Walk before you Run

I don’t think very many of us step foot into the gym after a prolonged absence and decide to push yourself as hard and as fast as you can – at least not more than once, especially if you’re older than 40. We know, or at least have a fair idea, if we did it would not be pleasant (to put it mildly). Yet many of us are so quick to think other aspects of our lives, specifically financial, would be any different.

I get it, I hear many of the same “experts” telling us we need to save more and spend less – and we do! But, and this is a very big but, you should not think you can suddenly do a complete shift and sustain it. You need to train yourself, just as you would if you were going to run a marathon.

Saving/spending are just as much habits as smoking or making coffee every morning (my personal vice). Yes, in a perfect world all of us would be saving at least 20% of every check towards clearly defined goals (retirement being just one of them); but this isn’t a perfect world – we all have other “stuff” going on that can distract us. So rather than try to make a drastic change, and then quit because it’s too hard, start smaller.

Although transportation and housing make up a significant portion of our spending, many of you reading this are probably not in the market at this time – so there probably isn’t much opportunity to reduce your spending here. However, if you are in the market, or if you haven’t looked into refinancing and you’re mortgage rate is over 5%; here are a few things you can do to help yourself.

Aim at keeping the house and auto payment down. If you have to finance a car for 60 or 72 months, consider a less expensive option. Cars are depreciating assets – meaning you will never get the money you put into it back. Refinancing your mortgage could free up some cash – and since you’re used to not having it go ahead and put it directly into a savings/investment account; don’t spend it.

For the rest of us, track how often you buy something every day/week. For now, don’t worry about how much you’re spending, this is to determine your purchasing habits. For everything you buy make a note of “need” or “want”. What drives your purchases? Are there certain times of the day you are buying more frequently, is it just super easy because your card info is saved on the website? These are the types of questions you should be asking yourself.

From here, pick one thing to change and commit. Maybe it’s deleting your card info from Amazon Prime, or you don’t hop on the computer right after work because it leads to retail therapy. Whatever it is, just make (1) small change and stick with it for at least (3) months. Easy way to track – Federal holidays. If you start something around the 4th of July, next step is reevaluate around Labor Day or Thanksgiving. No reason to make it super complicated, the easier it is the more likely you’ll follow through.

What you shouldn’t do: don’t suddenly increase your 401(k) from 2% to 15%; that’s too much of a shock to your system. Don’t tell yourself “I’m just not going to shop anymore”. That’s a punishment, not a constructive realignment of your attitude and behaviors (fancy talk for making yourself miserable). If you’re in a committed relationship with joint finances – don’t make any changes on your own. Have an open dialogue, and if necessary, use an impartial 3rd party to help steer it. Pick a pace that leaves you a little uncomfortable and get started. There’s no better time than now.


Nothing Wrong with Simplicity

I think we make our lives more difficult than we need to – in all aspects. Almost like we think we’re doing something wrong if we can explain ourselves in one sentence. But in my opinion, this is what we should be striving for. Life is complicated enough, I don’t feel like it needs any help from me.

More often than not I’ve found the mantra “keep it simple” has steered me in the right direction – even (or especially) when I’m working with clients. To be clear, you must absolutely do your due diligence when considering alternatives, but I’ve found those that you can easily understand and require the least amount of effort will often work.

This shouldn’t necessarily be applied when pursuing a degree or picking a home to live in for the rest of your life – because there is usually a lot of other things to take into consideration. But how you pay for school, or the home, shouldn’t be that complicated or fancy.

Call me boring, but I like to set things in place and then forget about them – secure in the knowledge that it’s doing what it’s supposed to do. Saving for college in a 529 plan – why not pick a target date fund with the year closest to when you’ll need the money? The same goes for your current employer sponsored retirement plan. Both of these will likely have a bunch of other options available, and not necessarily anyone available to help select what works best for you.

Alternatively you could hire someone to take care of it for you; my only input being make sure you understand what they are doing. This can apply to having a housekeeper, landscaper or financial advisor – in each case you’ll want to be very clear of your expectations, and understand what they will be delivering. Once the ground rules are laid, you can shift your focus to other things – circling back periodically to check on things.

