Episode 10: Start your year-end planning

Oscarlyn Elder:

To meet your wealth objectives, you’ll need to make some decisions every year. Think about your goals for charitable giving, investing, and transferring wealth. Are you making the most of your opportunities? We all get so caught up in our daily lives that scheduling the time to make these decisions can slip through the cracks. But to make the impact we want and live out our aspirations, we need to train ourselves to plan and complete these year-end activities.

I’m Oscarlyn Elder, co-chief investment officer for Truist Wealth, and this is “I’ve Been Meaning To Do That,” a podcast from Truist Wealth, a purpose-driven financial services company. Thank you for joining us.

In this episode, we’re going to talk to a strategist from Truist Wealth about specific year-end activities, including one that’s looming for families at the end of 2025. We’re also lucky to have with us someone from Truist who knows a lot about how to be more effective at working through your year-end to-dos.

Before we get started, if you want to take notes on today’s episode, we have a worksheet you can download and print. You can find it by selecting this episode at Truist.com/DoThat.

Since we’re going to be talking about taxes, I’ll also have a reminder for you. Any comments or references to taxes you hear about in this episode are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.

My first guest today is Mike Frost, an advice and planning strategist at Truist Wealth. Mike has a lot of experience working with clients on their year-end financial planning, and we’re so pleased to have him with us. Mike, welcome to the podcast.

Mike Frost:

Hi, Oscarlyn. Thank you for having me.

Oscarlyn Elder:

Tell us a little bit about your role at Truist Wealth.

Mike Frost:

So, I serve in the advice and planning group in the greater Washington, D.C., region as an advisor to our advisory team and our clients to help them identify, clarify, and prioritize their nonfinancial goals so that we can build a financial plan that helps them achieve all of their goals and objectives.

Oscarlyn Elder:

Mike, you mentioned nonfinancial goals. That often ties to purpose and values, which we’ve talked about, you know, quite a bit on this podcast. What’s your purpose?

Mike Frost:

My purpose is to take these areas that are complex to our clients, but not necessarily to me because of my background, and help them better understand that, so that that doesn’t cause them anxiety and makes their lives a little bit more relaxed.

Oscarlyn Elder:

Mike, that is a tremendous purpose and really kicks us off to get started on today’s topic, if you will. So, end of the year is fast approaching. What activities should we be focusing on, and when does that process begin?

Mike Frost:

When you talk about year-end planning on a podcast called “I’ve Been Meaning To Do That,” this synchronicity is absolutely perfect, because when we get to this point of the year, there’s three areas that clients are really looking at: charitable planning, investment planning, and wealth transfer. This time of year, we get the most questions on those three items by far.

Oscarlyn Elder:

And when should year-end planning kind of kick off or start?

Mike Frost:

In a perfect world, I would argue that you should not be waiting until year-end to be doing a lot of these things. Some of the things we’re going to talk about on the investment planning side need to be considered during the entire year. Because let’s face it, if we knew exactly how the markets were moving, we’d all be retired on an island the size of Greenland, only maybe a little bit warmer than Greenland.

So, ideally, engage with your advisory team throughout the year, but begin the specific year-end process in October at the absolute latest.

Oscarlyn Elder:

OK, so we’re recommending October’s a great time to really get going on activities that have to be completed before year-end.

Mike Frost:

Yes. Absolutely.

Oscarlyn Elder:

Well, let’s take a second and go deeper into the first area that you touched on, which was charitable giving. What are your thoughts related specifically to charitable giving?

Mike Frost:

So with charitable giving, there really is not a limit on how much you can gift to a charity. Where the issue comes is how much you can deduct and how much that deduction could possibly lower your income tax liability. I’m very specific with regard to possibly reducing your income tax liability, because thanks to the 2017 Tax Cuts and Jobs Act, the standard deduction for many individuals eliminated their ability to itemize charitable deductions and get an actual tax benefit for the charitable deductions that they’re making.

So, the first thing that our clients have to do and why this process has to begin early is first, determine whether or not there is going to be a tax benefit in this year for making charitable contributions now. And then if there is an ability, how much can you afford to make in terms of charitable contributions?

