Guide Real Talk: Financial Health

Photo: Tanner Haskins

Here at Redside, we understand that financial health, mental health and physical health are all connected. The Redside Financial Health Helpline, launched Spring 2018, allows guides to talk with a licensed Financial Advisor about topics ranging from credit card debt to savings plans.

For this quarter’s Guide Real Talk, we interviewed former Idaho guide and current Financial Advisor Mickey Smith to dive in to the financial struggles and advantages that Idaho guides face.

This interview includes the topics of ROTH IRAs, student loan payments, emergency funds, credit card debt and savings plans. Find your topic of interest in bold, or scan the whole piece for a great overview of beginning financial literacy for guides.

Emerald LaFortune: Hi Mickey, thanks for hopping on a call. Let’s start with you telling us about your career path.

Mickey Smith: I went to undergraduate school in Denver, Colorado, where I started guiding during the summer. I worked on the Arkansas River there, and was there for three seasons doing day trips. I was getting my undergraduate degree in math. After undergrad degree, I came straight to Missoula, Montana to get a Master's in math and stats. While I was in Missoula, I found another guiding company locally and worked on the Lochsa, Alberton Gorge, the Missouri, as well as the Main Salmon River. After I graduated, I did a bunch of odd things, including going to Chile and working as a river guide there. I eventually became a teacher at Missoula College and then finally at the University of Montana in the math department as a stats lecturer. I was the stats lecturer for two years while guiding during the summers. I ended up guiding one year in the Middle Fork and then I became a financial advisor at Merrill-Lynch in 2016.

Emerald: You've had experience in two pretty contrasting careers - guiding and then mathematics and statistics. I think the differences between the two are obvious, but do you see any similarities between the skills you built while you were guiding and what you do now as a financial advisor?

Mickey: Absolutely. When I first started my job at Merrill-Lynch, I was hired by my two partners. I came in thinking that they saw my potential with the background I had in math and stats. That is certainly true, but one thing I did not realize was that being a river guide taught me how to converse with people and how to service people in a very special way. So the skills I learned while guiding, especially on multi-day river trips, is immensely helpful in my job today, just because you're doing a lot of listening. You're understanding what people need in an uncomfortable situation. Sometimes people being outside for camping and using rivers and whatnot can be a little intimidating at first, but making people feel comfortable and just conversing with people is something I do a lot in my job. The auxiliary stuff behind the scenes is more my math and stats background.

Emerald: Well said. Having been in the guiding industry, what do you think is one or a few of the larger financial challenges that guides face?

Mickey: For me, I usually had a winter gig, but for a couple summers, or after a couple winters, I did not. Seasonally, it was always hard to decide what to do with the large chunk of change I had at the end of the summer. I was definitely living mostly paycheck to paycheck and not saving a whole lot of money until I got a job at the University and had a better winter job. It's hard to plan money-wise. You're only making money four months out of the year and then working odd jobs throughout the winter, so that was always a little bit frustrating. I think I kind of just winged it and it worked out for me, but winging it sometimes doesn't work out.

Emerald: Do you think on the flip side of that, do you think that there are any advantages to that sort of seasonal guiding work and setup?

Mickey: I got to do a lot of different things. I worked mostly as a guide during my twenties, so I'm super grateful for my twenties because I was able to be a little bit more free with where I had to be in my obligations. I certainly was not the person to get a career right after college and be on more of a career track right away. I was also getting close to making river guiding a career. The Middle Fork was lucrative enough and something I could see doing long-term. It was just relationships and my home in Missoula… guiding would've been a strain on that, so I really had two paths I could've taken and the one I took now just seemed to work a little bit better. But overall, I don't regret being a guide and working seasonally at all.

Emerald: Can you talk to us a little bit about planning for retirement and some of those real long-term financial goals when you have decided that you want to make guiding a lifetime career?

