Managing billions while living paycheck to paycheck: Don’t do what I did

In her new book, “Your Best Financial Life: Save Smart Now for the Future You Want,” she admits that saving for retirement is a joyless task. In one chapter, titled “You Suck at Saving (But It’s Not Your Fault),” Lester tries to take the shame out of how hard it is to squirrel away money. She brings retirement into focus for generations that won’t face it for decades yet.

MarketWatch: What’s your background?  

Lester: I grew up in a comfortable middle-class household, and I was raised by parents born in the 1930s who never had money growing up. They didn’t teach us kids how to save or about money. They figured we’d figure it out. I grew up with this idea that it will all work out. They didn’t teach us about money or credit cards.

My first job was on Capitol Hill and I didn’t make very much. I didn’t get my financial act together for a long time. I was always biting off more than I could chew. I was juggling student loans for graduate school. Even as I got older, I was juggling payments for the house, which we overpaid for. And we had kids. 

There were behavioral reasons and triggers. The thing that was toxic for me was that I kept framing it as a question of willpower, that if I were a better person, I wouldn’t be doing this. I had shame. I blamed myself. I know I’m not stupid — why can’t I get a handle on this? All of this was happening as I was managing billions of dollars of other people’s money. It was easy for me to be rational and methodical because it wasn’t mine, so I could be very logical about it. It’s like helping a friend move — you can be very organized and disciplined for them, but if it’s your own move, you’re a mess.

MarketWatch: You managed billions of dollars and ran retirement solutions for J.P. Morgan Asset Management. What were the biggest lessons you took away from that?

Lester: I spent a lot of time learning and traveling and going to every client pitch and sales call I could go on. I went and talked to everyone I could. I would sit through whole meetings and I started learning that participants don’t behave logically. They take out loans, they stop making contributions. This was not just me — this is everybody. It sent me down a path of trying to understand why.

It was so much behavioral economics. Understanding the why is a major way for people to stop framing things in the semi-moral framework I was using. Understanding how your brain works, what your habits and your triggers are, allows you to create these hacks or create the environment so you’re not falling into the same traps over and over again. It’s just the way you’re wired. It’s like your height. You don’t blame yourself for your height. 

Twenty years ago, people looked at decisions people were making with their money and labeled them irresponsible. Let’s take some judgment out of this. People and money are not completely aligned with what an algorithm would do. We’re not algorithms. To me, understanding the reasons behind it were important. We all spend our money on things that feel important in the moment. Find what is really meaningful in your life and find somewhere else to cut.

MarketWatch: Why was it important to you to target this book toward millennials and Gen Z? How are these generations different than their older counterparts?

Lester: I actually started writing a book for everyone, which really is a book for no one because the advice you’re giving to people in their 20s and 30s is much different than what you’d give to those in their 40s and 50s. So why did I want to talk to Gen Z and millennials? I don’t think there is enough being written for this younger cohort by those who have been in the industry for a really long time. I wanted to write the book that I wanted in my 20s and 30s. What was available then was a lot of finger-waggy messages from my parents that just made me feel bad and guilty — and let’s not go there again. 

Things are different for these generations in important ways, and in some ways they are similar. The economic environment is different. Gen Z and millennials came out into the world in periods of more dislocation economically than other generations. And then there was COVID. 

There’s a difference in information availability that fundamentally changes our brains in ways we’re just looking at now. We’re consuming a lot more. It’s literally easier to spend money now. Before, there were small barriers to spending money, like writing a check at the grocery store. Now I tap my phone and it rewards me with a fun little ping. That stuff matters in our brain. There used to be a lot more sand in the gears in our ways to spend money. It is physically more painful to spend cash. It involves going to an ATM and handing over actual cash. That’s painful. We need to learn how to create some of those brakes for ourselves.

MarketWatch: You talk about how we all suck at saving, but it’s not our fault. Why are most of us so bad at it?

Lester: Spending money is more fun. I think we all know if we’re spenders or savers. I have two kids and one is like me, poor guy. You could put him in a store and if there were no price tags on anything, he would fall in love with the single most expensive thing in the store. My other son literally couldn’t care less. I get money and I think “What can I do with it?” The idea of saving — it took a lot of time to build up that muscle. 

MarketWatch: Can you talk about “future discounting” and how it harms retirement planning?

Lester: What is important to us is what is in front of us. From an evolutionary perspective, delayed gratification just wasn’t a thing. Delayed gratification has to be learned. You also have to experience and trust it will be there. You may also have been taught in your life things that make it hard to trust — that the future is precarious. There’s nature and nurture in there for a lot of us. Some of this is the way you are made. 

Retirement savings is especially hard because you’re putting it away and giving it to a totally random stranger, as far as your brain is concerned. Retirement savings is trusting that markets go up over time. For those in their 20s and 30s, they think “I’ll be old and then I’m going to die.” There’s not a lot of thought about those retirement years. It’s really hard. Plus, those in their early to mid-20s — their prefrontal cortex is also still developing.

MarketWatch: Life costs more now — rent, cars, food, healthcare. How do people still scrape enough together for retirement?

Lester: You don’t have to do it all at once. Nothing is going to stay the same. It’s all going to keep changing. 

I believe housing will get less expensive in five to 10 years relative to the median income. Your income, for many people, will grow as you learn and grow, and your salary will go up. It will be possible to increase your savings rate and still enjoy a slightly better lifestyle. If you can save 5% of your income and raise that 1% to 2% every time you get a raise, you’ll eventually be at 15% to 20%. Then you’ll have enough money to be saving enough for retirement, paying off your debt and putting money aside for a down payment on a house. We are still anchoring on a 1950s, postwar-expansion view of the world — and that’s why it feels so bad right now. You don’t need to accomplish everything all at once. 

MarketWatch: What will Social Security look like for these younger generations?

Lester: Failure is too impossible to imagine. But imagine that Congress does nothing. I don’t think that’s the probable option. But if Congress does nothing, Social Security will pay 75 cents on the dollar of what’s been promised to people. It’s not very good, but it’s not zero. It’s not going to evaporate and be zero. I think they’ll change taxes and make other changes around Social Security. But there may be a need to be a little more responsible. You can plan ahead for changes to Social Security. 

MarketWatch: Layoffs have been making headlines in recent months. What do you need to do if you lose your job?

Lester: I’m a big advocate of having three to six months’ worth of emergency savings. That is nondiscretionary spending. Make sure you get laid off legally. See if you get a severance. Don’t sign anything until you have time to take it home and read it, and have a lawyer or a parent or someone else look at it, too. Make sure you understand what you’re signing before you sign it. File for unemployment immediately. Don’t feel shame. 

This happens to people. It happens to everyone eventually. Companies make mistakes and hire too many people. Do not feel shame. You are owed that money. The next thing to do is take a deep breath and give yourself permission to be pissed off for a minute. Then take a hard look at where your money is going. Cut back and be more aggressive than you need to be, because you don’t know how long it will take to get a new job. 

Everyone’s definition of what’s discretionary is different. Takeout or eating out is an easy place to trim. Loud budgeting is fabulous. There’s nothing wrong with saying you need to pull back a little. Have a plan. What are five easy things to cut?

MarketWatch: What’s the one big thing you want people to get out of your book?

Lester: You have totally got this. You can do this. It’s not impossible. It may feel as if it’s going more slowly than you want it to — it is for everyone. Most normal people will not feel like they have enough money for everything. If you are methodical about increasing your savings rate when you get raises, you will in fact be able to do all the things you want to do. Maybe not all at once or as fast as you want, but just have faith that you’ve got this.