And then after you’ve answered that question, you get into the how you’re going to make the charitable contributions. It’s not just writing a check or transferring cash to your favorite charitable organization. We see a lot of our clients take a look at long-term appreciated securities and transfer those in order to possibly eliminate long-term capital gains and to have a bigger tax impact for themselves and the charity.

Oscarlyn Elder:

All right. So, you really talked about three items there. Number one, most folks want to know if they make a charitable contribution, will it be deductible on their income taxes? And so often what we find, clients are reaching out to their tax expert to find out the answer to that, because it may impact whether they want to give or not.

So, that’s kind of step one. Then step two is really determining, OK, if a contribution will be deductible or we expect it to be deductible, does it fit into our budget? Does it fit into our resource plan? That’s kind of another element. And then the third element, if you walk through those first two steps, how am I going to do it? Am I going to write a check or am I going to transfer a highly appreciated investment, which takes longer? It’s more complex than writing a check, which is why we’re calling it out specifically.

Mike Frost:

Exactly, because the check you write, the check you mail it in. Credit card payment, you go online, you input your credit card number. But with the long-term appreciated securities option, depending upon whether it’s a stock or a mutual fund is going to have an impact as to the speed of completing that transfer. And then just letting the organization that’s going to be the beneficiary of this contribution know that they’re going to be receiving this contribution in that way as opposed to the much quicker check or credit card donation.

Oscarlyn Elder:

Are there any other challenges associated with making a charitable contribution at year-end or thinking through the process of how to make a charitable contribution at year-end?

Mike Frost:

Yeah, so, the last big issue we see with our clients is who to give to, because clients want to make these charitable contributions and get the tax benefit by year-end, but they’re not sure of who that eventual recipient is. So that’s where a lot of our clients are utilizing donor-advised funds.

And with a donor-advised fund, you’re able to make the contribution in the current year, but you don’t have to decide who the eventual recipient is. There is no time limit on when you move the funds out of the donor-advised fund. And in some cases, our clients even utilize these for estate and wealth transfer purposes. So, the donor-advised fund can answer that question of, how can I make a significant charitable contribution, even if I don’t know who I eventually want to receive the funds?

Oscarlyn Elder:

That’s a great point, Mike, and it gives folks the time—if they don’t know who they want to receive the funds, if they haven’t identified which organizations—it gives them time to think about what their purpose, what their values are, and then identify the organizations that they’re connected to and determine where they want to make impact that is aligned with their values and purpose.

So, what we would say as it relates to the donor-advised fund, right, is that ultimately, work with your advisory team, work with your tax expert as well to determine the path that’s best for you and if this vehicle is an appropriate vehicle to use for your situation.

Mike Frost:

Exactly, because clients feel better when their charitable giving is aligned with their purpose. And this is where not having that clarity of purpose—they may only give to a few charitable recipients, but having that time to think through it, that’s where this can become a rewarding experience for them.

Oscarlyn Elder:

Let’s talk for a moment about investment planning at year-end and specifically, year-end loss harvesting from a portfolio. We know that it’s an important to-do any time of the year, as you’ve already noted, but it typically gets a lot of special attention as we move toward the end of the year. Can you tell us what it is?

Mike Frost:

So capital-loss harvesting is nothing more than recognizing losses within your investment portfolio that enable you to use that loss to offset any realized gains that have occurred during the year or can offset capital gains distributions that you’re expecting from mutual funds or other types of similar investments.

Oscarlyn Elder:

And what we would say, right, is that it’s important for clients to talk with their advisors about the specific strategies, right. Or a specific strategy around what losses they may want to recognize. It’s also very important that the advisor and the client work hand in hand with their tax expert. And I’ll also throw out there just one other item about tax-loss harvesting that we want to make sure folks have an awareness of—but as always, they should be working with their tax expert for deeper details—but if you sell an investment for a loss, you want to avoid buying the same investment, or one substantially identical to it, 30 days before you recognize the loss or sell the investment or 30 days after you sell the investment.

It’s important that you have an awareness of this, because if you do end up in a wash sale situation, then your loss may be disallowed. So, it’s just really important that you work with your team, that you have an awareness of this, that you also work with your tax expert to avoid this unpleasant situation.

Mike, do you have anything to add to that?

