What Is a Plateau Experience and How Can You Use It to Get Ahead?
I was astounded when a friend at work mentioned that he and his wife had paid off their mortgage in seven years. Dan told me their secret was that they drove old cars and didn’t go out to eat. What got me excited was the challenge. Dan lent me his tapes by Larry Burkett. I was intrigued. It felt so impossible, but also counter cultural. Dan eventually convinced me that going debt free was my best option. Dan used to say: “It’s not a sprint. It’s a marathon.”
📝I wrote this article as an allegory. The major points are summarized at the end of the article.
In this episode, we pick things up with Julie — our super mom and rising star at work. She has it all — a wonderful family and a rewarding career. In past episodes, we learned that Julie has been promoted to CEO. She has visited several ‘coaches’ who have given her their best advice. In this episode, Julie meets with a financial coach to learn about money.
Note: I am not a licensed financial advisor. This is not financial advice. Work with a qualified financial planner before making any changes to your investments.
⚠️ This article is part of a 9-part series on being all you can be. If you haven’t reviewed the earlier articles, I recommend that you start with What Would You Do if You Were Shohei Ohtani?
Understanding the Plateau Experience
A bell rings as Julie pushes on the glass door and enters an office in a strip mall. The space is empty with the exception of an old office table located near the back wall.
“Hello, is anyone here?” Julie calls out.
“Oh, I’ll be right with you. I’m in the back,” says a voice from the back room.
“No problem. Take your time,” Julie replies casually, looking around at the bare walls.
“You must be Julie. My name is Barry Kowalowski,” greets Barry as he emerges from the back.
“Nice to meet you, Barry,” Julie responds warmly.
Barry gestures towards a folding chair and says, “Have a seat. Oh, Sharon’s office just called. They apologize for being at an offsite when you contacted them last week and wanted to let you know that all of your consultations, including me, are being covered by LoyaltyBuilders. Kristen, your EA, knows all about it.”
Julie laughs before replying, “I guess I should’ve known that a financial coach would know how to follow the money. Thanks for letting me know.” She then inquires curiously, “Tell me your background.”
“I recently moved to the city from Miami,” Barry begins. “So, I’m just getting started here. In Miami, I was mostly setting up offshore accounts to protect the financial assets of wealthy men (mostly) from their ex-wives.”
Raising her eyebrows in surprise, she asks hesitantly, “Is that legal?”
“It’s perfectly legal as long as everything is declared properly,” assures Barry quickly before adding with a slight smile, “And there are plenty of legitimate reasons for having an offshore account. That said, I recently thought I might be happier in a ‘cooler climate’… So now you’re a CEO?”
“I was recently named CEO at LoyaltyBuilders,” Julie begins. “I’ve come from a humble background. My parents were always hustling just to put food on the table.”
“Being a CEO, your worries must be over now, right? They pay pretty well, don’t they?” Barry questions.
“You’d be surprised,” Julie replies with a shrug. “A lot of it is deferred.”
“So, your income depends on how well LoyaltyBuilders does, especially the stock price. You guys just went public, right?” Barry probes further.
“The closing price on the first day of trading was $30… Now it’s around $20 a share,” Julie admits reluctantly. “I’m hoping it doesn’t drop any further, or I’ll be out of a job.”
“I see… Well, I can’t really help you there,” Barry admits with a chuckle. “But I do have some experience in helping the rich get richer.”
“Hmm… I’m not sure that’s what I need,” Julie responds thoughtfully.
“Good for you!” Barry exclaims with a nod. “You’d think someone with $100 million would be content. But it’s usually just the opposite. My old clients were obsessed with making more and signaling with their wealth… Multiple homes, cars, boats, even helicopters! It was insane.”
“I just want to be comfortable,” Julie shares honestly.
“That’s what almost all of my clients said too… Be careful.” Barry warns lightly.
“What do you mean?” Julie asks curiously.
“I’m no psychologist, but it seemed like all my clients had various insecurities,” explains Barry. “It was as if they were trying to fill some void in their lives.”
