What does your work week look like these days? For many of us, the lines between work and home are growing increasingly blurred as the months of the COVID-19 pandemic drag on. (I can’t be the only one missing my daily commute, right?!) Those of us who are working from home all the time may be wishing for some quality time with our most beloved colleagues, and pining for those “normal” office conversations that we once enjoyed — and likely took for granted. Perhaps you’re wishing for a shared laugh in the kitchen for someone’s birthday, or a group toast for a work anniversary happy hour… But it’s not just the milestones that we’re missing. It’s day-to-day interactions that are full of important non-verbal clues, none of which can truly be captured via Zoom.
Although we have no idea how long our fully remote world will last, it’s safe to say we’ve all entered into a new era of workplace communication, one in which distributed teams must work seamlessly from across the country, and across continents. We must offer clarity in phone calls, we must be articulate over email, and we must convey big ideas via Slack. Just how do we do all that successfully? We’re talking through it step-by-step on this week’s episode with Lindsay Kohler, lead behavioral scientist at U.K. consultancy ScarlettAbbott. (Here’s the conversation guide that Lindsay mentioned in her interview with us!)
“We are 2.5 more times more likely to perceive poor work behavior, such as incompetence, mistrust, poor decision-making or lack of meeting deadlines with virtual colleagues than we would with colleagues we’re located on site with,” Lindsay says. In the “before COVID-19 times” if you had a disagreement with someone, “you could just take a look to the next desk over and see what their face was like, or, you know, give them a nudge and say ‘How ya doing?’ And right now, we can’t do that.”
Lindsay talks about some of the negative assumptions we may be more likely to make with our virtual colleagues, and what we lose when we can’t see people face-to-face. “Don’t assume the worst,” she says. “And when you’re frustrated, don’t assume your colleague is intentionally trying to be a jerk. Maybe something just came up. So give them a chat or pick up the phone when you can’t just walk over in person like you used to, to check in on them and see how they’re doing.”
Lindsay weighs in on how she keeps her productivity up. “What we’re going to see is that companies won’t have a choice but to switch to output-based performance management, so those people who were already top performers are going to continue to shine, and those who rested comfortably on the fact that ‘As long as my body is in this seat from 9-to-5, I keep my job,’ there’s going to be some reckoning. The way we look at performance is going to have to change,” she says.
Lindsay also breaks down what similarity bias, confirmation bias, and explanation bias really are, why we don’t always bother challenging our biases, and why we should. She also shares why she’s mentally tired during lockdown like she’s never been before, and what she’s doing to overcome it.
Of course Lindsay also shares some of her favorite tactics that we can all use to improve our communication at work (and in life!), and offers advice for people who are struggling with working remotely. Hint: It’s okay to just “say hi” to a colleague. It’s essential that we replicate some of the spontaneous interactions that we had at the office, and at times we need to be deliberate about doing just that. Speaking of which, it may also be time to create some intentional boundaries between your work life and your personal life. We’ll tell you how.
In Mailbag, Jean and Kathryn tackle questions on refinancing a child’s student loan, a backdoor Roth conversion, 2020 IRA contributions, and whether $10,000 is best put towards paying off loans or investing in the stock market. Lastly, in Thrive, how Neflix can improve your credit score. (No, really!)
Lindsay Kohler: (00:01)
If you had a disagreement with someone, you could just take a look at the next desk over and see what their face is like. Or give them a nudge and say, how are you doing? And right now we can’t do that.
Jean Chatzky: (00:19)
HerMoney is supported by Fidelity Investments. Whether you’re saving for something in the near future or way down the road, Fidelity has tips and tools to help you meet your savings goals. Visit Fidelity.com/HerMoney to learn more.