Mike Frost:

Yes. I would say that you cannot just look at the account where the loss occurred. You cannot repurchase that security across all of your accounts. So, if you take a loss in a taxable account, you cannot go to your IRA and repurchase the security there. It has to be 30 days before or after across all of your investment accounts.

Oscarlyn Elder:

That’s a great call out. Thank you so much for bringing that to our attention. A final area to focus on at year-end is wealth planning. Mike, what are some of the basic decisions and activities that clients often work on at this time of year?

Mike Frost:

The biggest thing that we see clients doing at this time of year is making the annual exclusion gift. And these gifts can be made throughout the year, but they have to be completed by year-end. So, for some clients, if they write a check to their child, the child has to deposit that check into the account before year-end, or that gift gets rolled over into the following year.

And it’s important because the annual exclusion gift can only be used in a certain year. You cannot roll that amount over if it’s unused. So, it’s very important to make sure that that gift is completed by the end of the year. And then in a lot of instances when clients are making these gifts, sharing with their family members the why behind this gift and what they would like to see done with this gift. They do not necessarily want this to be wasted by their family. They want this to be the start of the family’s wealth building opportunities as well.

Oscarlyn Elder:

And I will say, Mike, I’m picking up on something that you just said. If you’re going to make these annual exclusion gifts, and a lot of folks do make them—not everybody, but a lot of folks do engage in this particular type of wealth planning—having the communication between the giver and the receiver is very important overall.

So, having the intent made clear, having really a space for the receiver to be able to say thank you, to acknowledge and appreciate—what I’ve seen over the years is that if there isn’t I would say an established protocol, an established culture around these particular gifts, sometimes there can be tension that crops up. Because, you know, maybe the receiver doesn’t acknowledge in a particular way, so the grantor may have a specific view of how the gift should be received, but maybe the person receiving doesn’t understand that.

So, just a lack of communication in general around the gift can be a place where a tension grows. And we would just call out specifically that if there is just really robust communication around the gift, it’s likely to land in a more positive place over the long term if there is an intention to establish a long-term gifting series.

Mike Frost:

It continues to amaze me how many recipients forget to say thank you to their families and how much of a bad taste that leaves in the giver’s mouth.

Oscarlyn Elder:

And the reasons that that can be, because it might be that the recipient doesn’t know how important it is to the individual making the gift or feels that it’s not an area that the giver wants to talk about, and so they may feel, you know, like the appropriate thing to do is just to move forward.

And frankly, there’s some folks who gift who maybe aren’t looking for that thank you. There are some who definitely are. So, it just gets back to if there’s communication around the gift, then both the giver and the receiver are likely to be better aligned on how it’s handled on an ongoing basis, if that’s the intent to have that ongoing gift.

Mike Frost:

Exactly. You said it perfectly.

Oscarlyn Elder:

All right. There is also a potential change to estate tax law that could affect wealth planning.

There are some provisions in tax code that were changed in 2017 that in 2026 could revert to prior levels. And I’m saying could, because we don’t quite know how all this is going to play out yet. So, if you can share with me, what are some of the key details that folks should know about this?

Mike Frost:

Oscarlyn, what you’re talking about is that as part of the 2017 tax law, the estate tax exemption—the amount that you can transfer without incurring a 40% estate tax—that exemption doubled from $5 million to $10 million. And that amount is adjusted for inflation every single year. So, with these inflation adjustments, by the time we get to 2025, we might have an estate tax exemption to the tune of $27.4 million for a married couple or $13.7 million individually.

Now, due to the sunset provisions within the 2017 tax law, January 1st, 2026, that $27.4 million gets cut in half effectively, so that we would be looking at an estate tax exemption to the tune of about $14.1 million for a married couple, or about roughly—let’s call it $7 million per. And again, these amounts are making some assumptions with regards to inflation, so please just use these numbers as a guide for sure.

But with this type of substantial reduction in the estate tax exemption, the type of conversations that we’re having with our clients right now is to prepare for that. Do they want to engage in gifting? Do they want to create structures that can house these gifts that not just fulfill their estate and gift tax minimization goals, but also makes sure that their families are able to receive this money, but not in a way that impacts their motivation to be productive human beings.