Mickey: So to put my financial planner hat on, I would say if you do make guiding a career that many outfitters don't offer any type of retirement plan, so you have to be very intentional about how you save for retirement and how you save just in general. And so utilizing retirement accounts like an IRA, a Roth IRA, or even a SEP IRA, setting up some type of limited liability company could be of help for particular guides. I talk about saving money, too. That includes retirement, but things like buying a home could be a great savings avenue, just putting money away into a savings account or some type of investment account can be a great way.

There's a fairly low limit to something called a Roth IRA, so going above and beyond that, you have to be a little bit creative. Maybe that's a savings account that can be used for retirement savings. Whatever you decide, I would just say make it intentional and come up with a plan and talk to as many people as you can to formulate that plan and make sure you execute it.

Emerald: Am I correct with retirement that there's an advantage to the length of time that an account has to age, correct? So can you give us an example of if you potentially were going to start saving for something like retirement and you started at age 25, how an average account would grow by the time you were 65, given ... Say, I decide I'm going to put $100 into a Roth IRA every month from now, from 25 to 65. What does that start to look like?

Mickey: I would say, without quoting exact numbers, I would say having some type of disciplined savings plans, like putting $100 into a Roth IRA monthly or $5,500 into a Roth IRA every year, you will be extremely surprised of what it does grow to, especially if it's invested in stocks bonds or any similar investments. Because that money isn't used until you're 61 or 65 years old, it's almost something you can forget about. Naivety is a great planning tool. By being naïve to the account balance and just sticking to the contribution side of things, you'll be amazed that accounts grow to six, sometimes even in seven figures just by saving 10, 15, 20% of your income.

Emerald: I think sometimes there's sometimes a personality type in guiding that leans towards the bury your gold in the backyard type of approach to money management. Can you talk a little bit to the risk of investment and how that is managed?

Mickey: The first place most people start investing is in their retirement accounts, but the retirement accounts have a huge advantage. You have a lot of time. Even if you start at, say, 30, you're still 30 plus years away from using that money. If you were to look at the stock market from the past 100 plus years, you are 100% of the time getting a positive return. And you could even go less. You could say over a 20-year period that you will have a positive return on your investment. That percentage goes down if you hold money for less time. Historically, if you hold money for a 10-year period, you're 82% likely to have a positive return over 10 years.

So yes, values do go down when you invest. That is part of investing. But that risk that you take on also lends reward, and so if you have time, like a retirement account, it is absolutely advantageous to put that money into something other than cash or just a savings deposit vehicle. There are super cheap and efficient ways to do it that are not complicated, that you own a whole basket of stocks. That is a great place to start.

There are simple, very straightforward ways to invest. The retirement account almost forces you to not buy and sell when things go down so that's kind of the first place that, in my experience, I started learning about investments and where most people will become more comfortable investing their money.

Emerald: To shift gears, let's say I'm a guide and have just graduated my undergraduate degree and I have let's say $40,000 of student loans that I need to pay back. As a younger person, what's the best place to start with addressing those if the plan is to be a career guide and sort of have that fluctuating income?

Mickey: That's a good question. As a guide, I would just count student loans as a type of expense that you have. Paying back a reasonable amount or close to a minimum, as long as your chipping away at the principal, I wouldn't worry about having student debt as long as you’re disciplined about paying it back. Now, if you're only paying interest and the loan is ballooning, as in the balance is getting larger even though you're paying back, that's where you have an issue.

Also, trying to save more amounts of money for other goals, like maybe buying a home or having some type of emergency fund for things like a vehicle or moving locations can be important. Don't let student loans be a barrier to your financial plan or your savings plan.

Emerald: You mentioned an emergency fund. Can you talk a little bit about why an emergency fund might be important for a career like guiding and what you recommend, not necessarily as a hard amount, but maybe as a percentage of living expenses or as what you recommend when folks are interested in setting something like that up?

Mickey: Emergency funds are something that is totally dependent on your obligations. When you're young and when you are, say, living in your vehicle or guiding seasonally and working other seasonal jobs in the winter, maybe you're a student, you don't have a whole lot of obligations. Having a small amount to pay for a vehicle fix or being able to not work for a whole month in between a guiding season and your next job, those would be the small amounts that you need for those obligations.