“Hmm… Really? With $100 million in the bank, I think I would feel super comfortable.” Julie comments lightly.
“It was just the opposite, Julie.” Barry shakes his head. “Sure, if you’re living paycheck to paycheck, more money is going to improve your life significantly. But there’s a point where… let’s just say, there can be too much of a good thing.”
“Hmm. Definitely something to think about.” Julie muses.
“What does the ‘Good Book’ say? Something about ‘people piercing themselves through with many sorrows’? I’ve definitely seen that with some of my previous clients,” Barry reflects.
“So, what’s the solution then?” Julie asks curiously.
“You have to realize there’s a feedback loop. When you start with nothing and gain a bit of money, it feels good. You get a little hit of pleasure. So, you focus on improving your situation and guess what? Another little hit of pleasure. Like with all addictions, though, each time through the loop, the euphoria lessens. That’s why I like to set my clients up on the Kowalowski Blueprint,” Barry explains.
“I’m intrigued… tell me more,” Julie prompts eagerly.
“It all starts by setting a goal and stopping when you reach it. Picture your ideal life. How big is your house? How many bedrooms does it have? Is it close to the ocean or does it have a view? How much money do you have invested? How much cash is in your bank account? Where do you want to vacation? When do you plan to retire? Then, when you reach that point, stop,” Barry continues.
“That’s it?” Julie asks incredulously.
“Yep, pretty much… Sounds simple right?” Barry chuckles softly. “But surprisingly few people stop once they achieve their desired goal. Imagine being a racehorse rounding the last turn — leading and feeling strong — when suddenly your jockey pulls back on the reins… This is what it feels like. That’s why I always say: It’s important to have money, but even more crucial that money doesn’t have you.”
Laughing heartily, Julie says, “That’s an amazing saying! I want my life to be more than just making money. I can feel that drive for more. Have any of your clients been successful in doing what you suggest, stopping when they reach their goal?”
“A few,” Barry admits with a shrug. “But, not as many as you would think, Julie. The whole world seems wired to promote this endless pursuit of stuff.”
“OK. I’m in! What’s my first step?” Julie asks enthusiastically.
“Before our next meeting, you and your husband could jot down what ‘enough’ looks like for you guys on a piece of paper and bring it along,” Barry instructs.
“Makes sense,” Julie nods. “But what happens after that?”
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The Kowalowski Blueprint for Financial Success
“That depends on what your one-pager says,” states Barry casually, “But generally, I like to structure things like this…” He spins his laptop around to reveal a diagram.
“Once you’ve got six months in the bank, I suggest that you focus on becoming debt-free,” he continues.
“But does that really make sense from a financial perspective?” Julie queries. “I mean, isn’t it better to maintain leverage in real estate?”
“A lot of financial planners would agree with you,” Barry admits. “They’d argue that if 10% of your money is in a house with a 90% loan, and it appreciates by 10%, your net worth increases by 100%.”
“So, what’s your point then?” Julie asks.
“It all comes down to your goals, Julie. If you want to max out like my clients in Miami, staying leveraged is indeed the best bet. But if you’re ready for the Kowalowski Blueprint, it’s all about creating room for other aspects of your life. Things like self-directed learning, travel and spending quality time with family.”
“You’re a revolutionary, Barry,” Julie chuckles. “This is completely unorthodox… but I love it! Please go on.”
“Yes, I do stir things up a bit,” Barry agrees with a grin. “But clients who’ve opted for the K Blueprint are much better off in case of a downturn. Imagine the peace of mind that comes with being entirely debt-free!”
“So instead of seeking peak experiences, we should aim for plateau experiences?” Julie ventures.
“Exactly!” agrees Barry. “The first piece of this puzzle involves setting financial goals — determining when to stop. Then comes budgeting—pretty straightforward stuff. Just look at your last three credit card and checking account statements and build a budget from there. I’ll send you a template after our meeting.”
