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.

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.

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.

 

 

Do You Have/Need an Exit Strategy?

Recently I’ve been receiving not so subtle reminders of how finite our lives are, and how much of a difference having a plan can make. I think we can all agree it’s impossible to plan for every eventuality, but I also think we can all agree there is at least one exit we are all going to make – to the best of my knowledge nobody has found the secret to immortality in our present state (this is not meant as a religious or philosophical post).

I remember how torn I was, weighing whether to reenlist or not. I retired with over 20 years, but if I’m completely honest with myself it’s not because I loved the Navy. The biggest reason I stayed was fear – I wasn’t sure what I would do about health insurance for my son – having received the Autism diagnosis in the early 2000’s and there not being much information available (that we were aware of). This had negative consequences – I was not someone anyone would want to be around; I felt trapped and took it out on everyone around me.

I think many, if not all, of us can relate to feeling trapped at some point in our lives – be it in a marriage, or a job or some other contract. And because this can be so overwhelming it’s easy for us to lose sight of options, convincing ourselves there is absolutely nothing we can do to make our situation better – regardless of what those around us may be proposing.

If you have kids, do you let them go through high school without talking to you about what their plan is after graduation? If the answer is “no”, then why are you treating yourself any different? This leads me to having an exit strategy – begin with the end in mind. Sounds trite, perhaps; but it will make a significant difference.

For example, no-one marries with the intent to divorce; but even if you don’t divorce the odds are one of you will outlive the other – even if it’s 50+ years down the road. Have a discussion of what you want, how you want to be remembered and where you want to be laid to rest – and put it in writing. Yes, this is an Estate plan; but it’s not meant to be set in stone – review it at major milestones, or at least every 5 years if you have nothing going on.

Another example I come across is similar to what I experienced in the Navy – people are afraid to leave their jobs (not just the military) because of uncertainty; will they make enough money, what else would they do, etc. In this case, my advice is to build yourself a “freedom fund”. Save money into an account with the strict purpose of giving you a buffer. How much is up to you, but I would suggest at least 6 months of income. I would also recommend you make a list of what is non-negotiable. What do you absolutely have to have – could be a minimum salary, specific benefit(s), etc; and also what you are completely unwilling to have in your life – could be too much autonomy, a micro-managing boss, specific working hours or days of the week, etc.

If you take nothing else away from reading this, please take the time to understand what’s most important to you. Don’t be upset or feel like you’re doing something wrong if your internal values don’t match your coworkers or friends – these are your values. When you are considering a change, especially a major one, take a moment to consider possible consequences. I’m doing this with my clients all the time, as I’d wager most Advisers are. Take it for what it’s meant to be, a glimpse of other possibilities; not finding fault with your ideas.

 

When the Floor Drops

This time of year (Mar – May) is rough for me, it brings back a lot of memories – most vivid perhaps the week my wife spent in the ICU until she passed, her subsequent burial over Easter weekend of 2012 and what would’ve been our wedding anniversary on May 18th. Certainly the most dramatic, but not the only time I’ve lost my equilibrium because something totally unexpected, and unwelcome, occurred. And when this happens, it’s up to us to decide how we’ll react – do we roll with the punches and come back fighting, or do we drop to the mat? Admittedly I haven’t always responded with grace under pressure – it’s taken years and multiple incidents I could’ve (and should’ve) handled better to get me to where I am; and I still consider myself a work in progress.

I’ve made it my mission to help families with disabilities and veterans (with and without disabilities) set and achieve their goals. It’s my intent to help them understand the opportunities that exist, opportunities many of us can’t begin to conceive of when we’re living in the moment (myself included). Sometimes it just takes an outside perspective to send the lifeline, provide a glimpse of what’s possible if you can just stay afloat a little longer.

Having gone through multiple meetings w/ medical professionals for diagnoses for my son, my wife, and even myself (working with the VA); and having made the transition to civilian life after over 20 years of active duty – I understand what it’s like to feel the floor drop out from under you. Watching all your plans dissolve, like a sandcastle built too close to the edge of the ocean when the tide comes in. What I’ve learned is this – no matter how dark things may seem; if you continue moving forward, not giving in to what seems so much easier, eventually you will come to the end of the tunnel. What’s waiting for you will depend on what supports you’ve sought and cultivated, and how you’ve chosen to look at things.

Personally, I choose to focus on the positives. From when my son got his first diagnosis my wife and I made it a point to celebrate the little successes, like getting him to use signs (ASL) to communicate. I believe noticing, and celebrating, our successes – no matter how seemingly inconsequential – helps us push through the negatives that are an unfortunate part of life. I wasn’t always like this, not too long ago I was perhaps one of the most negative people I’ve ever known – I wouldn’t want to associate with the past me now; and I’m thankful for those who stuck with me.