Jean Chatzky: (00:34)
Hey everyone. I’m Jean Chatzky. Thanks so much for joining me. I know many of you listen to this podcast during your work week. We publish on Wednesdays and we typically see that about 14,000 of you will have our latest episode listened to by Friday afternoon. So let me just say that I hope you’re all having a wonderful work week. But what does that even look like these days? I know that for me, the lines between work and home are growing increasingly blurred as the months drag on. And I’ve even heard from some of you who say that you are actually missing your commutes. Those of us who are working at home all the time may also be missing our co-workers. I know I am. And honestly pining for the normal human interaction that we once enjoyed at the office – shared laugh in the kitchen for someone’s birthday or a group toast for a work anniversary happy hour. But it’s not just the milestones with our colleagues that we’re missing. It’s these day to day interactions that are full of important nonverbal cues. It’s the face to face communication about an important project. It’s bonding over completion at lunch. And none of that can really be captured over Zoom. It is safe to say that, although we have no idea how long this era will last, we have officially entered into a new era of workplace communication. One in which teams must work remotely across the country and across continents. We have to offer clarity in phone calls. We have to be articulate over email, which can be really hard. And we must convey big ideas via Slack. And all of that, as you have probably realized, and I have certainly realized over the last few months, is a lot easier said than done. Today we are going to talk through all of these things with the help of Lindsay Kohler, the Lead Behavioral Scientist at UK consultancy, Scarlettabbott. Lindsay has over a decade of consulting experience with Fortune 500 companies. She’s a graduate of the London School of Economics, and she has agreed to help us apply what she has learned about workplace communication to life communication. So Lindsay, thank you so much for joining us.
Lindsay Kohler: (03:19)
It’s a pleasure to be here today. Thank you for having me.
Jean Chatzky: (03:22)
So, tell me a little bit more about what you do.
Lindsay Kohler: (03:26)
Sure. So, I’m a behavioral scientist and that means I study why we make the decisions that we make and why we behave the way that we do it. And I do it in the realm of employee engagement because that’s where I started my career. And I started with health and financial decision making. And Jean, as you know, those are two of the hardest areas for which people will actually change behavior. And I didn’t understand why just telling people what to do and giving them education, why that wasn’t enough to change behavior. And so I found myself looking into psychology and behavioral science to understand what we could do to unlock that. And so that’s the science and rigor that I bring into, employee engagement consultancy – to really kind of bridge that gap between academia and things that we can use in our everyday life to maximize performance and make better decisions for ourselves.
Jean Chatzky: (04:30)
Well, you know that you are preaching to the choir when it comes to me. I mean, I love everything behavioral science. I just eat it up. I think behavioral economics has been such a lifesaver for so many people when it comes to our money and our health, because of course, you’re right. You can tell me to save more and if I want to buy something, I’m still very tempted to buy it. You can tell me not to eat the doughnut. And if I really want to eat the doughnut, I’m still going to eat the donut. But I’m really interested to see how all of this fits into workplace communication, which I’ve got to say is a really tough area. I mean, those people who listen to this podcast on a regular basis will know my assistant Rebecca, and about, I don’t know, a month or so ago, I said to her, I don’t want any more Zooms. Can you just please make anything that would have been a phone call, just a plain old phone call? Cause I can’t do this. It’s exhausting.
Lindsay Kohler: (05:34)
It is exhausting. I think there’s even a term that’s been coined. It’s zoom fatigue, right? And it sort of dissects all the reasons why we find this online interaction so much more exhausting than the same conversation would have been in person. We have to focus more on the conversation because there’s subtle, but very powerful, cues that we’re going to miss if we’re not in person. I think being on video makes us very aware of being watched, which is acutely stressful. I think we also feel, at least for me, when it’s a phone call or a video call, it feels more formal. I felt like I have to have a proper reason to pick up the phone and call my colleague, versus if I just bumped into them at the water cooler or was going for a walk or was making them a round of tea. You’d have more informal interactions. And so I think sometimes in this new remote working environment, our interactions have changed to more formal and it’s really tiring. It’s exhausting.
Jean Chatzky: (06:45)
Yeah. It all has to be scheduled. Right? I mean, that’s the interesting thing. Like in my little company, right? I’m the boss, but still sometimes I feel like I shouldn’t just hit the phone button on Slack and call somebody cause maybe I’m taking them out of something else that they’re doing and I should be polite and schedule it. But let’s back up for a second before we get to the tactics of how to do this right. Do you think that this was always coming, that this era of working from home was just inevitable? Or have we been forced into a place that we were never going to be were it not for COVID-19?