Think Bigger

I think it’s safe to say all of us have something we want, but don’t yet have – be it something personal, professional, spiritual or financial (and any other category I may have omitted). When was the last time you took a step back, asked yourself what you were waiting for, and were sincerely satisfied with the answer?

I like to think I’m a pretty motivated guy, but a recent health scare led to me evaluating some choices I’ve made and asking myself if I made them for the right reasons. For choices I’ve acted on, I was 100% satisfied – however there were plenty of things I “haven’t gotten around to, because I’m too busy” that I had to call myself on. There were also some choices I’d executed where I think I held myself back, didn’t let myself stretch for fear of failure and/or rejection.

How do we get around this? Well, if you listen to enough “experts” you’ll hear  you just need to push through it. The problem I’ve always had is there is nothing to leverage yourself against to help with this “push”. So I recommend finding someone you trust, who believes in not just what you are currently doing; but also sees the potential you have. Share your vision with them, and ask if they’d be willing to help.

The argument I hear for this is “what’s in it for them”? “Why would they help me?” And a few others, but I think you get the idea. The simplest answer – by helping you realize your goals, and watching you stretch; you’ll expose them to bigger thinking and help them find the courage to attempt their own “stretch” goal(s). During your journey you may have to shift who you work with, either because they may not know how to help you grow, maybe they haven’t gotten far enough themselves or you find your dynamic together is much better as friends.

This is all okay, and to be expected. We all grow at a different pace, the key is to never stop. Thinking bigger doesn’t mean running for public office or starting your own company, it could be as simple as committing to save an extra $5 or $10 each week, or sticking to your grocery list. If you set small goals, increase them as you achieve them. I think starting small makes the most sense, because it creates positive momentum. Setting small, easily achievable goals outside of what you are currently doing will show you can do it!

You don’t have to start tomorrow, but definitely commit to a day and start. Get a wall calendar, or make notes in whichever digital calendar you use, to track how you’re progressing towards your new commitment. Setbacks are only failures if you give up, expect to have them and commit to not letting them get in your way. And it’s not a failure if you attempt something and find it’s not your “thing”, as long as an honest effort was made.

Much of this may sound like stuff you tell your kids, or teams you coach; no surprise – it’s how we help them become successful. It begs to question why we are not doing the same for ourselves. Take a chance, set a commitment for something huge – and then set smaller incremental commitments that will get you there. Find an accountability partner, a trusted advisor and/or friend. Track your progress, and be prepared to blow your socks off!


Don’t Let the Tail Wag the Dog

I enjoy coaching business owners, helping them determine where they can increase efficiency and dial in their focus running the business – as opposed to the business running them. Over the years I’ve found some very common themes – “not enough time” and “too much to do”; both of which can be addressed by stepping outside the business and looking at it as a perspective buyer, rather than the owner. Buyers look for opportunities and weaknesses (so they can bid the price down), they’re not emotionally invested in the company and won’t make excuses about why something is happening.

Unfortunately, many of us get so wrapped up in the day-to-day operations we lose sight of the bigger picture – where we want our company to be in 5, 10 or 20 years; and what is the core service or product our business provides. If you don’t have a vision for your company, or if you can’t put your finger on the core service/product, then ask yourself why you’re a business owner. Sure, there’s a lot of hype right now encouraging people to be entrepreneurs and chase their passion; but that passion may be met through hobbies or volunteering at much less cost than starting a business.

Same goes for “side hustles”. Unless you’re working part-time for someone else, you should be treating your hustle like a business. If you’re an Uber or Lyft driver, or you rent room(s) on Airbnb, then understand what your expenses are – please don’t delude yourself into thinking what you earn is “all profit”. I would also like to encourage those of you with side hustles to ask yourself “why”. Why do you have the hustle, what is the money going to help you do? Take this answer and make sure you’re taking the steps necessary to follow through.

Perhaps you’re saying “sure, this all sounds like a great idea; but you just don’t understand how busy I am”. Again, I challenge you to think as a buyer. Do you care how busy someone is, do you let them off the hook for a poorly delivered service or product? No, of course you don’t – so why are you treating yourself any different?