So, in a lot of instances, we are having these conversations right now with clients and determining what that structure looks like so that before we get to 2025, before the exemption changes, they’ve already put the structures in place and they’ve already talked to their estate planning attorneys so that these items are taken care of, so in 2025 we can just focus on, are we going to make a transfer or not? Not having the broader conversation that is absolutely necessary as to what do we want our family to receive, how do we want our family to receive it, and what values are we trying to accomplish and pass down to the family all at the same time.

Oscarlyn Elder:

So, Mike, to recap: Current state is that the estate tax exemption, we’re expecting it for a married couple in 2025 to be, we said, around $27.4 million. If Congress doesn’t act, if the sunset is allowed to happen, then that exemption goes to $14.1 million.

Mike Frost:

Yes.

Oscarlyn Elder:

Now, Congress may act and the sunset may not happen, but we don’t know that right now. And so, what we’re trying to do is make folks aware that there is a sunset in the current estate tax law. That sunset is the end of 2025. If it is allowed to occur, there’ll be a significant adjustment to the estate tax exemption.

And we think ultimately for these families where there’s impact, you really need to be thinking in 2024 about, how do you plan for this? What we’re suggesting is that in 2024, you should be working with your team to develop a plan A and a plan B.

Mike Frost:

Yes. Exactly.

Oscarlyn Elder:

You can track developments, but you should have formulated based upon all the things that you just talked about—what do I want for my family? What are my values? What’s my purpose? How does that all get reflected in my estate plan? But you should be working with your advisory team on developing a plan A and a plan B, and then as we get into 2025, and especially if the environment is such that it doesn’t become clear that there will be action, right, that will extend the tax law, what’s going to happen is that estate planning attorneys are going to start booking up, right, as we move through 2025.

Mike Frost:

Yes. Right.

Oscarlyn Elder:

Like when we get to midyear 2025, if there’s no action taken on this, there’s going to be likely a queue of people lined up with estate planning attorneys to draft and implement plans. And it just will make it easier if you know ahead of time, kind of, here’s my A and my B, and you’ll have a sense of what you need to execute on, and you’ll be able to work with your estate planning attorney in a more efficient, effective manner.

Mike Frost:

Exactly. The last time we saw something like this happen was back in 2012, and I will never forget making sure that I was working on December 31st helping clients finalize transfers, and then spending New Year’s Day 2013 not watching college football games, but watching C-SPAN. There is nothing more depressing than watching C-SPAN on January 1st, especially if you’re a college football fan like I am.

Oscarlyn Elder:

Yeah, that’s a great point. And Mike, something that you said just also triggered another thought in my brain. I was focusing in on the drafting of the documents. You brought up, kind of, the distribution—the other side of this—which often in a situation like this where there is a sunset, there may be very specific moves that are made aligned with the drafting of financial assets that take time to execute on.

Mike Frost:

Absolutely, and this just doesn’t apply, Oscarlyn, to wealth planning. It applies to all the topics that we covered today, because even financial professionals like to spend time with their families over the holidays. So, they may be on vacation, they may not be as readily available to help out with these things, so that the sooner you can get in touch with them on all of these areas and making sure that these are getting done in early December at the latest, it allows you to focus on your family and everything that always happens with family over the holidays—and allows for your financial advisors to make sure that they’ve taken care of all of your specific needs.

Oscarlyn Elder:

Mike, that’s a point well-made. And I just want to say thank you so much for giving us this 101 course on year-end planning. I know that we’re going to have folks who hear this, who are able to better plan, better prioritize how they’re focusing at year-end. So, thank you.

Mike Frost:

You’re very welcome.

Oscarlyn Elder:

Now that we’ve talked about the what of year-end financial planning, it’s time to discuss the how. My guest, Tim Houlihan, Truist’s enterprise director of behavioral sciences, has done a lot of research about our behavior when it comes to finances and investing. And Tim, you joined us for episode four when we talked about hidden biases. Welcome back.

Tim Houlihan:

Oscarlyn, it is great to be back. Thanks for having me.

Oscarlyn Elder:

Thanks for being here. Tim, how do you think about your purpose?

Tim Houlihan:

How do I think about my purpose? You know, my purpose ends up being something that I’m connected to sort of on a professional basis and a personal basis. So, I like the idea of feeling that my purpose in life, which actually has something to do with helping other people be successful, whether that’s my kids or my close relationships or business associates or mentees, that that translates directly into what I do every day at Truist.

