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.

 

 

Check Yourself!

This year my son turns 18, which by any measure is a major milestone; but I’m finding it especially noteworthy as I consider what it means with regards to my estate planning and his disability. When he was younger I was able to delude myself into thinking there may be a miracle cure, he’d suddenly wake up one day and no longer have the cognitive delays he’s had since birth. Some of this is hyperbole, I’m certainly being melodramatic – but it has been weighing on my mind.

Specifically what will happen when I’m gone. Having lost my spouse to a sudden illness, making the toughest choice I’ve ever had to make taking her off life support; I understand nothing is promised. I have an estate plan, I completed it the year after my wife died; but so much has changed in the intervening years – now it’s time to revisit the plan and make the appropriate changes.

Many of my readers will experience similar thoughts and feelings, if you haven’t already; the question is what are you doing about it? It’s much easier to turn a blind eye and say “I’ll get to it”; but let’s be honest – for a myriad of reasons we never do. Me, I’m waiting until after my son’s birthday; for a couple reasons. First, I’ll be applying to the VA for his “helpless child” status; an unfortunate moniker which nonetheless will enable him to receive my Survivor Benefit Plan (SBP) when I’m gone. For those of you who are not familiar with SBP, it provides a spouse and/or child(ren) with up to 55% of the veteran’s pension.

The other reason I’m waiting is because I need to make the decision about becoming his Guardian. As a minor this is automatic, but after he becomes 18, should I choose to pursue this option, I will need to prove to a judge he is incapable of taking care of himself. In my son’s case this isn’t as simple as “yes” or “no”. I’ve always, and regardless of if my decision is for guardianship, will continue to be, a proponent of alternatives to guardianship. That’s a topic for its own blog, but needless to say I have some major decisions to make in the next few months.

Why am I writing all this? To show you I “get it”. I understand how difficult it can be to verify asset titling and beneficiary designations, and why you may not want to make that call to the estate planning attorney to get your documents in order. But believe it or not, doing so WILL help. In some ways I can’t wait to get mine done, ensuring my son’s first and third party trusts are established so he has one less thing to worry about when I’m gone.

Losing someone is difficult, there is so much to be done it’s often hard to conceive how you’re going to accomplish it all. Why add to this by making your family and loved ones try to figure out what you would’ve wanted? Have the tough conversation, and get your final wishes in writing – it’s a whole lot less unpleasant than not having anything when the unforeseen happens. My wife and discussed extreme measures, and although it didn’t make the decision easier when I had to make it; I’m glad I knew what she wanted – because I knew ultimately I was honoring her. So take a look at your documents, if it’s been more than 4 years since you had your estate plan done (or you haven’t gotten around to it yet) reach out to an attorney. I’m here for my clients should they need the moral support, and I’m sure many of you can rely on your Advisors as well.

What Should I Say?

More often than not the first thing somebody says to me when they find out my son has Autism is “Where is he on the Spectrum” or “Is he high-functioning?” Speaking only for myself, as a parent neither of these questions has an easy, or comfortable answer – and even if they did I don’t believe the individual(s) asking would understand. It’s my belief these questions are asked because people don’t know what else to say, and I’m hoping this will help change that.

Yes, Autism is a disorder that has a “spectrum”; but the DSM-V doesn’t provide a band we can point to and say our son/daughter is here. Often times the diagnosis of Autism comes with accompanying intellectual disabilities, as is the case with my son; or other disorders. The idea of a spectrum is, in my opinion, really only helpful to physicians and insurance companies trying to prescribe and pay for the proper treatments.

Generally, high functioning Autism applies to people with an IQ higher than 75. Using this definition, my answer has to be “no, my son is not high functioning”. However, if you take a more general approach, looking at how self-reliant people with Autism are; then my answer would be “yes”. My son cooks his own dinner, self-regulates all aspects of his personal hygiene, provides me with a weekly grocery list, puts laundry away and makes his bed every morning – to list just a few of his independent living skills. I would argue that at 17 he is much more “high-functioning” than many of his peers without a disability.