Make the time. Set at least one day each month aside for your business. Instead of arguing how much business  you’re going to lose (cost); think of it as an investment which will increase your profits by improving efficiency and honing your focus. Create an agenda for your day, and follow it. It’s going to feel weird at first, and maybe you’re not super productive right away – it’s a new skill and it’s going to take time to get good at it. Don’t give up, push through. If you’re not sure how to start find a mentor or hire a coach.

I need to stay busy, but I don’t like to waste my time. Think back to why you started your business or side-hustle; I’m willing to bet it wasn’t so you filled your every waking moment with work. Be honest with yourself, do you really want to run a business? Be okay with the answer, whatever it is, and take the necessary steps to be successful. Just do something.

Vets – save that pension

This post is for my fellow veterans – those who have already retired, or are considering a military retirement; and are interested in living a life of financial independence as quickly as possible. We’re in a unique position, we’ll have a steady stream of income starting at a relatively early age (some of us are under 40). Depending on where you choose to hang your hat, maybe this will be all you’ll need – but more than likely you’ll want to keep working, if for no other reason than to keep from being bored.

So let’s say you decide you want a second job/career. First, let’s talk about how to determine your income need. Many of those I’ve spoken to were satisfied to have their employer pay them the difference between what they were making on active duty and their pension; without consideration for skills and/or education. Please be real about what your worth is.

When you enter the workforce, I think it’s best to pretend you do not have any other income; but rather take stock of what skills/talents you have and what those are going for in the “real world”. Glassdoor and Salary.com are two resources I’ve found useful over the years to establish a baseline income level for jobs I was interested in. The only exception I would generally make is if you’re starting a business from scratch – because then using your pension (and VA disability if you qualify) can help significantly.

Once you’ve done your homework and established what the job should pay given your skills and experience, that becomes the minimum base salary I recommend you accept. So what if it’s more than you need because you’re getting a pension – does this mean you can buy a bigger house or a more expensive car?! No – not if you’re goal is what I stated in the beginning; financial independence as early as possible. Instead, I’m proposing you save the entire amount, and not all of it in retirement accounts.

Let’s say your after-tax pension check is $2,000/mth ($24k/year), and you’re not receiving any VA disability. The first thing I would do would be max out your 401(k) contribution – which for those under the age of 50 is $18k/year. Here’s why I like this – it’s going to reduce your taxable income, and it’s not going to feel like you’re saving the full $18k because it’s pre-tax dollars. You can’t put your pension into your 401(k), instead  you’re investing the money from your paycheck and using your pension to live. Because you’ll receive your pension on the 1st, and your 401(k) contributions will come out with every paycheck, you’ll want to make sure you’ve set a system in place to pay your bills in the beginning of the month with your pension check.

The remaining $6k I would put into a taxable brokerage account, I like Vanguard and Fidelity because they have low fees, but anywhere it can grow for the next 7 – 10 years taking advantage of the stock market is fine. How and where you invest will depend on your individual risk tolerance. If possible, I recommend making this an automatic withdrawal from your paycheck just like the retirement withdrawals; it’ll help avoid temptation to spend it elsewhere.

If you’re receiving VA disability, I would explore a different option – because it’s coming to you tax-free already. This money I would want to set aside in a Roth, either IRA or 401(k). If you’re income is too high for a Roth IRA and your employer doesn’t offer the Roth option, then talk to your advisor about using a taxable IRA and Roth conversions. My goal is helping you keep this money tax free. This strategy works just as well if you’re active duty and deployed in a combat zone receiving tax free pay – move your contribution to the Roth TSP option and increase it to the highest threshold you can stomach; but nothing less than an additional 2%.

These strategies will build your account values quickly, and the lower you can keep your living expenses the sooner you’ll become financially independent. I’m not against working, quite the opposite – I think I’ll work as long as I’m able to. But I believe we should work on our terms. Speaking for myself, after 10+ deployments and 5 years as a geographical bachelor, I’m done working on any terms other than my own – so it’s critical I do what I need to, to afford myself this freedom (and the same goes for you).


How “High-Functioning” Are You?!

Full disclosure – this is a rant. I’m not a fan of being asked “is your son high-functioning”, or words to that effect; regardless of how well meaning someone is. In the research I’ve done the best definition of “high-functioning” I’ve been able to find is from Autism-Help.org, and it states: “High-functioning autism (HFA) is an informal term applied to individuals with autism, an IQ of 80 or above, and the ability to speak, read, and write.”

