Category Archives: Getting Started

What can you do to begin the process of retiring on your terms.

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Think Like an Athlete, Retire Like a Pro

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Like many of you I watched a little football this past weekend. As a former competitive athlete I have an appreciation for the mental part of the game. Not to take anything away from the athletic abilities of the players, if you strip that away or could somehow even-out the talent on both teams you would find that it’s the team and players with the mental edge that will usually win.

I have been an athlete most of my life and once I made the transition to the business world after playing college football I found myself relying on the same qualities in business that served me well as a competitive athlete. In many cases they gave me an edge over my coworkers and competitors. I also realized that these qualities were not limited to athletes. They could be learned. So what is “the mental edge”?

One of my classmates from Stanford, Mariah Burton Nelson, who was a terrific competitive athlete in her own right in college (basketball), wrote a compelling book titled, We Are All Athletes, where she explores how everyone can apply the athletic qualities of champion athletes to everyday life.

To clarify, when I discuss the “qualities” of a champion athlete I am referring to qualities like discipline, goal-oriented, humility, commitment, courage and having a plan. Let’s take a closer look at these qualities so you have a better understanding of how you too can “think like an athlete and retire like a pro”.

  1. Goal-oriented – Think for a minute about your favorite athlete or sports team. Do you think that at some point there was a goal or do you think that individual or team success “just happened”? I know from my own athletic experience I always had a goal. I wanted to be the best I could be in my sport. But I learned at an early age that wishing wasn’t going to get it done. I had coaches who helped prepare me and parents who encouraged me and a belief in myself that I could get there i.e. passion. I also had a belief in my ability.

    So how can you apply this to your retirement planning? Well, it all starts with goals; short-term goals (1-5 years) and long-term goals (5+ years). It involves you sitting down with a pad and pen (or iPad and stylus) and deciding on what your retirement will look like and how you will get there i.e. savings and investing goals, lifestyle and timeframe.

  2. Have a plan – One of my college coaches, the late Bill Walsh (yeah, he coached at Stanford before his 49er fame), used to script the first 20 plays of every game. Part of it was contingency planning so if things didn’t go as planned there was another play to call that would address the new situation. We have to do the same with our own financial planning. We can hope to get a 7% return on our investments but what if we don’t? That is Plan B. A football team can plan for a strong running game, but what if the team comes out passing? How will they defend the change in plan? We have to know what the goal is and the plan will make sure we get there, maybe with a few detours but we will get there.
  3. Humility – Hey, life happens, right? That’s what Plan B is about. Frankly this is a quality many athletes struggle with, how to be humble. What was that old poster from years back, “It’s hard to be humble when you’re as great as I am”? I’m sure we all know a few people who embody that saying. Humility and our financial lives do go hand in hand though. To me, humility means having respect for wherever we are in life and that applies to your financial life. So if you are not where you want to be financially, respect that and make a commitment to “put a stake in the ground” and say, this is where I start, today”.
  4. Courage – It takes courage to be a champion athlete and it takes courage to execute a successful financial plan. Just like an athlete you make sacrifices and tough decisions for the good of your financial plan because you believe that your plan will take you to the “Super Bowl” of retirement whatever you perceive it to be. You own it.
  5. Discipline – The most disciplined athletes are the most successful. Your discipline will be a reflection of how committed you are to realizing your financial goals. I put discipline and courage together. You can’t have one without the other. Discipline takes sacrifice. Your financial success will be a direct result of the disciplines you embrace. No it won’t be easy. Things worth having rarely are.
  6. Commitment – Do you “walk your talk”? This is where games are won and lost and financial fortunes are made and lost. I’m not referring to staying with an investment or a plan that just isn’t working. Coaches change up game plans at halftime to respond to things that are working or not working. Commit to the right activities and behaviors. Change your plan as necessary and don’t do it alone.
  7. Teamwork – Just as championship athletes rely on their team for their individual success we have to rely on our financial professional to help us develop and execute our financial game plan. This is no time for going it alone. The “stadiums” of financial planning are littered with retirees who went broke trying to do it themselves. Work with someone that you trust. Do it as a team!

You don’t have to be an athlete or even follow sports to embrace the qualities that go into a championship athlete and team. You are an athlete when it comes to building your financial success. Think like an athlete, retire like a pro!

Time Out! Which quality do you struggle with when it comes to executing a successful retirement income game plan? You can leave a comment here.

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Your Life Experiences Affect Your Money Decisions

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A financial advisor was trying to get the business of a wealthy, retired man in San Diego. At their previous two meetings, the advisor talked about making big returns on the client’s money and had the client pegged as an “aggressive” investor. At the next meeting, the advisor was going for the “close” and had fancy charts to cement his presentation and what he thought was a sure sale. As the client sat stoically the advisor asked, “You seem somewhat distracted. Have we missed something?”

The client proceeded to tell the advisor that he didn’t like his strategy and his proposal to invest in risky stocks made him somewhat angry. He explained that his father died penniless after investing too aggressively in the stock market. He went on to explain that his father lost his manhood and his money and that wasn’t going to happen to him.