So what should people say/do? In short – nothing different than you would if I told you I had a son, period. Speaking for myself, if I disclose my son has Autism I’m not looking for sympathy – rather I’m hoping to explain behaviors that may seem “off” despite my son having no visible disabilities. I will also disclose his diagnosis to help explain why he will not graduate at 18, instead staying in school until 21.

Frankly, I feel the sooner we as a society stop taking special notice (not the same thing as providing accommodations) of individuals with disabilities the better. I acknowledge this is will be a challenge, because despite this being the 21st century race and sex are still an issue for some people. But I’m optimistic – I really believe most of us are trying to do the right thing, and with these particular questions are asking because people are uncomfortable and are trying to fit the information into their available models. With time, patience and education I know our models will expand; in the interim I ask everyone to stop themselves before asking about the disability, and instead focus on the amazing individual him/herself.

I am NOT finding fault or placing blame with anyone. This is not meant to be offensive, and if it makes you uncomfortable or angry; I would ask you to explore the “why”.

 

Frederick County Affordable Housing Land Trust

The Frederick County Affordable Housing Trust is a non-profit whose purpose is to ensure a sustainable supply of affordable workforce housing. It’s a partnership between Habitat for Humanity and the Frederick County Commissioners, and to the best of my knowledge is the only one of its kind in Maryland (although several other states have similar models).

Who They Are

Municipal land trusts, in general, are non-profits founded with the intent to keep housing affordable. They will either receive public/private donations of land and homes or use government subsidies to purchase them. After they acquire the land they sell the houses to low-income families, guaranteeing the homes are more affordable. In Frederick, the target family income to be served is 30 – 80% of the median income for the County. The goal, as with anything tied to Habitat for Humanity, is to provide a “hand up – not a hand out”. 

What They Do

When an individual applies to purchase a home through the land trust, they require several things from the family. The family needs to be able to qualify for a conventional mortgage (VA is authorized), and they must contribute at least 1% of the purchase price for the down payment. Given many mortgage companies want 10 – 20% down, this is a much more affordable target; especially when the home prices are already lower to promote purchasing. These homes are not open for purchase to be used as rental properties, the owner must live in the home – which, in my opinion, only seems fair. 

Families need to live, or work, in Frederick County. I don’t think this is an onerous requirement, I know many people who commute to DC or Montgomery County because it’s too expensive to live there. Finally, Habitat for Humanity will require the purchasing family to complete 8 hours of home buyer education training, offered by the Frederick Community Action Agency; and attend Land Trust Orientation. Again, to me this makes sense. After all – a big part of Habitat for Humanity is offering a hand up – and educating people about home ownership can go a long way to helping them understand the significance and commitment that comes with purchasing a home.

What Else Should I Know

The Frederick County Affordable Housing Land Trust is always looking for properties. Donations are welcome, although they will also purchase properties – within reason. As a non-profit they can give donors receipts for applicable tax deductions – for more information on how to claim this donation I recommend talking to your tax professional. For families or individuals who own their home, but have no one to leave it to, what better legacy could there be than to give someone, who may not otherwise have an opportunity, the gift of home ownership. An estate planning attorney can help you with these particulars. 

Additionally, because it’s a partnership with Habitat for Humanity there may be options to modify the home at a much lower cost. This is HUGE for veterans and families with disabilities – perhaps they need a ramp installed or doorways widened, just to name a few common needs. With the purchase of an affordable home more of the families budget can be set aside in savings and growth. Instead of being “house poor”, these home owners have the opportunity to establish themselves and focus on living, not just surviving. Click here to see the selection criteria.

Disclaimer

I am not an employee of Frederick County Affordable Housing Land Trust, and any errors noted are my own. If I have misrepresented, or misstated anything please provide constructive feedback so I may make the appropriate change(s). I will be posting about at least one organization a month, using information and notes I took when I met with them – as well as additional research I completed online. All opinions and views are my own.