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.

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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.

 

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.

 

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.

 

Why I’d Rather Pay

Over the years I’ve been told, by well-meaning people, to trust in my network of friends and family to provide for my son when I’m gone; rather than hiring professionals. I know they mean well, and I will admit to a degree of cynicism; but when I’m gone I have taken measures to ensure my son has enough money to work with professionals for the duration of his life. This is not meant to imply any mistrust or cast doubt upon the capabilities of anyone in my personal sphere of influence – if I count someone as a friend it’s because they have proven time and again they may be relied upon, and I trust them implicitly.

Seems counter-intuitive, doesn’t it? After all – if I trust them, and I do; why would I not rely on them to help my son out? The short answer is they don’t have a stake in the game. I have no doubt they would do what they can for my son, but if push comes to shove they need to (and should) take care of their stuff first. For example, if they have a family emergency, I would not expect them to put it on hold to address the needs of my son.

Another of my considerations is doing what’s in HIS best interest. Again, I think most people mean well; but it can be easy to project one’s desires/interests onto someone else, especially if they do not have an active voice. This wouldn’t be done maliciously, or even consciously; but in my opinion it would eventually happen in more cases than not. Sometimes doing what is in someone else’s best interests requires them being told “No”; and this can be very difficult if  you have a relationship – because you want to keep them happy.

Using a professional significantly reduces these risks. If they are being paid for a service they have incentive to provide the service, and do so at a certain level of quality or they risk losing the contract. There are no feelings to be hurt by my hiring an impartial organization to monitor the delivery of the services I’ve requested. And there are much fewer acceptable reasons to not deliver the service they are being paid for.

If my son asks for something outside of the scope of the original agreement, I can build in parameters of what is acceptable – and the agency or individual(s) I’ve hired can use those parameters to make a decision. If it’s not in my son’s best interest, or acceptable within the parameters I’ve set forth; I have complete faith they’ll say “No”.

Are there risks, absolutely. It’s incumbent upon me to leave parameters broad enough to allow them to make the best decision; and I can’t predict every eventuality. There are costs associated, these are professionals and I’m asking them to provide a service – and you get what you pay for. To me, though; the benefits outweigh the costs. Being honest with myself about what I want, I took the time to do the research and get a baseline of what I can expect to pay. From there I worked out what I resources would be available when I’m gone; and purchased enough life insurance to make up the difference.

As is the case for anything else in our lives, this is a personal decision and will vary from individual to individual. In my case, I don’t want to rely on family and friends – for the reasons enumerated above; and I’m able to afford what I need to put this in action when I’m gone. Cost should never be the sole driver, but let’s be real – it will always be a consideration. For me, it means I’ve made some sacrifices over the years to afford the insurance; but in my mind it’s an investment towards my son’s future.

And this is what I think we all need to frame questions like this: Is it a cost, or an investment? If it’s a cost, then it can become very difficult to stick with the plan when you encounter challenges (and you will). But you believe, as I do, providing your child(ren) the opportunities they would be able to get for themselves if they didn’t have their disability is an investment you will let nothing get in your way.

Automate This…

I realize what I’m about to say goes against what I perceive to be “conventional wisdom”. When I was Active Duty I earned my Lean Six Sigma Green Belt and I understand, quite well I think, how to become more efficient and eliminate waste. With this in mind, I’m not a fan of having my clients set their bills up for auto-pay, for a couple reasons.

First, if you’re not monitoring it you can’t manage it. If “extra” credits are added to your bills, or if your spending increases incrementally, you may not notice right away – if at all. This problem is compounded if you’re paying your bills via credit card, because at least you’re checking account will notify you if it’s been over-drafted – assuming you live off a budget and are transferring just what you routinely spend.

I don’t buy into the argument that it’s going to save you a lot time; after all – how much time does it really take to pay your bills every month? Speaking for myself, I like to know where my money is going, and it may take me a whole hour (if I’m distracted for 45 minutes) to login to my bank, review my bills and assign the payments from my checking account.

What I’ve noticed over the years, with clients and seminar attendees across the wealth spectrum, is a rise in individuals who admit they are not sure where all their money is going . Will paying your bills solve this; no, not necessarily. But it will force you to acknowledge, if only for the moment you’re transferring the money or writing the check, how much you have spent.

So next time you hear an efficiency guru recommend automating your life, I recommend thinking twice; and being honest with what it’s really saving you. Because, in my opinion, what you’re being saved isn’t time – it’s the sometimes harsh reality you’re spending much more than you would like to admit; and not saving nearly as much as you know you should be.