Lindsay Kohler: (07:26)
You know, I think it depends on sector. So, I think in certain sectors like tech, this was already the way of working and more and more people were jumping on board. I think what’s been really challenging is more traditional industries that also have a mix of frontline employees and then corporate employees. For them, they’re very, very used to always working on site. And for corporate it’s very much in solidarity with the fact that frontline people have to go to a store every day. They have to go to a bank. They have to go to a construction site. And so, I don’t know that we would have been here had COVID not forced our hands. I think it showed people that we are very adaptable, but I think it also exposed some pretty big rifts and some pretty big issues. And we’re, I think, just uncovering more and more issues between mental health, which we can talk about fairness. So many things have been exposed by COVID really.
Jean Chatzky: (08:31)
Well, yeah. I’d love to dive into some of those, as well as the concept of mixed signals that you were talking about. I mean, when you point to the things that we are now seeing that have become problematic, what are they?
Lindsay Kohler: (08:48)
So, I think that there has been a very big fairness issue that’s cropping between people that had to go into the office during COVID and people that didn’t. Because it sort of exposed this idea of privilege and inequality that maybe we knew was there. But all of a sudden you’ve had, and I had one of my clients tell me they had a perception where the people that were going into the stores every day felt like the people working in corporate were sitting in their back gardens just sipping gin day if they were working from home from the environment. And they thought, why can’t I do that? And I think what’s really been interesting and that organizations and people need to consider is that it’s not necessarily inequality that bothers us. Like in general, we’re sort of okay with inequality, if we all have the same starting point and advantages. But we all know that that is not true. And so it’s really this lack of fairness that starts to, I think, create divides in organizations between people that did not have the luxury to work from home during COVID and people that did. And I think that’s a huge, huge issue that I haven’t seen enough people talking about or researching.
Jean Chatzky: (10:07)
So let’s say that you work for a company, or you have friends in your circle who are going into the office when you are not, or vice versa. What’s the best way for us as individuals to address those inequities? And what’s the best way for employers to address them?
Lindsay Kohler: (10:30)
I guess I’ll start with the best way for employers to address it. So, one of the biggest things that frontline people have needed that maybe people back in the house didn’t was, they needed a lot more motivation and recognition and praise and mental health support because they were going in every day. There was so much, especially in the beginning, that we didn’t know about the disease. And they’re there every day and that feels scary. And they’re dealing with customers who might not wear masks, who might be aggressive. And so that group, from an employer standpoint, recognition is so key. I think updated performance management guidelines is key to recognize the situation that they’re in Recognizing that morale may have taken a big hit and figuring out what are those feel good campaigns and incentives to increase it. I think from the employer standpoint, they have to figure that out and they have to figure it out quickly. I think the second part of your question was what can we do as individuals. And I think that that gets back more to the idea of empathetic communication. So, we’ve seen a lot with Black Lives Matter. We’ve seen a lot more people wanting to use our voices and wanting to learn more and wanting to speak up, but not knowing how. So, I think just that recognition that you have a privileged position, that recognition that you want to listen to those around you that are not in the same position to figure out solutions together, is probably the best way for an individual to have one-on-one impact as they don’t have the resources that a large organization does to enact change.
Jean Chatzky: (12:17)
Let’s transition and talk about communicating effectively. When we can’t be in person with people, when instead we have text and chat and email and video, what do we lose? What assumptions are we more likely to make about other people? And how can that get us into trouble?
