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!

 

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.

 

 

Expense or Investment?

When I used to think about hiring someone my immediate thought was “how much is this going to cost”; and in this article I’m going to share why – at least for me – this was the wrong question to ask. When I was younger I was convinced I could, and should, master anything I wanted. While to some degree it’s probably accurate to say if I put enough time and energy into learning something I may be able to perform adequately, it’s not realistic – if for no other reason there is only so much time in the day. Not to mention all the things I just don’t like doing – like cleaning the house, yard work, etc.

But what alternatives do I have? It’s unlikely I’m ever going to find someone everything I dislike for me out of the kindness of their heart; and with regards to the skills I don’t have, when I need them it’s too late to try to learn them. The most recent example for me is replacing the brakes on my car. I don’t have a driveway (on street parking), I’m not a fan of working on cars, and frankly I have very little mechanical aptitude – so I’m taking the car to the shop.

Now yes, I understand how “easy” it is, and I could very likely YouTube it; but to me the time I would need to (1) watch the videos and (2) do the work takes away from things I’d rather be doing – like hiking or even Netflix. In my opinion, I work hard Monday – Friday as a Financial Planner so on evenings and weekends I am unwilling to add any additional work, especially if it’s something I’m not a fan of. Say what you will about my philosophy, but it’s mine and I own it! : )

This is where I ask myself is something an investment or an expense. To me, an investment (unrelated to the markets) is anything that brings me value when weighed against the cost in time, money or both. An expense is anything where the cost outweighs any value I receive. I value my free time very highly, so giving it up for things I don’t enjoy has an equally high cost. I provided an example of an investment to me – getting my brakes done by professionals. An example of a cost is using a grocery delivery service (at least right now); because although I do not like grocery shopping, I can usually be done with it very early (I go between 6 and 7 am). This is more valuable to me than waiting for the delivery service to show up, even factoring in the convenience of not needing to go to the store.

We all make choices like this almost everyday, admittedly I would wager many don’t think of it quite like I do – but in my opinion everyone has a system of checks and balances they use when making decisions. Unfortunately I think often we are “penny wise and pound (dollar) foolish”; making choices based purely on the dollar value assigned as something’s cost.

Insurance is the most obvious (in my opinion) market, and companies don’t help by advertising to provide the lowest possible premiums. There are other things to consider, the most important to me being will the company pay a claim with a minimum of fuss, or are they going to look for reasons not to.

Durable goods, like furniture; and services, like accounting and estate planning; are another area where I think people try to go cheap – either doing it themselves or shopping for the lowest bidder. In my experience you get what you pay for – although I’m not advocating to pay the highest price all the time; because price is not a guarantee of quality. What I am proposing is consumers take the time to determine what they want, and how important it is to them.

If something is truly important, invest more time before buying; and don’t let the price be the only factor. Weigh the other benefits – tangible and intangible. Is it going to free up your time? If the answer is yes, what is the value of your time? How long will it last? Quality craftsmanship may last generations, meaning you will only spend this money once. Finally, don’t underestimate the value of peace of mind; not having the nagging concern in the back of your mind of “did I do it right?”.

I work with my clients to understand their true expenses, so they can afford to make investments in the things they value the most. You can, and should, do the same. It may not be easy at first, because it’s almost counter to what advertisers want you doing; but once the habit has been developed I believe you’ll wonder how you ever got by without it. Here’s my last example, in favor of cable TV. If you enjoy sports, it’s something you’re passionate about and rely on it to unwind; then having cable or a sports package is an investment for you. But to afford this you may need to cut back on other expenses, like buying store brand groceries or shopping for clothes at a thrift store.

Where do I Start??!!

The New Year has lost it’s luster, many of us who started with the best of intentions and a resolution of “this year’s gonna be different” are finding ourselves back on the treadmill to nowhere, and may be getting very discouraged. Or maybe you aren’t a resolution person, but you do have something you want to change and aren’t sure where to begin. With so many possibilities how do you know which is right for you?!

I’m a financial planner, so my focus will be on money – but these ideas will apply equally well to most other goals. Specifically, my focus in this article is going to be getting out of debt – because it’s a scenario faced by so many people.