The lessons in this story are two-fold. First, the advisor failed to ask the right questions. Secondly, he didn’t respect how the client’s life experiences impacted the way he viewed money, which he would have learned had he asked the right questions. We are a product of our environment and life experiences. We either learn from them or we are destined to repeat the mistakes of those who influenced us.

My parents were hard-working people. My father was a career Marine and my mother a stay at home mom. We lived paycheck to paycheck during my childhood though I never felt I lacked anything. My parents never had enough money to even think about saving for retirement as they were busy paying for necessities for my brother, sister and me. So they never thought about retirement income. Fortunately, my father had two pensions and Social Security so they ended up in a financially ok place when my father retired from the City of San Diego.

As a result of my life experiences, I had a keen interest in money and finances growing up. As a kid, I sold flower seeds door to door and I had two paper routes to earn spending money. In high school, I worked at the local drive-in theater.

Not only did I want to have a more comfortable financial life than my parents, but I also wanted to know all about personal finance. That thirst for knowledge drove me to a career in financial services. I have certainly made my share of financial mistakes along the way; too much credit card debt in the past, investing in a “sure thing”. The good news is that those mistakes have made me a better teacher and advisor. They have also made me more prepared for retirement than I probably would have been otherwise.

How about you? What lessons can you take from your life experiences with money? Here are three suggestions to make the most of those experiences:

  1. Write down the mistakes you and/or your parents made with money. Be specific. How do you feel about them? Have they helped or hindered you?
  2. What lessons have you or can you take with you to improve your personal financial life? Write them down in a Financial Journal.
  3. Write down your short and long-term goals in your journal. These could be to get out of debt (long-term), start saving for a grandchild’s college education (long-term), decreasing your spending (short-term), not using credit cards (short-term), etc.

Finally, as we learned from the story at the beginning of this post, find a financial advisor or coach who you trust and who asks the right questions to get to know you and your financial life. There is no such thing as one size fits all when it comes to your unique financial goals and concerns. Don’t let anyone short change the experience for the sake of their personal gain. You are in charge! Please leave your comments below. You can also check out my FREE personal budgeting course here.

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3 Ways Good Habits Can Increase Your Retirement Income

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Over the past several months I have read two excellent books about habits and how they influence our lives in some good and some not so good ways. If you get a chance, please pick up a copy of The Power of Habit by Charles Duhigg and/or Atomic Habits by James Clear. Both books offer some practical advice on how habits can build us up as well as serve as roadblocks to achieving our goal of becoming the best version of ourselves. In this post, I offer three ways that habits can benefit you in building your retirement nest egg.

  1. Start small. As James Clear points out, “habits are the compound interest of self-improvement.” If you have a big goal like saving $100,000 in your retirement account you won’t necessarily start by saving $1,000 every week if you haven’t saved anything to date. You start by looking at why you haven’t saved anything. Perhaps you are spending $50 a week on Amazon.com. The things you buy are not really necessary so you agree that every time you get the impulse to buy on Amazon you will put $25 in your retirement account. Once you feel good about that new habit you might increase it to $50 then $100, etc. You are using the same trigger that used to cause you to spend money on Amazon and you have replaced it with a deposit to your retirement account.
  2. Focus on what you want to become. In the example above, instead of focusing on the $100,000 focus on who you want to become – a savvy retirement saver who builds a comfortable nest egg to provide income for life. You can identify with that transformation versus a dollar amount. It is like losing weight. Instead of focusing on the pounds you want to lose, focus on the vision of the healthier version of yourself who will enjoy life more once you lose the weight you want to lose.
  3. Focus on your system instead of goals. If you want to save more money for retirement then focus on your system for getting there instead of the goal itself. Charles Duhigg in The Power of Habit speaks of the cycle of a habit. There is a “cue” then a “routine” then a “reward”. If you have a cue that leads to a bad habit yet the reward is positive then perhaps you can keep the cue and the reward just replace the routine. That is what we did in the example above. We replaced the shopping on Amazon with putting money in your retirement account. That is a system that works, in this example. What cues do you have that lead to bad spending habits? It could be boredom, hunger, a need to be social. How can you replace the unproductive behavior with a better routine? Maybe it’s paying with cash when you get an impulse to buy something on credit that you really don’t need.

Habits can be extremely helpful on the road to financial peace of mind. As the authors Cleary and Duhigg explain, habits need to help us become a better version of ourselves. In other words, they need to become part of our identity. Good habits shape our identity which is why good routines are critical to success in forming good habits. Habits can change our beliefs about ourselves. Pick one routine this week that you will work on changing that will lead to better spending habits.

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Do You Need a Financial Coach?

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Sally and Roger have been married for over 30 years. Roger is 60 and Sally is 58. They have never saved much of their paychecks, so Roger has a small amount, about $100,000 in his 401k. Like Roger, Sally had good intentions to set money aside for retirement, yet it seems something else always took precedence such as needing a new car, loaning money to the kids, or fixing something at the house.