“That sounds doable,” Julie responds. “What about this part?” pointing to the checking account part of the diagram.
“Good question,” Barry says. “This change was a result of getting my debit card hacked at a gas station. Back in the day, the transmissions between the pumps and the store were unencrypted. They got hold of my account number and PIN, and then minted a new card. In just a day or two, they emptied my checking account and started transferring money from savings.”
“Yikes,” exclaims Julie sympathetically.
Implementing the Kowalowski Blueprint
“Fortunately, the bank covered my losses,” Barry starts. “But I want to prevent this in the future. As a result, I only keep a month or two worth of funds in my checking account. If you have direct deposit, then you should be transferring what you don’t need for the month into savings. This transfer can be automated. Then, you set up autopay from this account to your credit cards.”
“Isn’t that risky?” asks Julie.
“I get a notification for every credit card and checking account transaction over a dollar,” Barry explains. “That way, if I see something I don’t recognize, I can make a quick call to report fraud.”
“Makes sense,” replies Julie. “What about savings?”
“It’s important that your ATM card doesn’t have access to the Savings account, for reasons explained earlier,” Barry continues. “I have account alerts set up on both accounts when the balance falls below a certain amount. That way, if something goes wrong, I’ve got a fail-safe backup. Of course, I log on every week or so and just review my checking, savings and credit card transactions — it only takes a minute from my phone.”
“What about CDs? Do they still make sense?” Julie queries.
“It all depends on your bank,” answers Barry. “Sometimes they’ll offer you a rate that’s close to a CD, so it doesn’t matter as much. But I like having money in another institution as an additional risk mitigation measure.”
“CDs… I’m still not sure about them,” Julie admits.
“For my high net-worth clients,” Barry explains further, “I recommend six months of expenses in CDs. I actually create a CD ladder with a quarter of the total in each of the 12-month CDs, which means one comes to term every quarter and pick up the latest rate. I set them up so that they auto-reinvest at the original amount, then I sweep the interest into another account.”
“And all this can be automated?” Julie asks.
“Yes,” confirms Barry. “Everything we’ve discussed can be automated — from your direct deposit, your credit cards, the transfers between checking and savings to maintain your preferred balance amounts and even these CDs.”
“What’s next? Oh, 401K… Yes, I already have that. It’s the maximum I can get with matching.” Julie states confidently.
“Good. That’s what I recommend,” Barry says with a nod. “It amazes me how many people don’t take advantage of this. I mean, matching is basically ‘free’ money. And, usually, my clients don’t even miss the amount that’s taken from their paycheck.”
“Yup. Both Dan and I have this set up,” Julie replies confidently. “But how should we invest the money in our 401K?”
“OK, I’m not licensed to advise you on that. But my recommendation is to not try to guess where the market is going and to essentially invest in the entire market.”
“The entire market?” Julie asks curiously.
“Yeah. You know, equities and bonds. Domestic and international,” Barry explains patiently. “There is something called index funds that allow you to invest in the entire US stock market, another for the entire non-US stock market and the same for domestic and international bonds. This way you can adjust things on two dimensions — the balance between stocks and bonds, as well as between domestic and international markets. These contributions to your post-tax investments can be automated, too.”
“What percentages do you recommend?” Julie asks.
“That’s a tough one… definitely outside my expertise,” Barry responds thoughtfully. “But considering your age and when you’re likely going to need the money, I’d suggest leaning towards equities over bonds. How you split domestic versus international depends on your perspective of how well you think the US economy will perform over the next 20, 30, or 40 years. Again, my goal with these index funds isn’t about trying to guess correctly but ensuring that you’re well-diversified. I’ll send over an article if you’re interested.”
“What happens if the stock market crashes?” Julie asks.
“That’s definitely a risk,” Barry responds, “But there’s another risk you’re forgetting — inflation. Equities will generally protect you against inflation. You’re losing money every month if you stash cash in your mattress.”