Oscarlyn Elder:

Thank you for sharing that. Tim, there are just a number of financial planning activities that folks listening will need to complete before the end of the calendar year, because there are tax implications for many of these activities. These are activities that we know can’t really wait till the new year, and so, you, me, folks listening will need to have a timeline for getting these items completed. There are a lot of books and resources and certainly on social media, people can access content that’s really focused on helping them get through these to-dos. But what thoughts do you have based upon your research and your experience about how we can more effectively and efficiently get through our to-dos?

Tim Houlihan:

Well, you and Mike talked about a lot of these resources and a lot of tools and a lot of things that need to be done, and it might feel overwhelming. It’s possible that you might sort of feel inundated with the number of things. And when it comes to getting anything done, the most important thing you can start with is to reduce friction.

And so, you know, friction being something that would inhibit us from getting something done, right. Procrastination is a manifestation of friction. And the first thing that I think I would recommend is just to really start small with time blocking. Think about doing all the things, but don’t do all the things.

Don’t try to actually have a big checklist of all the things I have to do. Just time block on your calendar when you want to actually get those things done.

Oscarlyn Elder:

OK, so step one is put time on the calendar. Specific time. Time block.

Tim Houlihan:

Exactly. And you’ve got to keep a couple things in mind. One is, we are great at planning things—well, humans are fantastic at planning things—but we’re also really good at what they call the planning fallacy, whereas we pretty much reliably underestimate the amount of time it’s going to take.

Oscarlyn Elder:

I’m the worst at this. So, anybody who’s worked with me professionally knows this is a major issue that I have, so I understand it.

Tim Houlihan:

Yeah, we’re all familiar with it. So, when you’re going out to block that time, add a little bit of buffer time, add a little bit of extra time, maybe add an extra step. Give yourself one extra block of time in your calendar to accomplish those things that maybe you just hadn’t fully anticipated.

And the second thing is that it’s really important that we block this time out, because we think about the future differently than we think about the present. This is something called temporal discounting. We actually tend to think of the present in very concrete terms.

It’s really easy to imagine what’s going to happen today, and we can go through in a pretty fair amount of detail as to what’s going to happen today and what we’re going to do today. But if you say, well, what is the third Thursday of the month, five months from now going to be like, that’s very abstract. That’s a very hard thing to define.

So, the time blocking actually accomplishes two things. It helps us with our planning fallacy, because it actually sets those times up in our calendar to say we’re going to work on these things then. And it also makes the future a little bit more concrete for us. So, that’s a really important part of it.

The second thing that I think we have to do after we time block is actually have a plan. Have a plan that you’re going to execute in these time blocks. It’s important to us from a stress reduction perspective and a sense of control. It gives us both of those things just by having the plan that says, I’m going to do these things in these particular steps.

Oscarlyn Elder:

Tim, the plan can’t just be in our minds, I don’t think, right? It needs to be—we would recommend that it be in a spreadsheet, in a note on the phone, that it be handwritten down, but that there is some value to actually putting it, documenting in a way that we can come back to it.

Tim Houlihan:

Yes. Like you said, it can be as informal as the note on the phone or even just a Post-it note next to your computer. That can be your guide to set up your time blocking.

And by the way, time blocking is used by people like Cal Newport and Elon Musk and Nir Eyal. There’s a lot of really successful people that use time blocking on a regular basis. It’s not just an important psychological technique. It’s also proven in the real world.

Oscarlyn Elder:

And so, the benefit to this time blocking and making the plan—and the plan may start out as actually quite simple and maybe more complex the deeper we get into executing the plan, right, maybe as more steps become apparent to us that maybe weren’t apparent when we started. I will share that for me, having the list, the plan, some semblance of process, decreases my anxiety about a situation. It relieves some stress for me. What have you observed relative to that?

Tim Houlihan:

Absolutely. The implications for reducing stress and increasing our sense of control are both closely tied to having the plan and to time blocking. There’s great research to support both of those things. So, we actually feel better about ourselves when we have a greater sense of control.

And, of course, we’re going to make better decisions. Our decision-making actually gets better when we reduce the stress, when we have less stress in our lives. So, those are really additive. They work together to make all of the things that you’re needing to do before the end of the year better.

