you and [Jean] are going to be OK. Correct?

Schwartz: I think that's exactly right. Barring some other mess [and it's always out there], if things continue in the way they're going, we ought to be OK, and that's the good news of the book. That we made it and we would hope that other people could figure that out, as well, for themselves, especially by starting young.

Brokamp: Right. A bonus part of the book -- I wouldn't necessarily call it a lesson because it didn't lead to any progress for you -- is that you did go into detail about getting an estate plan.

Schwartz: That's exactly right.

Brokamp: You point out that Prince died without a will. You were about the same age and at that point in your life you didn't have a will, either. But also, as a journalist you covered the Terri Schiavo case, which I think most of us remember. It could have been avoided, to a certain degree, with better estate planning on her family's part. It tells a little bit about your road to getting an estate plan.

Schwartz: It is, again, one of those things that I avoided because I've already said I'm a little phobic about money. That I would rather think about other things. Now let's talk about death. No! Let's not talk about death. Let's really not talk about death.

Southwick: No one ever wants to talk about death.

Schwartz: Why would I? One of the really nice things about having a job that is all-consuming is you can put off every decision in your life for a really long time and claim, "Well, I don't have time. I'm working."

So, while assessing all these other things, I decided it was really time to get the will. And because I'm not terrific with paperwork and we felt that our lives were a little complicated, my wife and I decided that we would go with an attorney. I found one nearby and he turned out to be a very nice guy who was funny. I place funny really high on my list of what I look for in a professional. If it's funny -- not mean, but actually funny -- that shows the kind of warmth that I can relate to.

But he also had good recommendations from friends. He walked us through what we might need. He walked us through the issues that we were going to encounter. He let us know that we were nowhere near the limits of the estate tax, so we'd be fine, there. And then, after walking through all this in his office over the course of something like an hour and a half, we went away.

A week or so later, not only did he provide the wills themselves [one for me and one for [Jean], my wife], but also summaries that were very readable and he also had walked us through and wrote up for us advanced directives and a medical power of attorney, the sort of documents that make sure that if you don't want to end up in a hospital with all tubes and no consciousness, with people working you over to no avail or benefit; if like me, you really don't want to see that happen not just to yourself, but to your family standing by, that this is the way to make those wishes explicit and get them down on paper.

I'd always joked to my daughter that if I end up unable to do certain things, you just get a gun. And she says, "Daddy! That's not the way to do this." It's a fun conversation and a family moment -- "Shoot me. [Signed], Daddy."

Southwick: I can relate to that conversation.

Schwartz: It's the way we talk to each other.

Southwick: Put me out on an ice flow. Dad!

Schwartz: Dad, you're embarrassing me. But it only gets you so far and it doesn't help you with the hospital. "Well, we had this conversation and he said, 'Shoot me.'"

Southwick: So, there she is. She's at the hospital and it's just mayhem.

Schwartz: The legal effect of that is just not great.

Southwick: Right.

Schwartz: But they know what to do with pieces of paper, so you get the piece of paper, and you leave a copy with the lawyer, and you make sure that the kids have copies or know where to find them. Because you just spent a lot of money on this stuff, you want it to be useful. And then you hope that these bad things don't happen, but you feel a lot better for having done them.