Improve Your $ Habits

I want to acknowledge James Clear, it’s his image I chose as cover art – and you can learn more about his ideas at his website https://jamesclear.com/three-steps-habit-change.

I’ve been thinking a lot about habits lately, as I’ve committed to improving my communication skills through the remainder of 2017. I understand this won’t happen on its own – I need to actively work on changing my behaviors while finding ways to reward myself until I don’t have to think about what I’m doing any longer.

Another impetus for this topic is client-driven, over the last several months I’ve met with clients who have poor financial habits; and from what I’ve seen this is more common than not. Individuals and families do the best they can, but often they haven’t been given the tools to develop good habits; or they’ve identified things they want to change and try to change too much – becoming overwhelmed and giving up.

In my opinion the “easiest” habit to create is one that requires little extra thought or action on your part. For saving money, I ask people to find $25 – $50/mth, and set it aside somewhere they won’t spend it – that could be in an envelope in your underwear drawer or an online bank account w/o an ATM card; it’s more important not to touch it than where you put it.

Need motivation, tie the money to something else you’re trying to do. For example, if you’re trying to lose weight pay yourself $5 or $10 every time you decline dessert. The money will reward you for following your diet, so you’ll become more likely to stick to it. And saving the money towards something you really want will reward you for your discipline. Win Win.

You can use these same tools with your children, to help them develop healthy saving habits young. I understand some may disagree with rewards, because then you may only be doing something because of what you get – and I want to acknowledge that argument. However, my belief is if I can get someone to work up to saving $400/mth, even if they are using $100 each month to reward themselves they’ve still set aside $300 more than they were before.

This is one idea, and certainly not the Holy Grail of personal finance. There are many resources available – blogs like Paula Pant’s “Afford Anything“; “Mr. Money Mustache”, and J. Money’s “Budgets are Sexy” to name just a few; and just as many or more podcasts.

The key is not trying to change everything. Start with one thing, focus on it until it becomes second nature and then move on to the next. Having an accountability partner (and I know I’ve said this before) can be a HUGE help. Celebrate your successes, and don’t beat yourself up too hard when there are bumps in the road – it happens. What I believe you will find as time goes on is you will notice the bumps less; because your success has achieved a life of its own.

 

Advertisements

The Struggle is Real

Lately I’ve been on a kick to help people motivate themselves to maintain momentum, if moving forward; or overcome inertia if they’re at a crossroads; and today I want to share a few of my current challenges and strategies.

My son turned 18 recently – leading me to start the process for his SSI, updating DFAS so he maintains eligibility for my military pension and TRICARE, and updating the VA to keep my disability payments at their current level (with a dependent). Given his disabilities I’m also applying for Guardianship. As you may be able to imagine (or perhaps can relate having been through already), this in itself can feel like a full time job.

The first challenge I’ve come across is how to help my son receive his full SSI benefit and the adult disabled child benefit (survivor benefit) from my wife. If both go to traditional savings or checking accounts, the SSI will be offset by the other benefit. So my first thought was his ABLE account, because the assets are not considered when determining SSI eligibility.

Unfortunately, his ABLE account is not equipped to receive electronic deposits – so Strike 1. No problem, I need a 1st Party Special Needs Trust anyway, for the military’s Survivor Benefit Plan; I’ll just send the adult disabled benefit there. My intent was to complete ALL the estate documents at once – 1st & 3rd party SNT’s, Guardianship, DPOA, etc – and I was on a great trajectory.

Was being the operative word. I was able to get the Physician’s letter, no problem. However, I also need a Social Worker letter – and because he’s never received services (DDA “future need”) – he hasn’t worked with a Social Worker. His teacher gave me a couple options, and although neither was viable I appreciate her time and effort. So now we’re in a sort of limbo while I figure this piece out.

Rather than let the whole process stall, I’ve decided to move forward with everything else, and finish the Guardianship as I’m able. I’m also working on engaging the DDA again, since my son is an adult and they should be able to help me with the transition from High School at age 21.

The last piece on my plate (as far as I’m aware) is following up with DORS again – getting my son employment assistance. I’ve been working on this for (2)  years, since he turned 16 – it had been my hope to have him working summers; getting used to the routines necessary to be successful post-high school. That hasn’t materialized, yet, but I will redouble my efforts towards the end of this school year.