Oscarlyn Elder:

So, our recommendation is put time on the calendar. Put more time than you think you need. Probably more blocks than you think you need, right. So, it’s better to overestimate versus underestimate, because we tend to underestimate. So, more blocks, more time. Put your list together, your timeline. Be flexible within that, and the combination of those really gives you the space to tackle the important to-dos that you have going on. And all of that together reduces stress, gives you a greater sense of control, and helps you achieve that very important item that you’ve been meaning to do.

Tim Houlihan:

Well said.

Oscarlyn Elder:

That the way to think about it?

Tim Houlihan:

Yeah, I think that’s a great way to think about it.

Oscarlyn Elder:

Well, we need to get the ball rolling on these specific tasks well before the end of December, right. We can’t wait until December 15th to get something done that needs to be done by end of the year. So, as you’ve pointed out, Tim, having that plan is really important. Respecting the timeline is also really critical. How do you suggest, Tim, that we stick to the plan? What can help us there?

Tim Houlihan:

Let me first say that willpower is not the solution, and I think that we need to think about the best ways to do behavior change are based in development of habits. Wendy Wood, who is a fantastic researcher at USC, has done decades of research on habits and rituals in our lives and has discovered that more than 40% of our behaviors are driven by habit and routines.

So, if we can organize ourselves in such a way that these activities simply become habit or habitual, we’re much more likely to actually get them done. And we can start that actually by using a technique that was developed by B.J. Fogg, who was a Stanford professor.

And B.J.’s idea is to use tiny habits. Now, tiny habits are a really wonderful little trick where we kind of leverage an existing habit that we already have. And he writes about this in his book. It’s called Tiny Habits: The Small Changes That Change Everything. It’s a fantastic book. It’s a great read. But if we leverage a habit that we already have—say, the barbecue on Labor Day—that we decide that we’re going to use that as our capstone to start our habitual planning for the rest of the year.

Now, we don’t actually have to start planning, but we use that to actually block out time on our calendar to start to write our plan, to think about the things that we need to do, to analyze, review last year—those kinds of activities can all get kicked off because it happens with Labor Day.

Labor Day is going to happen every year. Guess what? We can use that as our tiny habit to kick off our habitual planning process for the year-end that needs to be done.

Oscarlyn Elder:

And Tim, I’m going to point out that we have links to this book that you’ve noted on the webpage for this episode. So, if folks want to learn more about the book, they can go to that link and learn more about where to get the book.

So, this thought of tiny habits being really a springboard to more significant change. You don’t have to start big. You can start small with a tiny habit. You mentioned the Labor Day kickoff. You know, that basically is an occurrence that kicks off time blocking, that kicks off maybe document gathering—all of those steps in your timeline to making sure that you can tackle those end-of-year to-dos.

Tim Houlihan:

Absolutely. And by reducing friction, a lot of this just happens so much easier—less stress, more confidence.

Oscarlyn Elder:

And tiny habits—in general, I think a number of us know that, look, I know tiny habits from raising my daughter. I remember this tiny habit when she was like 18 months, 24 months. Every night we would lay out the clothes for the next day.

Tim Houlihan:

Oh, that’s a great one.

Oscarlyn Elder:

It just made our lives so much easier to already have the clothes laid out, and it made our days flow smoother.

I know for some folks working out—and you and I have talked about this before—it makes it easier, right, if you put your shoes and your workout gear together so that you’re not struggling to find them the next day.

Tim Houlihan:

And it’s not that your child, your baby, wasn’t going to be clothed the next day. It was going to happen. But you reduced a lot of stress by laying those clothes out the night before. You reduced a lot of friction when you laid out your running shoes and your running gear the night before to make it easier so you don’t have to search and find it. You reduce friction, and that makes habits and makes our behaviors much more effective.

Oscarlyn Elder:

I think in the financial realm, as we think about year-end planning, some of the tiny habits that come to mind that may work for folks, right, would be, if you’re keeping your records digitally, it might be great to have a year-end gifting folder for each year where you’re saving your letters from the nonprofits that you donate to.