Lindsay Kohler: (12:40)
That is a great question because we assume the worst. That’s what happens essentially. I saw some research recently that said that we are two and a half times more likely to perceive poor work behaviors, such as incompetence and mistrust and poor decision making or lack of meeting deadlines, with virtual colleagues than we would with those colleagues who we are located on-site with. So, I think what that exposes is a) we assume the worst, but I also think that this idea of organizational trust has been massively thrown into the spotlight. For cultures and businesses that worked on a nine to five model, or If you had a disagreement with someone, you could just take a look at the next desk over and see what their face is like. Or give them a nudge and say, how are you doing? And right now we can’t do that. And there’s actually something in behavioral science that I have to remind myself of all the time when I get frustrated and it’s called the fundamental attribution error. And it basically describes our tendency to explain other people’s poor behavior as arising due to some innate character flaw that they have versus a situational events. So, if a driver cuts you off in traffic, your knee jerk reaction is, oh, they’re such a jerk.
Jean Chatzky: (14:13)
Lindsay Kohler: (14:13)
But maybe they had their pregnant wife in the back seat and they’re rushing to the hospital. So, they’re not a jerk. They just had a situation that was influencing their behavior. So, I try to tell people, don’t assume the worst. And when you’re frustrated, remember that your colleague is probably not intentionally trying to be a jerk. You know, maybe something just came up, so give them a chat or pick up the phone when you can’t just walk over in person like you used to, to check in on them and see how they’re doing
Jean Chatzky: (14:48)
This idea of corporate mistrust, too, makes me think of employers who have traditionally really valued face time, and they valued face time for work that could have been done remotely, I think in many cases, because they felt like people probably weren’t going to work as hard from home. But I wonder if you think that perception has changed during lockdown. I mean, I have felt that I am working harder than I’ve ever worked. And I think that my team is doing exactly the same thing. Do you think people have gotten over this perception that face time is better?
Lindsay Kohler: (15:30)
I think they might have individually. I don’t know if they’re willing to speak up at a large enough level, so that organizations change their performance management from time and face time to output-based. I personally have loved this shift to remote work because I work in bursts. It might take me three hours, but I do a day’s worth of work. So for me, I was never going to sit in a chair, but my measures were always going to be on output. And from my time working in-house at Fortune 500 corporations, there is still such a culture of, if you’re not in first and out late, and you’re not seated there from nine to five, you’re not working. So, I think what we’re going to see is people aren’t going to have a choice, but to switch to output based performance management. And so those people that were already top performers are going to continue to shine. And I think those that rested comfortably on the fact that as long as my body is in this seat from nine to five, I keep my job. So, I think there’s going to be some reckoning because the way we look at performance is going to have to change. And I think those conversations, the longer COVID goes on, are going to start to happen. And I think we’ve probably seen some of our teammates shine and others, you can’t get ahold of them all day and you wonder where they are.
Jean Chatzky: (16:56)
Yeah, absolutely. When we were talking earlier, you mentioned that certain biases at work have actually become more prevalent due to COVID. Can you talk about what some of those are?
Lindsay Kohler: (17:06)
Sure. You know, I was thinking about this because I saw on, I think it was LinkedIn News, that reported that traditionally male-dominated fields, so like entertainment, finance, technology, had lost some of the ground that they had made recently in creating a more gender-balanced workforce. So, naturally, I was thinking, well, why is that? And did COVID exacerbate some of the hiring biases we all know about. Cause I think hiring biases is talked about a lot. But I wondered, well, are there any in particular that COVID made worse? And I think that there are three. And those are explanation bias, confirmation bias and similarity bias. And I think for the sake of time, I’ll just dissect one of those. So, Jean I’ll let you pick what you’re most curious about between explanation, confirmation and similarity bias.
Jean Chatzky: (18:04)
I think we’ll have to do explanation. I mean, I think similarity bias is being biased toward people who are similar to us, right.
Lindsay Kohler: (18:13)
Jean Chatzky: (18:13)
And confirmation bias. It sounds like it’s being biased toward people who agree with us.
Lindsay Kohler: (18:20)
It’s similar to that. Confirmation bias is more where your brain looks for hits rather than misses. So, you’re searching for information that confirms an idea you’ve already had. But you hit similarity bias. You hit the nail on the head. That’s exactly what it is.
Jean Chatzky: (18:37)
So, what’s explanation bias?