All of this is meant only to show I understand how frustrating and time consuming it can be. And I get it can be overwhelming, especially if it’s all taken into consideration at once. The best thing I think anyone can do is pick one item and work it until the next steps are out of your control; rinse and repeat. Not sure how to prioritize, ask for help. I started a company – Special Needs Navigator – just for this purpose, and it’s my belief there are other resources like this throughout the country; although it may take some work to find them.

Don’t give up, as the image I selected shows success could be the next step you take. If you’re feeling overwhelmed, stop and take a breath. Help yourself, establish routines to give yourself a mental/emotional recharge – the pause and refresh will help you identify alternatives you may otherwise miss. Keep charging – you’ve got this!

The Right Time is NOW

It’s so easy to justify putting something off, something else always seems to come up or there’s just no time. This is BULL, and if we’re honest with ourselves we all know it. There is never going to be a better time than right now to take action. “Need” to lose weight or save more? What does waiting until tomorrow get you?

Since I left the Navy and started my journey into the disability world with my son, I’ve seen (and been guilty of) entirely too much inaction. People will come to Resource Fairs and walk away with great information, but I can only wonder how many follow-up. Talking to some of my fellow vendors the number is nowhere near as large as we’d like.

I think this is because we let life get in the way – at least it was for me. I’d come home on a Saturday, with several folders of information, put them down and forget about them. It was information I needed, and I knew I needed, but I told myself I would get to it on Monday. Unfortunately by the time Monday got here I had not only forgotten about them, I was already overwhelmed with what the week was bringing – I wouldn’t have been willing to do anything even if I had remembered.

I broke this cycle by forcing myself to take 10 – 15 minutes when I got home, reviewing the materials and sending an e-mail to those I wanted to follow up with. This got the ball rolling, and when Monday came the responses I received ensured I followed through.

Sure, I put my name on the mailing lists; but more often than not I would just ignore the e-mails – not even replying to state I wasn’t interested because I felt like it took too much bandwidth. If this sounds familiar, I can tell you it’s not going to get any better on its own – all that will happen is time will continue passing you by, until some crisis doesn’t allow you to ignore it any longer.

So if there is something you’re thinking of doing, then do it. Don’t set it aside, because life doesn’t get any less busy (at least not in my experience). Frequently letting something sit will cause it to morph into something much bigger than it needs to be; making it even more likely you won’t take action. At some point YOU need to make a change, it requires an act on your part – well, probably several, because it takes time to make this into a habit.

So take a look at your situation and take action on the first thing you think of. Don’t spend time considering which item on a laundry list you should address, this puts you at risk of being overwhelmed by choices. Just pick the first thing that comes to mind, knock it out, rinse and repeat. Find an accountability partner, someone who will help you follow through – we all need one; it’s too easy for us to accept our own excuses. I encourage everyone to check out Mel Robbins’ 5 Second Rule; it helped put things in perspective for me.

Mind the Gap

How many people do you know who want to retire early, or leave their job for one reason or another? At first glance it seems like it would be awesome – plenty of free time, nobody telling you what to do, it’s like moving out of your parent’s house all over again! And I’m all for this, although I’ll be the first to admit early retirement just isn’t for me – at least not in the traditional sense. But I’m not discussing the pros/cons of early retirement – in the next few paragraphs I’d like to identify some things I think many of us overlook in our race to the finish.

First, and this is a biggie, health insurance. You are eligible for Medicare three months before your 65th birthday to 3 months after. There are some additional opportunities for those with disabilities, but let’s stick to this. If you retire before age 65, and you had been relying on your employer’s healthcare plan take a look to see what you’ll do when you leave. Does your spouse have a plan? Will it affect any of your children who may still be on your plan (under age 26 or disabled)?

I encourage everyone to make sure they (1) have identified what they’ll do and (2) are sure they can afford the option(s) chosen. It would be horrible to work off the premise you’ll use COBRA and then find out you can’t afford the premiums, or that it doesn’t cover you until you’re Medicare eligible. If leaving the work force before 65 is on your radar, healthcare should be one of the first things you consider.

Next – what are you going to do with all that time? For most of us work accounts for at least (8) hours, 5 days each week. Not counting travel time or other jobs (side-hustles) you may have. This time is occupied, even if only with “busy work”, not requiring much on your part to entertain yourself. What would 52 weeks of vacation be like for you? Could you afford it?