Given this definition, why does it matter in “normal” conversation? I don’t think I’ve ever asked the parent of a neuro-typical child if their son/daughter was an honor student, or if they had an IQ over 80, within the first ten minutes of meeting them. Sure, I can hear people replying “well what are we supposed to say?” Or, “we’re not trying to be rude, we just don’t know what to say”.

Why do you feel you need to say anything? If you’re not familiar with the diagnosis, be it autism or other disability, why not just admit that and let the person you’re having the conversation with decide how to proceed?

Here’s the reality. There are going to be circumstances in all of our lives where we will be at a loss for words or feel extremely uncomfortable. In my opinion, the best thing you can do is lean into it. Either choose silence, or explain why you’re uncomfortable – I think you’ll find most people will be very accommodating and will really value your honesty.

Speaking as a parent, I don’t expect you to understand if you aren’t familiar with it. And frankly, most of the time I don’t want to talk about it; especially in casual conversation. Make no mistake, I’m very proud of everything my son has accomplished, but I’m a very private person. Other parents may choose to be more open, and perhaps the high-functioning question doesn’t strike a nerve with them as it does with me. All I ask is think before you speak. If you are going to ask a question like this, where are you hoping the conversation goes?

How to Transition to a Monthly Paycheck

For most of our working years I think it’s safe to say just about all of us receive our checks weekly or every other week; and plan to pay our bills accordingly. Speaking for myself, while on Active Duty my wife and I designated the 1st’s paycheck to the mortgage and the 15th’s to our living expenses. Simple and easy to repeat; and I’d wager many others do something very similar.

I never considered what would happen if I was only paid once per month – and although I “knew” it’s what would happen when I retired from the Navy I wasn’t ready for it. It’s a different dynamic, even if you’re being paid the same or making more; because if it’s something you’re not used to it’s easy to spend like you have another check coming at the halfway point – and if you’re used to weekly paychecks it can be even worse.

To add insult to injury, it’s likely there is going to be a gap of at least (1) month between your last regular paycheck and your monthly check when transitioning to a military pension or social security. It could be even longer if you’ve filed a VA claim, I believe the current wait for fully developed claims is (6) months – a fully developed claim is one in which all supporting documentation has been provided and the VA forms have been completed correctly.

So what can you do to help yourself?

At least six months, a year would be ideal, start gradually transitioning to paying your bills within the first week of the month.

First, figure out your living expenses. Start with tracking all your spending, Mint.com is a useful tool; but many banks will include a similar tool. This will tell you how much you need to earn, and if you’re not interested in transitioning to another job/career; it will help you determine if, and where, you need to cut back. For those who are Active Duty and are being paid BAH cut your expected earnings by almost 2/3 – because you will receive ~50% of your base pay only (whatever percentage you’re entitled to, it’s calculated off your base pay). If your expenses are more than your new income you have two choices – find another income source (not credit cards or other debt instruments) or dial back your expenses.

After you’ve calculated your living expenses and your monthly income, train yourself to live off one pay period.  For most of us this is going to take some coordination, because we don’t have sufficient savings to serve as a buffer. Start small, with a bill or two that are fairly consistent – like phone and/or cable. You know how much you need to set aside, and can plan for it by dialing back accordingly.

When you’re ready to start, set aside 1.5x’s the amount of the bill(s) you’re adding to the first of the month; and I recommend putting this somewhere other than your everyday savings/checking. You’re saving more than you “need” to build the habit and get you used to having less money available from your other checks. This also gives you the extra money you’re going to need to have available on the first of the month. If you cannot afford to save the full amount, then start by setting aside at least an extra $25. The less you can afford to set aside the more time you will need to give yourself for the transition, because we want the habit firmly anchored before the transition occurs.

The goal is a complete transition to paying all your bills on the first of the month before you leave the work force. This isn’t the only way to do this, and if it doesn’t appeal to you my hope is it has at least got you thinking about when you’re only going to have a monthly check. Don’t hesitate to get help if you need it, in this particular case I would recommend a fee only (hourly) planner – Garrett Planning Network, NAPFA, and the CFP Board all have “Find an Advisor” tool; to name a few organizations.