Lindsay Kohler: (18:40)
So, explanation bias occurs when we’re asked to generate an explanation for an outcome. So, for example, the explanation that a man was hired over a woman because he was the better candidate and not because of his gender. And what happens is once we’ve created this explanation in our head, we focus all of our attention on it. So, that, in general, is explanation bias. And it sort of precludes us from considering anything else and we don’t bother challenging it. And why I think COVID made it worse is, I mean, I don’t know about you, but I’m mentally tired during lockdown in a way that I’ve never been before. So, I don’t really have the mental energy to bother challenging my own perspectives. And that’s really what explanation bias, to get over that, we have to challenge our own perception and explanation that we already came to that was a pretty easy conclusion for us to get to. So, that’s why I think COVID has made that worse and I think just cleaning to our existing worldview, when the world has changed so dramatically, is an understandable reaction.
Jean Chatzky: (19:54)
Well, yeah. But also I think a very dangerous one right now because of all the social change that is ongoing. You know, it is exhausting, but we are living through a time when we all have to push ourselves to make sure that we’re not succumbing to these biases that we may have held for many, many years Lindsay, in the time that we have left, I want to get to some real tactics that we can all use to improve our communication while we’re in lockdown. Maybe make it a little bit easier, less cumbersome, less exhausting. But before I do that, let me just remind everybody that HerMoney is proudly sponsored by Fidelity Investments. Wherever you are on your financial journey, it’s important to have a plan for your savings. And that’s where Fidelity comes in. They’ll work with you to help you create a savings and investment strategy and help you fine tune it whenever life changes. Plus, they have tips and online tools, like their planning and guidance center, that can help you meet your short and long-term goals. And you can visit Fidelity.com/HerMoney to learn more. I am talking with behavioral scientist, Lindsay Kohler, about workplace communication. So, what are the best practices for us to communicate and collaborate effectively remotely?
Lindsay Kohler: (21:25)
That’s a great question. And I think the number one tip to remember is that collaboration requires reciprocation. And so, there’s this amazing quote that I love on this topic from Dr. Robert Cialdini. And he says, “we are human because our ancestors learned to share their food and hone their skills in an honored network of obligation,” which I just think is great. But what’s really tricky is we’re not in person to hold each other to account. And so, embracing cooperation really kind of opens us up to, you know, we risk exploitation, we risk rejection. So, one thing that I’ve seen, that’s been proven to be pretty effective for remote teams to enhance collaboration, is to find a prime time where they’re all online together, working on the same project and agree to it. So, it’s really about coordinating certain times of high responsiveness with each other, which helps to recreate that in person collaboration, productivity and success. And I think I’ve seen some research that showed that teams who communicate in rapid bursts, with immediate responses, are much more productive than those who have delayed feedback due to email response times or work being coordinated amongst multiple threads.
Jean Chatzky: (22:45)
So that argues for using a tool like Slack, which we’ve really taken to.
Lindsay Kohler: (22:50)
Yeah. I think Slack is great. My current organization doesn’t use it, but my prior one did. And it does allow you in real time to see progress, to chat. And so, I think if we all agree that from 1:00 PM to 3:30, we are going to be online, all working toward the same project and communicate in this rapid burst, it helps a) to get that accountability. We see the reciprocication in real time, which is the key to collaboration. And we’re just more available for one another and it helps us just get things done.
Jean Chatzky: (23:24)
Any advice for people who are really struggling with working remotely?
Lindsay Kohler: (23:29)
Yeah. I guess it would depend on what the cause of their struggle was. If the cause was that they felt that they don’t have boundaries between work and home life, so they can’t turn on or they can’t shut off. For those people, it’s really about, how do you create artificial boundaries – even something like going for a walk in the morning to replicate your commute and coming back. And then when you’ve decided you’re done working, leaving the house again to replicate your commute home. Something like that’s really helpful. If the reason that you’re struggling is isolation. That’s a different matter entirely. I think corporations are being better about addressing isolation and mental health. But I think those tips are to, if it’s not exhausting, because we know it can be, but to create more check-in meetings with colleagues, just to say hi. And I know that, again, it feels effortful. We feel like we have to have a reason. But it’s okay to say hi. It’s okay to go for a walk with a friend. It’s okay to figure out how do we replicate some of those spontaneous interactions that we had before? We do have to be more deliberate, but that’s probably the cure for isolation. I think if people are struggling with other reasons, again, it’s, I mean, the Hydroscience 101 is figure out what the problem is, what the barriers are, and then deploy solutions that fit the barriers.