Anything relative to that process can go into those folders so that when you do kick off that September habit or that October habit, you know exactly where to go. You’re not looking around your office for paper, but you kind of have had that digital folder together. Or it can be a live folder, right, a hard folder, but it’s organized so that everything is together and you’re not searching around, you’re not dreading the hour and a half search through, you know, your drawers to find the information that you need.

Tim Houlihan:

Which can actually be part of your time blocking. So that maybe one of the last steps in your time blocking is to organize what you decided on, how you decided, what were the rationale, what worked, what were the discussions that I was really happy to have, what were some of the things that were more difficult to decide on.

You can make a reflection—as they say, you don’t get better just by practice, practice, practice. You get better with practice, reflect, practice, reflect.

Oscarlyn Elder:

Tim, talk to us about the snowball effect and how habits may, tiny habits may compound on each other.

Tim Houlihan:

Well, getting back to this idea that that friction is what keeps us from getting lots of things done in the world, the snowball effect is based on an idea that, you know, if you start with this with a tiny little snowball at the top of the hill and you start rolling it down the hill, it’s going to get bigger and bigger because it collects more snow. And by the time it gets to the bottom, it’s this massive snowball, right. That’s the idea.

Well, when it comes to our habits and when it comes to the things that we need to do, it can be daunting thinking about all the things that Mike talked about as being really complicated or overwhelming. But if you can start with the smallest thing, the easiest thing to accomplish, then you can feel good about getting that small thing accomplished and move on to the next hardest thing.

Now, some things have to be done sequentially. It might not work all the time. However, if you can break down some of those tasks into smaller or medium-size, and then larger tasks, put the larger tasks actually off toward the end, because you’ll be building momentum. That will help you feel more confident and more relaxed about making those bigger decisions, because you’ve got momentum going into them from successfully making all those smaller decisions upfront.

Oscarlyn Elder:

And you’ve relieved your stress and anxiety, especially around the smaller stuff, right? You’re feeling more in control. You’re more likely to be in that cool state, which I think you’ve talked about before.

Tim Houlihan:

We have.

Oscarlyn Elder:

Maybe explain that a little bit further.

Tim Houlihan:

There’s been a lot of research on making decisions in a cool state versus a hot state. And a cool state would be when we’re removed from the actual situation. It’s sort of like, well, let’s take a hot state is how I feel when I’m on the freeway and there’s more traffic than I expected and I’m running late for the appointment.

That’s a hot state to make decisions in, right. That’s a hot state to make my—where do I go? When am I going to get off? How should I change my route? You know, those kinds of things are very difficult and stressful to make in the moment, but a cool state would be making those decisions in advance.

So, anticipating—well, if traffic is really heavy, and I don’t know if it’s going to be, but if there’s an accident or something that is slowing me down, I’m just going to take a different route. I’m going to go this way and have a little plan in advance of that. And that cool state decision really helps us when it comes to feeling less stressed and actually feeling more confident, in control of our own lives, which just ultimately makes us feel better.

Oscarlyn Elder:

Something that you said about the cool state and thinking about decision-making, knowing that these are year-end decisions just brings to mind, triggers a thought for me, that the way that we’ve talked about this, we’re making it sound as if some of these decisions are solo decisions.

But often for folks, there are multiple people that need to be involved in the decision. It may be a spouse, it might be a sibling, just depending upon the complexity of the situation. There may be a co-trustee. There just may be different situations, more than one person in the decision-making. And it seems like, you know, as we think about relieving stress, making the best decisions, and the connection with time blocking, that within that process, making sure that we have the time blocked to bring others into the discussion, if necessary, is really important within the process, that we account for that ahead of time, if at all possible.

Tim Houlihan:

Very much so. And we know that psychologically we feel better about decisions where there’s more transparency, more openness, where we understand what the process and the criteria is that we’re going to use to make these decisions. And getting alignment on those things is really important. And the time blocking can help and say, OK, in this discussion that I’m going to have with say, my spouse, all we’re going to talk about is the process and the criteria that we want to use for making our decision.

We don’t have to talk about making the decisions. We don’t actually have to talk about the charitable organizations we’re going to support or not. We don’t have to make any of those. That’s for another time block. This time block is just the process and the criteria that we might want to use. And again, hold those bigger decisions of which ones are we going to actually choose to spend our time and precious resources on as a later decision.