First, begin with the end in mind. Setting the only goal of being “debt free” in “x” years, while admirable and certainly achievable over the long term; may not be the best way to start – especially when you take into account the average household is over $130,000 in debt (NerdWallet). I say this because it’s easy to become discouraged and give up, or put off working towards the goal altogether. Instead, set a monthly goal which will make you uncomfortable; but will also give you a sense of accomplishment when you achieve it.

Let’s use $16,000 in credit card debt, with minimum payments of $250/mth and an 18% interest rate as a hypothetical situation. Paying just the minimum it will take over 19 years to pay this debt off. Horrifying, right? And if you have more than one credit card, your balance owed is higher, or both (or any other combinations of additional debt) it’s easy to understand why people feel stuck.

Adding just an additional $25/mth to your payments will decrease the amount of time to pay that card off from 19 years to 12 years – you drop 7 years of payments (and associated interest). Bumping it up to $50/mth decreases the time it takes to 9 years. My point is this – contrary to what it may feel like, you do NOT need to make a HUGE change to your payments, anything over and above the minimum will help you pay the debt off (as long as you stop adding to it).

If you want to see this for yourself, using real data, here’s how. Open an excel spreadsheet. Enter the following (use a separate cell for each): Interest rate (use percent sign), annual payment (=monthly payment *12, excel will do the math), current balance owed (using a negative sign). Then, click on the “fx” (function) button and look for NPER (number of periods). Select the cell matching what it’s asking for. Excel will then solve for how many years it will take you to pay the debt down.

Rate – interest rate

Pmt – annual payment

PV – current balance

FV – 0

Type – leave blank

Great, right? But what do you do if you have more than one credit card or source of debt? Personally, I’m a fan of attacking whatever has the highest interest rate; but alternatively you could select the one with the lowest balance. The advantage to selecting the lowest balance is it gives you a “win” sooner. After you’ve paid that debt off, take the payment you were making an roll it into the next debt you want gone.

Using my example above, if you are paying $250 on (3) different cards ($750/mth total), and you increase it to $775/mth by adding $25/mth to one of those cards; you would take the $275 and add it to the $250 your paying on the next card – so now you’re paying $525/mth (after the first card is paid off). The last card would have you paying the full $775 towards it, and voila – you’re not only debt free, you’re comfortable not having that $775/mth. So now you can put it to work for you – all from decreasing your monthly spending by $25/mth.

No, this is not going to change your circumstances overnight. I would prefer anybody who chooses to pay down their debt to pay more than an additional $25/mth, but I feel like everybody can find $25 in their budget. My intent is to offer hope, a ray of light to pierce the darkness and despair debt can cause. It doesn’t have to rule your life, but you have to take the first steps of (1) understanding your spending habits and (2) having a willingness to change.

Pooled Trusts

This month rather than focusing on just one non-profit, I’m highlighting (3). Living in the DC metro area those of us with a family member with a disability are fortunate enough to have several options available to us – in Maryland, The First Maryland Disability Trust; Shared Horizons in DC; and The Arc of Northern Virginia Trust. It’s important to note, they are not geographically bound, meaning you don’t need to be a resident of where they are based to take advantage of their services.

So, what is a pooled trust? The Center for Disability Rights  provides a more detailed overview, but in a nut shell it’s either a first or third party (or both) Special Needs Trust managed by a non-profit. The advantage to using a pooled trust is the money for multiple beneficiaries is “pooled” together, allowing institutional level investing for each individual account. This benefits individuals who may not have a lot of money to invest, or don’t have anyone to act as a Trustee.

Pooled trusts offer the same protections individual special needs trusts provide, allowing individuals to accumulate more than $2k in assets while maintaining eligibility for SSI and Medicaid. Although there are costs, as there would be with any trust solution managing assets, I consider the fees very reasonable; and realistically speaking, when you have smaller investment accounts it can be difficult to find professionals willing to manage them.

Let’s explore each of the above organizations in a little more detail. First Maryland Disability Trust will serve as the Trustee for Payback Trusts, Pooled Asset Trust, Medicare Set-Aside Trusts, Third Party Pooled Asset Trust and Testamentary Trust (more information of each on their website). At this time they only manage investable assets, no real estate or anything else. They have also established a Charitable Funds Program to provide emergency assistance to their clients.