Jean Chatzky: (24:58)
Absolutely. I know that your company has put together a conversation guide. Can you tell us where we can get our hands on it?
Lindsay Kohler: (25:06)
I can. Thanks for asking. It’s something we’re really proud of. We’ve been working so hard to support people proactively. So, we’ve created, the Leading the Conversation Guide, which gives HR and internal communication leaders, 15 actual plans to put in place to address the key themes that we see emerging right now. So, that can be lack of leadership visibility. It can be changing emphasis within the employee value proposition and so on and so forth. And you can actually download a free copy of that from our website, which is scarletabbott.co.uk.
Jean Chatzky: (25:44)
And we will put that in the show notes as well so that people can just click on it and get it. Lindsay, thank you so much for great conversation.
Lindsay Kohler: (25:52)
Yeah, this was lovely. Thank you for having me.
Jean Chatzky: (25:54)
Anytime. And we’ll be right back with Kathryn and your mailbag
Jean Chatzky: (25:58)
And HerMoney’s Kathryn Tuggle joins me now. I’m in New Jersey. She’s in New York. Hey Kathryn.
Kathryn Tuggle: (26:14)
Hey Jean. Hello from across the Hudson.
Jean Chatzky: (26:17)
Is it getting to you as well? All of these Zoom conversations?
Kathryn Tuggle: (26:22)
Yeah, honestly, I’m a walker and a talker when I talk on the phone. I have some of my best ideas when I’m pacing or doing something else. And my girlfriends now always want to have Zoom calls. And previously, when we would be having a phone call, I’d be cleaning out my underwear drawer or like, cooking some spaghetti. And now, there’s all this pressure to like, look in the camera and nod and smile. And I don’t want to have to do that.
Jean Chatzky: (26:52)
I know. I really have backed off on a lot of the Zoom calls and I’m just doing them as phone calls. But the downside to that is I’m really annoying my husband. So, I keep my phone in my pocket. I keep my earbuds in my ears. Like, I’ll go all day and not take these ear buds out of my ears. And he never knows when I’m on the phone and when I’m not on the phone. And he gets annoyed at me. We were doing, I think it was a Facebook Live. It might’ve been an Instagram Live. And I was on Instagram doing this little video where I was looking at the camera and he was upstairs unloading the dishwasher. And it was friggin’ loud. And I couldn’t shout to him in the middle of this Instagram Live, hey, stop unloading the dishwasher. You know, he’s trying to do something nice and be helpful. So, I texted Becca to text Elliott to tell him, or to call him and tell him, to stop. It was just the most ridiculous thing. Finally, he hears me stop talking and I can hear him tiptoeing down the stairs very quietly to say, can I make noise now? I mean, it’s just awful.
Kathryn Tuggle: (28:07)
Oh my gosh. And I can’t imagine what people with kids are going through. It must be torture.
Jean Chatzky: (28:13)
Yeah. Yeah, absolutely. Anyway, let’s, let’s answer some questions.
Kathryn Tuggle: (28:18)
Yes. Our first letter comes to us from Carrie. She writes, Dear Jean. My husband and I currently have $79,424.11 in debt from our daughter’s college education and living expenses. We are overwhelmed by this and are currently paying $1,200 per month on all the loans. There are seven separate loans with varying interest rates from 6.06% to 6.96%. They’re all Parent Plus Loans. Our daughter also has $30,000 of her own loans to pay back. Is there anything we can do to lower the interest rate on these loans as about $600 a month is interest alone? Should we try to refinance these with a bank or credit union? What suggestions do you have? Thank you so much.