Oscarlyn Elder:

That’s fantastic, Tim. This is really part of why I wanted you back on the podcast, because I love how you approach these to-dos, these efficiency improvements, right, in our process in a very, I think, logical, easy-to-access way.

Before we wrap up this part of the conversation for our listeners, I just want to go back and let’s touch on the major points. So number one, we want ultimately to help folks decrease their stress, to improve the number of to-dos they’re getting through, to feel like they have greater control in their lives. So, that’s really what we want for folks. And our advice to do that is, number one …

Tim Houlihan:

Do some time blocking.

Oscarlyn Elder:

Do some time blocking.

Tim Houlihan:

Have a plan.

Oscarlyn Elder:

Number two, have a plan. Doesn’t have to be complex, but commit it to paper—digital, paper. Commit it to more than just your memory and make sure that it’s flexible. So, you’ve got to have the plan. Time block. Have a plan. Remember the importance of tiny habits.

Tim Houlihan:

Yeah, and get some of those little things out of the way first. Leverage that snowball effect so that you can feel good about making some of those small decisions upfront, and then move to the bigger ones later.

Oscarlyn Elder:

And then number four, if you’re not making the decision solo, make sure that’s part of the plan. And include time, specifically in the time block, to talk about how you’re going to make the decision. What’s the process? Include that in the process so that you can make these decisions in a cool state versus a hot state, too. It’ll help that.

Tim Houlihan:

Beautifully said. Yeah.

Oscarlyn Elder:

It’ll help decrease tension and increase the probability of making the decision in a state where you’re really just in a more favorable mindset. You’re not rushed. You’re calm. You’re able to see all the data points.

Tim Houlihan:

Very much so.

Oscarlyn Elder:

Tim, this has been a fascinating conversation and this is exactly why I wanted you on the podcast. Thank you so much for sharing your expertise with us.

Tim Houlihan:

It’s my pleasure.

Oscarlyn Elder:

Tim and Mike, this has been a great conversation that will really focus listeners on what’s important for their year-end financial planning. And so, we’ve come to the end of this episode, but before we go, I’d like to ask each of you this question: What’s the one thing that you’ve been meaning to do but haven’t done and will commit to do in the future?

Tim, let’s start with you.

Tim Houlihan:

Well, as you might remember, the last time I was on, I had made a commitment to get out and perform a little bit. And just to let you know, I did make that happen. So, it felt good to get that done.

This time because my wife and I are still relatively new to the Charlotte area, we want to expand our friends network. And so the “I’ve been meaning to do that thing” for me is to continue to expand our social network.

Oscarlyn Elder:

That’s beautiful. That’s a great to-do item. So, I look forward to hearing how that goes and what your steps are to make that happen.

Tim Houlihan:

I’m working on it.

Oscarlyn Elder:

That’s great. Mike, how about you?

Mike Frost:

So, every five years, my wife and I clean the three basement closets that we have. And we do a good job in our part to keep the gross domestic product of the U.S. up, but it creates three incredibly cramped closets. The last time we’ve looked at these closets is 2018, so we really do need to take a look at everything, get it cleaned out, make the hard decisions about what goes to Goodwill and what needs to go to the trash.

So, before year-end and to lock in that charitable contribution deduction, I commit to cleaning out the three basement closets.

Oscarlyn Elder:

So, Mike, I gotta tell you, that sounds like way less fun than Tim’s to-do. Way less fun.

Mike Frost:

Just a little bit. Yeah.

Oscarlyn Elder:

Tim and Mike, this has been a great conversation. Thank you so much for joining me today.

Mike Frost:

Thank you so much for having me.

Tim Houlihan:

Yeah, and thank you from me, too.

Oscarlyn Elder:

And to you listening, thank you for joining me today. If you liked this episode, please be sure to subscribe, rate and review the podcast, and tell friends and family about it. If you have a question for me or a suggestion for this podcast, email me at DoThat@truist.com.

And as a reminder, any comments or references to taxes you hear about in this episode are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking action that may have tax or legal consequences.

I’ll be back soon for another episode of “I’ve Been Meaning To Do That,” the podcast that gets you moving toward fulfilling your purpose and achieving your financial goals.

Talk to you soon.