I urge you to consider this seriously, because I’ve heard several “rules” of thumb when it comes to retirement and I’m not fond of any of them. For example – the rule you only need 80% of what you’re currently making. This is a great rule IF, and only IF, you are in the minority of the population who is saving at least 20% of their income. If you’re not, why would you spend less when you have more free time? Sure, you may fill some of this time volunteering and with hobbies, but rather than just jumping right in try taking mini-retirements first – vacations without trips planned, because in most cases it’s not realistic in most cases you’ll be able to take trips each week – while spending what you’re spending now. 

Last, and not in any way least, understand your why. Are you doing this because it’s the “thing” to do, because you have a bigger vision you need time for, or because you want to relax and enjoy your later years? There’s no right or wrong reason, but the more connected to your why you are the more likely you’ll do whatever it takes to make it happen.

And that’s the point I want to stress – no matter what you want to do, or why; if it’s important to you treat it that way. If you want 40+ years to yourself in retirement, make sure you have enough money to fund it – even if it means making sacrifices now. Only, if it’s what you really want they won’t be sacrifices; they’ll be steps on your journey to your ideal state.

If you’re retiring before Medicare eligibility, consider investing into a side account, at least equal to your current insurance premiums, to be drawn from later. If you want to live on a beach or in the middle of the woods, would it help to pay off your current mortgage to maximize the money available to purchase these cottages? Just food for thought, and don’t feel bad if you don’t have all the answers. Talk to your advisor(s), friends and family – use them as sounding boards (but not final decision makers). Look for those with similar goals and see what they did to accomplish their goal; or have done to put themselves on track. And learn from their mistakes – not reinventing the wheel goes for the bad as well as the good.

 

Side Hustle, What?!

When I was younger if you had a second job, it was just that – a job. It wasn’t anything to celebrate, because often you were working to help pay your bills. I’m not sure what’s changed, and I fully admit I’m not 100% in touch with current lingo – but as I understand what I’ve been hearing, a “side hustle” is something people SHOULD have.

I can think of many instances when this is a good idea; for example if you have a hobby  you’re trying to become better at, in the hopes you can make it into a career (i.e. wood carver). After all, assuming the following:

1) Malcolm Gladwell’s theory it takes 10,000 hours to master a skill is accurate

2) We work and sleep on average (8) hours per day

3) We can spend (4) hours of each day (Monday – Sunday) working on our skill

It would still take us almost (7) years to become a “master” (6.85 years). That’s a long time to work on something for no reward (other than the satisfaction of becoming better). So getting paid to practice could be a great way to both stay motivated to learning and put a little extra cash in your pocket.

However, I question if this is why most people have a side hustle – I think for many it’s a way to increase their income. Nothing wrong with this, if you’re honest with yourself and you know what you want the money for. If it’s being used to cover monthly expenses, then I encourage you to revisit your spending habits. On the other hand, if you’re using it to save for a specific goal; just to have some extra cash; or as I postulated above, to get better at a skill more power to you!

Here’s where I become an old fuddy duddy (as proven by using the words “fuddy duddy”). When you consider a side hustle, and are determining how much money you’re going to make – please consider the associated expenses. This means if you’re driving for one of the ride share apps consider the increased frequency of required maintenance (oil changes, detailing, brakes, etc); the same goes if you’re renting a room or your house – typically there are additional expenses, including insurance, that often go overlooked.

If you’re “earning” $500 per month, but spending an extra $300/mth doing so evaluate if it’s really worth it. Many of the side hustles I’ve seen people do have the potential to be very lucrative; but like anything if you don’t know what it’s costing you you cannot be sure you’re really making a profit.

If you’re not sure how much you’re really making, track your cash flow. This is nothing more than the money coming in vs the money going out. You can set up a tracker in basic tracker in excel or talk to a financial advisor.  I like to see my clients saving at least 20% of money coming in for goals (not just retirement, things like trips to Disney & new cars as well). If you can’t, even with the side hustle, I would encourage you to evaluate where your money is going – and not just take on something else. And remember, although I’ve only talked about money; there’s another cost to be considered – time. Use it wisely, I don’t know of anyone who died wishing they’d spent more time working.