The concept of retirement has always felt like it was “out there” on the horizon. Now, reality is hitting them like the proverbial “ton of bricks”. Sally wants to stop working and devote more time to the grandkids. Roger knows that the only way that can even be a remote reality is if he just keeps working. His health is ok so he and Sally decide that will be their retirement plan. Roger will keep working until he just can’t physically do it any longer. They have a $500,000 life insurance policy on Roger so that will help Sally should anything happen to Roger.

This scenario may sound far-fetched or it may resonate with many of you. It’s called the “Work Until I Die” retirement plan. Many Americans have embraced this plan because they don’t think they have an alternative. Most don’t think they are qualified to meet with a financial advisor because those people only deal with people who have “real money”, whatever that is. As a result, millions of Americans drift into the “retirement years” unaware that help is out there. Help can take the form of a traditional financial advisor or it can be a Financial Coach.

What is a financial coach? A financial coach works on your financial life instead of investing your money and/or selling you financial products. Some people work with both. Not all financial advisors are equipped to be financial coaches. For example, a financial coach can help you put a personal budget together, teach you about Medicare and Social Security and educate you about other financial topics that will impact your financial life.

A financial coach will help you develop good money habits that will last a lifetime. You don’t have to have a lot of money. In fact, many people come to a financial coach in debt to get help building good spending and budgeting habits.

Sally and Roger can benefit from a Financial Coach. They are at a point where they don’t know what they don’t know. Knowledge is power and they need to be educated about how they can retire on their own terms. They may find that Roger won’t have to work until he dies. With some belt tightening with their budget and a few other changes they will be surprised at how their retirement looks after working with a financial coach.

Financial Coaches like financial advisors are not miracle workers. They are trusted advisors who are vested in your financial health. Like a coach in sports, they can get you into shape financially and then help you stay there into your retirement years, whatever you envision those years to be.

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Do These Three Things Today If You are Turning 60

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Turning 60 can be a landmark for many of us. You might be getting ready to retire or think about your next employment gig. Even if you plan to continue working in some capacity there are still things that you need to be aware of and, in some cases, act to avoid surprises down the road. If you are 60 or getting there soon, you still have time to get your finances in order if you do plan to retire in the next few years. Here are three things that I recommend you do right now.

  1. Get Social Security Benefit Information. Remember those update we used to get from the Social Security Administration every year. Yeah, they don’t do that anymore. But you can still find out about your retirement benefit by using the Social Security Retirement Estimator. It shows what your estimated retirement benefit from Social Security will be at different ages.

    This is an important step as most people have no idea how much they will receive from Social Security upon retirement. So, if you do this when you are 60 you still have time to make any necessary adjustments. When you take your Social Security benefit will impact your monthly check in a significant way. If you were born in 1960 or later, your Full Retirement Age (FRA) is 67. If you choose to receive benefits before you reach that age, your benefit will be reduced by 6% per year. Let’s say your FRA benefit is $2,000 per month. If you decide to take your benefit at age 62 the amount you receive will be $1,400!

    Luckily the opposite is true as well. IF you delay receiving your benefit until age 70 your benefit will increase by 8% for every year beyond your FRA. Let’s use that same $2,000 FRA example. If you delay receiving your benefit until age 70 you will receive $2,480, a 24% increase (8% x 3 years).

    Hopefully you can see why some advance planning can have a big impact on the benefit that you receive!

  2. Compute the Income You Expect from Retirement Plans. Just as we did with Social Security, we need to figure out what we will receive in income form our retirement plans whether that is a pension, 401k or other defined contribution plan or both. So how do you figure this? Common practice today is to use what is known as a safe withdrawal rate. The common rate used today is 4%. The idea is that if you withdraw 4% of your retirement savings each year it will last your lifetime. The idea is based on the premise that if you have a portfolio of 50% stocks and 50% bonds it should yield around 6%. Keep in mind that the S&P 500 index averaged 10% from 1926 to 2018. So, if you withdraw 4% per year that leaves 2% to cover inflation.

    Let’s use the example of a retirement plan balance of $500,000. If we apply the 4% safe withdrawal rate you would receive $20,000 per year. If you have a million dollars you would receive $40,000 per year.

  3. Increase Retirement Plan Contributions. If after looking at your Social Security benefit and income from your retirement plans you don’t think you will have enough income in retirement, then now is the time to increase your contribution. Before you begin let’s look at some calculations you need to do.

    First, you need to estimate how much income you need in retirement. Then you need to figure out what you expect from Social Security and your retirement plans. As an example, you have determined that you need $100,000 per year to live comfortably in retirement. Your expected sources of income are:

  • Social Security for you and your spouse – $40,000 per year
  • Your pension will provide $15,000 per year
  • Your spouse has a 40ik with $750,000 that will produce $30,000 per year
  • Total income will be $85,000 per year

With that you have a shortfall of $15,000 per year. As we learned earlier you may be able to delay Social Security to get a little more. You can also start increasing your contribution to your 401k or other defined contribution plans. This year you can contribute $19,000 plus a catch-up provision of $6,000 since you are over age 50. You may also be able to contribute to an IRA account depending on your adjusted gross income.

For other ideas, please check out my Guide to Getting Started When You are Starting Late.