“Good point,” Julie concedes. “I see what you mean. How about balancing my 401K versus my post-tax investments?”
“I suggest keeping it straightforward by making them the same,” Barry advises. “Or if you plan to tap into one account before the other, you might consider leaning more towards equities and less towards bonds for the longer-term account.”
“That makes total sense. Thank you.” Julie smiles appreciatively.
“You’re welcome,” Barry replies warmly. “I look forward to reviewing your one-pager at our next meeting.”
Epilogue
My wife and I had a little ritual that we performed on Fridays. We called it ‘Happy Friday’. We put it on our calendar and celebrated it without fail. During the time we were paying off our mortgage, we had a flower vase full of marbles. There was one marble for each month we had left on the loan. We would purchase Chimay, which, if you don’t know, is a delicious beer brewed by Trappist monks in Belgium. We would toast each over, say “Happy Friday” and then throw one of the marbles away. In retrospect, this ritual was a little odd. But it was definitely something that we looked forward to during the week as the same time it kept us focused.
If you are interested in implementing some or all of the financial concepts discussed in this episode, follow these steps.
- Set a clear financial goal: Visualize what ‘enough’ looks like for you and your family. Include specifics like the size of your house, your bank balance, retirement age, etc.
- Create a Budget: Review your last three credit card and checking account statements and build a budget from there.
- Limit the Balance in your Checking Account: Only keep one or two months of funds in the checking account and set up automated transfers to move the excess to savings.
- Pay off Your Credit Card Debt: There are many articles about this. But the place to start in my experience is the credit card with the smallest balance. There’s a little pop of dopamine that will come when you have accomplished this. If you have more than one card, select the one with the highest interest rate. Another trick is to perform a balance transfer to a new card with a lower interest rate. But be careful: after this maneuver, it might be tempted to run up the balance.
- Autopay Credit Cards: Set up autopay from your checking account to pay your credit cards.
- Notifications: Activate notifications for every credit card and checking account transaction over a dollar to monitor for potential fraud. Also, set up alerts on both Checking and Savings when the balance falls below a certain amount as a fail-safe backup.
- Savings Account Restrictions: Make sure that your ATM card doesn’t have access to your Savings account.
- Create a CD Ladder: Consider creating a CD ladder with six months of expenses into four 12-month CDs which mature every quarter.
- Max Out 401K with Matching: Take full advantage of employer’s 401K matching if available as it’s essentially free money.
- Pay down your Debts: Most mortgages allow you to make payments that exceed your monthly amount. After checking with your bank or mortgage company, accelerate the retirement of your mortgage by adding $100 to your normal monthly payment. If you have extra money at the end of the month or receive a bonus, put that down on your mortgage too. You can save a substantial amount over the life of the loan if you are able to retire it early. There are online calculators like this one that will show you how much.
- Invest in Index Funds: Once you have paid down your debts to zero, invest in index funds that cover domestic and international, both equities and bonds. See the article below.
- Regular Review: Log on every week or so and review transactions across all accounts — it only takes a minute from your phone.
If you are interested in learning more about building a portfolio of index funds, check out this article.
If you are interested in reading more about debt-free living, I recommend “Debt-Free Living: Eliminating Debt in a New Economy” by Larry Burkett.
In the next Episode, Julie meets Jake, a breathtakingly handsome personal trainer.
👉 Make sure you follow me so you are notified as I publish more about self-actualization. Just scroll up or down to my photo and click on the follow button.
⚠️ This article is part of a 9-part series on being all you can be. If you haven’t reviewed the earlier articles, I recommend that you start with What Would You Do if You Were Shohei Ohtani?
👋 If this article inspires you, then please show your support by giving me one or more claps. The clap icon has been ingeniously designed to allow between one and 50 claps. In order to view the clap button, use your finger to scroll up or down on your phone and it will magically appear or scroll all the way to the bottom if you are on a laptop.
Note: I am not a licensed financial advisor. This is not financial advice. Work with a qualified financial planner before making any changes to your investments.