Shared Horizons administers two types of Pooled Special Needs Trusts – the Wesley Vinner Trust (1st party) and the Third Party Community Trust. Similar to First Maryland Disability Trust, they only manage investable assets – no real estate. All beneficiaries of the Trust receive quality of life planning services, starting with an assessment. This provides the beneficiaries with a voice when creating their budget. Finally, they also offer Charitable Fund Awards three times a year to anyone with a disability and financial need, living in Maryland, DC or Virginia.

The Arc of Northern Virginia offers The Family-Funded Personal Trust and the Self-Funded Personal Trust. What I find unique is their ability to manage real estate as well. So if you, or a loved one, has property without a mortgage and you want it left to an individual with a disability this is the only Pooled Trust option in our area (to the best of my knowledge).

Like any other solution, Pooled Trusts are not the answer for everyone. Other options include using an attorney or a bank as a Trustee and establishing your own Trust. I recommend against doing this when the Trust will be funded with less than $750,000, because of the associated costs with managing the funds and difficulty in finding a qualified resource willing to be the Trustee. ABLE accounts do not replace the need for Special Needs Trusts, they should be seen as another tool to be used in conjunction with. It’s critical people do not leave assets to individuals who are receiving SSI directly, because of the risk of losing their benefits. It’s equally important that this not be a reason to avoid leaving an inheritance of any sort to the individual – Special Needs Trusts allow individuals to receive financial assets without fear of losing benefits. Pooled Trusts, like the ones listed above, have staff specifically trained to help families through the process and take care of their loved ones when they’re gone.

 

Get Rich, Quick?!

 

In my experience, there are (3) time proven methods to getting “rich” consistently. And much like losing weight and keeping it off, none of them are magic buttons or are going to happen overnight. Sure, there will always be those who win the lottery or inherit, but for most of us this is not our reality. For us it comes down to increasing income, decreasing living expenses, and/or decreasing debt.

Since many of us have “day” jobs, earning extra income will likely come in the form of a “side hustle” or second job. Could be as an Uber/Lyft driver, renting rooms out for Air BnB, or just picking up hours at a local bar/restaurant. Whatever you’re doing, don’t lose sight of any costs. The extra money coming in should be weighed against what it’s costing you – lost productivity at work, extra miles on your car (leading to more frequent maintenance visits) or incurring additional liability. There are other, non-traditional, avenues available as well.

Many of these opportunities are Multilevel Marketing companies, and the way to make more money is to continue recruiting people below you. These aren’t all scams, Avon and Mary Kay have been around for years, and seem to do right by those willing to put in the time and energy. However, with today’s technology it doesn’t take much to put the infrastructure in place and start selling people on the idea of making money, especially when it doesn’t seem to require much effort.

If you’re willing to do your homework and understand the risks associated with Multilevel Marketing, more power to you. But please don’t delude yourself into thinking it’s going to be the answer to all your problems right away. Like anything else, it’s going to take time; and you’re going to have to work for it.

No time and/or energy to work a second job? Then look at decreasing your living expenses and debt. Interest on credit cards and loans chip away at savings – through the opportunity cost of not being able to save those dollars and taking advantage of compounding. You do not need to be in debt to have a great credit score, paying off cards monthly and doing your best to keep overall household debt below 20% of your income will go a long way towards allowing you to accumulate wealth.

This includes housing and education costs – be honest with how much you need, versus what you want. When purchasing your home don’t lose sight of the other costs you incur – heating/cooling it, maintenance, cleaning, etc. The mortgage you qualify for is almost never the mortgage I want my clients to get. Paying less for housing leaves more to save. The same is true for education. Depending on your degree path, do you need to attend a University right away; or would attending a community college or even using services like DANTES (veterans, active duty)CLEP and Excelsior exams be a better fit. They’re certainly much friendlier for your wallet.

I know, nothing in this talks about how you can get rich today – and I’m not going to apologize. True wealth requires dedication, hard-work and sacrifice, and even with these there’s no guarantees. It also requires honesty with yourself, what does it mean to you to be financially independent? I don’t believe in setting standards based upon what I see actors and sports professionals doing; it’s more important to understand what makes YOU happy, and work towards that. Professionals, like me, can certainly help and will give you tools to use; but ultimately it comes down to you deciding what you’re willing to save and how much you can live without now for the future you desire.