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.

 

College – It’s not for everyone (and that’s OK!)

If there is one theme I feel very confident in saying I run into in almost every planning encounter I do for families with young children, it’s college planning. Yet the research I’ve done, using Pew Research Center, indicates only “56% of students earn degrees within 6 years”. Combine this with an average student loan debt amount of almost $29,000 per borrower ($28,950, Institute for College Access & Success, 2015) and you have a recipe for financial disaster. Because if these students are not finishing their degrees, are they finding jobs paying enough  to cover the loans, or did they fall victim to a feeling of failure and take unskilled labor positions.

Not too long ago a college degree was not the only answer, individuals were proud to be craftsman and take up trades like plumbing, HVAC, electrical, etc. I joined the Navy as a Junior in High School using the Delayed Entry Program because at the time not only did I not have any interest in pursuing further education, I wasn’t really sure what I wanted to do with my life. And in 20+ years since then I’ve had several transitions – from completing my Journeyman’s as an Electrician, to a Six Sigma Green Belt and finally as a Financial Planner. Admittedly I’ve since gone back to school, and I’ll have my second Masters (MBA) later this year – but I’m doing so without taking on any debt.

I applaud parents for thinking ahead and saving for college for their children, but not at the expense of their own retirements (as so often seems to happen). But I want to raise awareness of other avenues available, especially for those (like me) who are not necessarily inclined to pursue yet more book learning after High School, and/or just don’t know what they want to be when they grow up. Less than 1% of the U.S. population serves in the military (309 million in 2010, NPR); and given the fact we’ve been involved in armed conflicts for as long as I can remember it’s not going to be the best option.

Mike Rowe, the host of Dirty Jobs and much, much more, started a Foundation to help those interested in pursuing a blue collar career. His Foundation, mikeroweWORKS, offers scholarships to help individuals learn a trade – from welding to agriculture. And let’s be real, no matter how advanced our technology gets we’re going to need people who can keep our lights on and water running. This isn’t about unskilled labor getting minimum wage, it’s about learning valuable skills that, although may evolve, will never (in my opinion) not be needed.

I’ll admit my position may be a bit unorthodox and unpopular, but I stand by my assertion those who take the time to learn trades can become very successful. Accumulating wealth isn’t about which school you attended (and are now indebted to), it’s about how much you can save and how well you can live within your means. Next time you sit down at your desk and start your computer, think about those who wired the building your in, or are producing the electricity you’re using – and what you would be doing without them. Success is a destination with multiple paths, don’t feel trapped into pursuing just one because it’s what is getting the most air time.

And finally, this is NOT a dig against college – if you know what you want to do, and you need a degree to do it, then go for it. This is an attempt to raise awareness of other options, and negate some of the negativity associated with blue collar jobs that I perceive. I refuse to believe we all know what we want to do as soon as we leave High School, and although college can help you “find yourself”, do you want to pay over $16,000 per year to do so (National Center for Education Statistics)?

If your child has a 529 plan – don’t despair, according to IRS rules these funds CAN be used for vocational training. “An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education” IRS.Gov. Talk to your Advisor/Planner to get more information about options available for you, and don’t hesitate to think outside the box.

Veterans and Survivors Pension (VA)

Not to long ago I helped my parents file a claim on behalf of my grandfather for Veterans pension; and it helped me realize how underutilized it is. I don’t think many veterans’ families are aware they, their family members or friends may qualify for it. In the hopes of helping raise awareness, I’m going to discuss what Veterans Pension is, how one qualifies and what Survivors Pension is. We as veterans need to make sure we’re asking for everything we’ve earned; it’s nobody else’s responsibility. We also need to be looking out for our less fortunate brothers and sisters. This fact sheet provides a good overview as well.

What are the Pension Benefits?

Veterans pension is a tax-free monetary benefit payable to low-income wartime veterans. There are income limits, with the income offsetting (reducing) the amount of pension received. The veteran’s income may be adjusted for medical expenses, including the costs of care in skilled nursing, assisted living, adult day centers and at home – as well as the premiums for Medicare and other insurance. If the veteran is collecting SSI or welfare, these benefits are NOT included in calculating income. Sources counted as income are gambling winnings, gifts of stock/property, inheritance, IRA & 401k withdrawals, social security and SSDI, VA compensation (VA disability), VA Dependency and Indemnity Compensation (DIC) and wages. The 2016 pension amounts are below, each year these values are set by Congress:

Veteran with no dependents = $12,868

Veteran with a spouse or child = $16,851 (+ $2,198 for each additional child, adult disabled children may be included)

Surviving Spouse/death pension = $8,630 (+$2,198 for each additional child, adult disabled children may be included.

What is Survivor’s Pension? 

Survivors pension is a tax-free benefit payable to low-income, un-remarried surviving spouse and/or unmarried children. It is also income limited, although the income may be adjusted the same way as the veteran’s – by reducing for costs of care and insurance premiums. There is no age limit for unmarried spouses, but the benefit for children will stop at 18 if they are not attending a VA approved school or permanently disabled before the age of 18. If they are attending a VA approved school the child’s benefit will continue until their 23rd birthday, and if disabled (permanently incapable of self-support) they will receive it for life.

What are the Eligibility Criteria? 

The following criteria are NOT mutually inclusive, the veteran only needs to meet one of these and have a yearly family income below the amount set by Congress (and shown above). Although the veteran must have served during war time (not in a war zone), given how long this country has been in conflicts it’s safe to say most will probably qualify. The veteran must be age 65 or older, OR totally and permanently disabled, OR a patient in a nursing home receiving skilled nursing care, OR receiving Social Security Disability Insurance (SSDI), OR receiving Supplemental Security Income (SSI). I think it’s important to note – you can be in a nursing home, receiving care and paying for the care with your retiree pension and still potentially be eligible for this benefit – depending on the cost of care. Think about your friends and family who have parents or grandparents receiving care – they may be able to offset some of those additional costs through veteran or survivor pension. 

Are There Additional Benefits?

There are two additional benefits veterans should be aware of – Housebound and Aid & Attendance (A&A) . Housebound may be added to the monthly pension if the veteran or survivor are substantially confined to their immediate premises because of a permanent disability. A & A is an increase to the monthly pension if a veteran or survivor:

  • Requires the aid of another person in order to perform personal functions required in everyday living, such as bathing, feeding, dressing, attending to the wants of nature, adjusting prosthetic devices, or protecting yourself from the hazards of your daily environment
  • Are bedridden, in that your disability or disabilities requires that you remain in bed apart from any prescribed course of convalescence or treatment
  • Are a patient in a nursing home due to mental or physical incapacity
  • Their eyesight is limited to a corrected 5/200 visual acuity or less in both eyes; or concentric contraction of the visual field to 5 degrees or less

How to Apply?

You can download the form from the VA’s website and submit the claim to the VA yourself, although I encourage you NOT to. Veteran Service Organizations (VSO’s) like the American Legion, Disabled American Veterans (DAV) and Veterans of Foreign Wars (VFW) will submit the claim on your behalf and work as your representative to the VA, free of charge.