Jean Chatzky: (29:04)
Yes, yes, yes. Now is the time to refinance with a bank or credit union. You will lose, because these are federally backed loans, you will lose some income-based repayment provisions. Federally-backed loans, have a slew of repayment provisions that private loans do not. And what I just want you to be aware of before you do this, is that you’re not going to use them. But as long as you know you’re not going to use them, by all means, go ahead and refinance. And if your daughter is not going to use her repayment provisions, now is the time for her to refinance. This will be a credit-based decision. So, the better your credit, the better the interest rate you’re going to get. But you can go to a website like Magnify Money, which maintains a really good list of all the student lenders out there and what their rates are likely to be. And you can go ahead and you can refi in the private market. Credit unions do this. Not all of them, but some of them. There are lenders that are non-bank lenders that do this. Like SoFi, like CommonBond. There are non-bank lenders that do this, like College Avenue and others. There are bank lenders that do this, like Citizens Bank. You’ve got a lot of different choices. You want to shop for the best rate that you can possibly find. But by all means, I wouldn’t wait at all because interest rates are extraordinarily low.
Kathryn Tuggle: (30:41)
Yeah, I totally agree. Now’s the time. Our next question comes to us from Julie, who says she’s 38 years old and lives in Boston. She writes, I recently had a change in my financial situation – a good one. My student loans are gone as of yesterday.
Jean Chatzky: (30:57)
Kathryn Tuggle: (30:57)
Jean Chatzky: (30:59)
Yeah. That’s awesome.
Kathryn Tuggle: (31:01)
Amazing. My first order of business was going to be to max out my IRA contributions, but with the market doing what it is, I’m feeling like I’d like a bit more in my emergency savings. In order to do a Roth, I’ll need to backdoor it. I know you can take out your Roth contributions, but I wasn’t sure about a couple of rules. Can you still take them out if you’ve done the Roth through backdoor conversion? Is there a five-year holding requirement before you can take them out? My gut is telling me to hold off and see where my emergency savings are at the end of the summer. I don’t have my current retirement balances because I refuse to look, but I will max out 401k contributions for the year, and maxing out HSA contributions, and I’ll max out my 2020 IRA contributions. What do you think I should do?
Jean Chatzky: (31:45)
Wow. Well, in light of the last sentence of your letter, Julie, I would probably put a little bit more in your emergency savings fund because you’re doing such a good job maxing out everything else. If you feel like your emergency savings fund is not where it should be, and that you don’t have the three to six months worth of living expenses that you feel that you need, by all means, I would absolutely bulk that up and put the money there. I also just want to give you a little bit of a nod for knowing the lingo. I love that she wrote in order to do a Roth, I will need to backdoor it. So, let’s just explain what that means. When you backdoor of Roth, it means that you put the money into a traditional IRA first, because you have too much income to qualify for a Roth. And then, you convert the traditional IRA funds into a Roth because there are no income restrictions on doing that. In order to do the conversion, you pay the taxes on the money that you convert at your current income tax rate. But you’re right. You will have to adhere to the five-year holding requirement on those converted funds before you get the money out. So, essentially I think, I mean, you didn’t tell me how much you have in your emergency savings fund or how much you’d like on your emergency savings fund. But right now, during COVID, with unemployment raging, I think we have clear evidence that having a fully-funded emergency stash, or as much of a fully-funded emergency stash as we can get to, is no longer just a wish list item. It’s really, really a priority. It’s a necessity. So, I’m with you on that. That’s what I would do.
Kathryn Tuggle: (33:50)
Fantastic. Love it. Our last note comes to us for an anonymous listener, a 53 year old mom of two in California. She writes, I feel like an idiot when it comes to finances. Thus, the reason I wanted to say anonymous. But we have about $10,000 in the bank we were going to use to pay off my son’s student loan and car loan. However, with the recent turn of events, I was wondering if it would be wise to invest in the stock market. If you say yes, would you please tell me the best way to do that as I’ve never done it before? Thank you.