I say this to help you, the reader, understand it’s never too late to shift your perspective. If you’re weighted down because of medical, consumer or student loan debt it’s not the end of the world; there are resources for you. If you, or a loved one, has recently received news that at first cripples you into inaction; take a moment and acknowledge its impact and significance. Then ask yourself who can help you with perspective – perhaps a religious leader, a partner or a professional you respect; to name a few options. I will tell you, again from personal experience and with the utmost respect for how you’re feeling – no matter how much you may believe you are alone and there is no one who could possibly understand what you’re going through and that you’re all alone, it is my belief you are wrong.

The internet is a fantastic tool, please don’t hesitate to use it. Be careful about who you share with, there are “emotional vampires” who will, in my opinion, only make things worse – by feeding into your perceptions and beliefs, rather than helping you look for, and celebrate, your successes – no matter how small. After my wife died one of the successes I would celebrate was just getting out of bed – to me that was a win. That is what I mean by celebrating successes. Over the course of our lives we are going to have good things, and bad things, happen to us. It’s up to us to decide which we let shape us. So take the a minute, get up and look around you – I challenge you to identify at least (3) things that make your life better, and why.

Simplify – Keep, Delete or Delegate?

How many of you have ever felt overwhelmed – like there was just not enough hours in the day to accomplish everything that needs to be done? I know I have in the past, and at times still do – usually because I put something off until the last minute and then other stuff pops up. But this is within my control, I have no one to blame but myself – and it’s not the focus of this article.

Instead, I want you to think about what you can get rid of. What eats at your time and either doesn’t add value, or even though it adds value it stresses you out. When do you feel overwhelmed – is it Sunday night because you “know” Monday is going to bring a host of new problems, or is it Friday because “there is just no way you can get everything done before the weekend”? Or is it something else entirely? Whatever it is, write it down – I’m going to share how I was able to reduce my stress/anxiety, and hopefully some of these tools will work at least equally well for you.

Make a list of what you, and only you can do – this is going to be the baseline of what you keep. Some examples are paying the bills, projects at work, taking care of the kids, etc; but be realistic – this should not mean only you can do it because no one else will do it the way you like. If the only reason you’re not delegating is because it’s not getting done the way you like, ask yourself is it really that important to have things done your way, or is it something you can let go and accept it may not be “perfect”, but it’ll work. Often I’ve found we get in our own way by telling ourselves things “must” be done a certain way; when the reality is there are other options if we keep an open mind.

Next, make a list of what you absolutely hate doing – and be honest. Looking at this list what can you get rid of? If you have children, is there anything you can assign to them as chores; or perhaps hire help. If you can’t get rid of it, can you set aside specific times to get it done, and be done with it? For example I hate maintaining my yard, cooking, and reading e-mails. So I have a “yard guy”; I cook on Sunday, making a week’s worth of meals (usually in the crockpot, eating the same thing every night for dinner); and I’ve built reading e-mails into my work calendar (I check it 3x’s/day, that’s it).

I use work lists, it helps me organize my thoughts around what needs to be done; but I don’t expect to accomplish everything in one day. I note which 3 or 4 things are the most crucial to accomplish, and the rest is there for when there are lulls – appointments cancel, dead time waiting for a meeting to start, etc. I also like to combine tasks – for example walking the dogs while waiting for laundry.

We all have time-wasters, those things we know don’t add any value yet can’t seem to get enough of. Facebook, games on the phone, etc are just a few examples; and they can eat up a lot of time if you let them. Rather than try to eliminate them completely, set a timer – allow yourself 5 – 10 minutes of mindless activity to reset, and stick to it. I got rid of cable because I used to love reading, yet I would feel obligated to catch up on shows because I wanted to get something for all the money I was paying – leaving me little time for what had once been a passion. It’s been over a year since shifting to Netflix (significantly cheaper) and I’ve found myself back in the groove reading, while still enjoying the occasional, guilt-free, show.

At the end of the day the only one who knows what you absolutely have to do is you. It’s up to you to decide how you want to spend your time; and if you decide to delegate or sub-contract (hire a housekeeper, landscaper, etc) take the time to understand how it will affect your budget. You may have to give something else up, so only do so if getting your time back is truly worth it. I reduced my phone’s data plan to free up cash flow, and to prevent myself from getting on the internet every time I had a free second. What can you do to regain an hour a day?