The Catch-22 of Taxes and Social Security

I don’t think anybody likes taxes – in fact I think it’s safe to say we would all prefer not to pay them. To that end, we do whatever we can to reduce what Uncle Sam sees as our taxable income; and why not – after all we work hard for what we earn! Unfortunately, not very many companies offer pensions, so it’s up to the individual to save for his or her retirement. Add a child with a disability, and you’re saving for at least two generations; and this is where the catch-22 comes into play.

If you reduce your taxable income your reducing the amount you pay into social security. Social Security considers the average of 35 years of wage history, with any years not reported counted as $0 income. This average is used to determine what they will pay you, the worker, in the event you become disabled or retire. The lower the amount you pay in, the lower the amount you receive. This will be even further reduced by taking social security before your full retirement age (FRA).

So what,  you may be saying. Well, remember what I said in the first paragraph about most of us not receiving a pension. Without Social Security, 2 in 5 elderly Americans would have incomes below the poverty line – that’s 40% of people aged 65 and up (source Center of Budget and Policy Priorities). If you decrease the amount you “earn”, without saving for your retirement, you’re also reducing your retirement income; not to mention what you’ll leave behind for your spouse or disabled child.

Disabled adult children become eligible to receive SSDI, provided they were disabled before the age of 22, paid on their parent’s Social Security earnings record. There are additional requirements (found here); but the point I want to make is YOU control what your child will receive. In 2017 the maximum earnings subject to Social Security payroll tax is $127,200. This means if you’re married or head of household you’d be in the 25% federal tax bracket.

In my opinion it’s worth it (to me) for my son to receive the highest amount of SSDI possible. I’m not a fan of paying taxes, but I do want to ensure my son’s quality of life doesn’t drop when I’m gone. I’m not counting just on social security, I have life insurance and I’m fortunate to transfer some of my military pension to him as well. Each of us needs to make our own decisions, there is no right or wrong answer. However ensure you are making an informed decision. Weigh the pros/cons of taxes, and consider what you’re doing to help yourself, and if applicable, your disabled child.

This, like many financial decisions, doesn’t have to be made in a vacuum. Talk to your advisor and/or accountant; get their input. The solution is not necessarily always reducing your taxable income, especially if you’re a self-employed business owner and you’re reinvesting everything you make back into the business (not saving for retirement).

When Is Your “Independence Day”?

July 4th is Independence Day for those of us living in the United States, and it brings to mind thoughts of what independence means – is it the same for everyone; or, as I suspect, do each of us hold our own ideal close to our heart – perhaps never sharing?

Certainly, the freedoms guaranteed by our Constitution mean a LOT to me, I’m proud of the years I served in the Navy; but I don’t consider myself truly “independent”; at least, not yet. In my mind I won’t be “independent” until I’m confident my son will be able to have a life worth living on his own – this should not be confused with “surviving”. Until this happens, he’ll be dependent upon me; which to me means I’m not “free”.

This is not a pity party or a complaint, but it is my reality – and I think for many of you reading this there is a similar reality. I think we plan our whole lives for when we don’t have to answer to anyone, when we can just do what we want when we want (well, I KNOW this was my plan). However, reality is seldom so black and white.

My “independence day” is on the horizon, and I have a strong belief I will live to see it – my son’s own independence continues to grow in leaps and bounds; and thanks to technology things we once thought would be insurmountable can either now be done, or will be achievable in my lifetime, without much more effort than it takes to open an app.

For those of you reading this – what does freedom mean to you? Are you doing everything you can to achieve it; or are you waiting for someone else to give it to you? If you’re waiting, don’t! To the best of my knowledge independence has never been achieved without a LOT of effort from those desiring it. I’m not suggesting you storm the ramparts or take up arms against the establishment; but if you don’t at least contribute the achievement of your goals will you truly value them? Heck, will you even recognize when they come true?

So set your sights on what freedom means to you, and map out a strategy to get there and get moving. If you’re fortunate enough to have achieved your freedom, extend a hand and help others – encouraging words go a LONG way, so don’t be shy or afraid to offer praise. Celebrate the little victories, and don’t let losses bog you down – learn the lessons they are meant to teach and forge ahead. Finally, remember it’s hard to know you’ve arrived at your destination if you’ve never identified where you are going.