Jean Chatzky: (34:19)
Absolutely. And first of all, can I just say, you’re not an idiot. And even if you feel like an idiot when it comes to finances, these are all things that none of us are ever taught. And we’re all learning as we go along. And so, please don’t feel that way. And thank you for listening to the show and thank you for trying to learn along with us. Kathryn and I are learning new things about this world of personal finance every single day because there are always new things out there. So, before you do either one of these things, I actually want to ask you a question. And if you want to write us back on that, you can certainly do it. I want to know why you’re going to pay off your son’s car loan. I do understand the student loan – that sometimes parents make a deal with their kids that the child will borrow because the child can borrow cheaper, but the parent will pay it off. And if you have made that deal, then you’ve made that deal. But it’s your son’s car. I assume your son who is working has an income. Maybe your son could pay off some of that car loan himself. Maybe he could pay off all of that car loan himself. At this point, when you have kids who are grown and potentially flown, we have to look to our own future. And so, I would say if this is the first time that you’re looking at investing in stocks, I wonder about how well situated you are for retirement and whether you have retirement accounts through work. The best way to invest in stocks is to first look for an account where you can get some tax advantages. That might be a 401k, where you get a tax deduction for making a contribution and then the money grows tax-deferred until you withdraw it. It might be an IRA or a Roth IRA. A traditional IRA has similar tax treatment to a 401k. A Roth IRA is one in which you invest the money on which you’ve already paid taxes, but it can grow tax-free forever. You never have to pay taxes, even when you pull the money out. And you, at this point in your life need to be making sure because you’ve already done such a great job of taking care of your son, that you are on track for your own retirement. Because the markets have been so volatile lately, I would not put all of the money in at once. I would dollar cost average, which means I’d probably divide this $10,000 up into equal chunks, and maybe put a thousand dollars a month into a portfolio that makes sense for your age and your risk tolerance. At 53 years old, you probably want about half of the money in stocks and half of the money in safer havens, like fixed income. And I would just make sure that I keep my fees very low, my expenses as low as possible, and my investments diversified, which probably means investing via index funds or exchange traded funds. I hope that gets you going. If not, please let me know. And if you want to share some more details about whether or not your son can do this himself, that would be okay too. But good luck. And thanks for writing.
Kathryn Tuggle: (38:04)
Amazing. Thanks Jean.
Jean Chatzky: (38:06)
And in today’s Thrive, how Netflix can boost your credit score. Yep. You heard me, right? You could be streaming your way to better credit before you know it. Here’s how it works. The more a potential lender knows about you. The more comfortable that lender is letting you borrow money. In July, Experian announced that a customer’s Netflix payment history can be factored into the company’s new Experian Boost alternative credit score calculation. The move is designed to give those with a thin credit file, and that’s usually younger people, an opportunity to qualify for more credit opportunities and better borrowing terms, Experian Boost, and other alternative credit scores like it, are designed to provide a more complete picture of a person’s credit worthiness based on additional indicators of sound financial behavior. The score incorporates factors that other scoring models don’t, like utility payments and bank account balances. And these free opt-in programs are typically best for those people who are new to building credit. Experian Boost requires connecting an online bank account to Experian, so it can grab your utility payment history for the past 24 months. Qualifying utilities include water, electricity, cable, mobile phone, landline and, as of July, Netflix. Only positive payments are considered and you can pick and choose which utilities to include. Then, you decide if you want to add that information to your Experian FICO score. Experian reports that, on average, customers who used Experian Boost saw a 13 point increase to their score. Just remember you have to be patient. Time is the real secret sauce to improving your credit score. Once you’ve set up good habits, the best thing you can do is sit back and let time do its thing. Thanks so much for joining me today on HerMoney. Thanks to Lindsay Kohler for talking us through these communication issues. I can’t wait to chat with her again, but hopefully face to face. If you like what you hear. I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review because we love hearing what you think. We want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through Megaphone. Thanks so much for joining us and we’ll talk soon.