For things in my case, I own a house now and I now have the obligation to be able to pay my mortgage if I lose my job or need to do big home repairs. My funds required for that has increased drastically since I was a guide when I 22. So I would just go through and think about, “What are my obligations?”

You could look at your deductible on your car insurance. What were to happen if you were to hit a deer somewhere on Highway 12 late at night? Can I afford my deductible? Would I be able to get to work? I wouldn't worry too much about having a huge amount of just money. I would maybe have a savings account and say, "Okay. I can use this for something fun, but it's there first priority for an emergency."

Emerald: Will you speak to the advantages and disadvantages of using a credit card? I know a lot of guides who use that credit card as that crutch to get them through the last month or two before their season begins.

Mickey: Credit cards can really spiral out of control. I've been there. I know a lot of people that have been there, I'm sure a lot of friends of yours. It's surprising when you hear about it, but I think it's more common than you'd think. Credit cards you've got to be really careful with. They're great for emergencies. I was thinking about it before, and I would not use credit cards because you're gaining tons of the fancy points or the cash back. I would use them really for something pretty small. When I first got mine, I just used it for gas to gain credit. I talked about savings before, but if you have credit card debt, that is the most important thing to handle. That's number one on your list. Come up with some way to pay off debt as quickly as possible. Interest rates are so high that it's just not worth paying that much interest.

On the other hand, having a credit card is not bad. It does gain credit if you don't have one. Your local credit union and your local bank, if you go talk to them in person, they should be able to issue one without any credit. There will be a really low minimum, so you won't be able to rack up a lot of debt on a credit card, but use it for something simple like gas payment or maybe your groceries, something like that. If you are worried about credit card debt and you are scared about having access to a credit card, there are other ways to gain credit. There's something called a secured loan, which means you basically have the money to pay back the loan already in your bank account and you can't use that money, and so it could be something even like $500 or $1,000. The bank loans you that money. The money is in your bank account, and you just pay it back over 12, 24 months. It's a great way to earn credit without having a credit card.

Emerald: And credit then becomes very important when you do move forward into larger purchases, such as a home or property.

Mickey: Exactly.

Emerald: It's awkward to talk about money. It's definitely something that's taboo for a lot of us, and that idea gets passed down not only from families but from employers and our coworkers and everything else. Particularly from a guiding perspective, why is it important to ask questions, to take your finances seriously, to understand where your finances are at and be prepared and have a plan?

Mickey: I would say that the ultimate thing is it's going to make you less stressed and make you more happy. The more knowledge about and the more security you feel about going forward with using your money, the more you’re going to be able to enjoy what you earn more and reduce so much stress that comes with finance. If you don't have that stress, you are just going to feel more comfortable being able to spend money. When you get off your guiding season and have $10,000 can you spend $1,000 and go on a three-week, four-week road trip? If you have things under control, you can make those decisions and not worry about what's to come.

Emerald: Any last thoughts or pieces of advice for guides who are ready to take their financial planning and systems to the next level?

Mickey: I've had a bunch of my friends ask me a very simple question I don't think a lot of people have an absolute answer for, which is, "How much money should I save?" I like to spit out the number 20% of your gross income. That doesn't mean that you should put 20% just into your savings account. You can include things like your 401k, your other retirement accounts like your Roth or IRA. Also things like a home, gaining equity in your home, that's essentially saving money. I know not everyone owns a home, but that's one case that I would certainly include in that 20% in savings.

Maybe you can't afford 20% right now, start with 10% and try to work up. Increase it by a percent every year. A lot of these things are with the caveat if you can afford it, and so if you can't start at the top or the absolute ideal, then that's okay. Don't let that be a barrier either.

Emerald: That's good advice. Start where you can. Thank you for your time, Mickey, and for volunteering your services to Redside through the Financial Health Helpline.

Mickey: Of course.

Through the Redside Financial Health Helpline, Idaho Guides can set up a no-cost, no-obligation 30-45 minute advice call with Mickey to discuss anything from savings plans to credit card debt to, “Where should I start?”. Learn more here.