What Is Your Retirement Dream?

I have talked a lot in this blog over the past several weeks about investing and saving, but what is our goal in the end?  What are we sacrificing now in order to have in the future?  Too many of my Soldiers, both young and old, see retirement as nothing more than a pipe dream that they will never reach.  They think that they will have to work until the day they die.  That is incredibly sad.  When I retire, I want to do something that I love or work that I’ve always wanted to do.

 

In My Retirement Dream I Want To:

1. Teach part-time at a local community college
2. Start my own small business
3. Invest in residential real estate as a landlord
4. Visit all 50 states and travel overseas more
5. Play a lot of golf

 

What is your retirement dream?  You need a long term goal to aim for now.  You can change it along the way, but you still need something to motivate you now to keep you on track saving and investing.

 

In 2001, my parents got up one day, sold their house, and bought a houseboat.  I have to tell you that most of my family though that they were a little crazy, but they didn’t care.  I guess that is one way to know that you are on track to live like no one else.  I have never seen my parents happier.  Their goal is to one day soon sail the “Great Loop”, a 7,500 trip up the eastern seaboard, into the Great Lakes, down the Hudson, Tennessee, Ohio, and Mississippi Rivers, and back around Florida.  It’s an awesome idea and a fantastic retirement dream.  Because my step-dad invested carefully, planned, and never lost sight of their goal, they are now living “The Dream” in retirement.  I can only hope and pray that we are all so lucky and blessed one day.

 

Don’t waste one second more.  Figure out your retirement dream with your spouse or loved ones (you can change it as your life changes), tell a lot of people (peer pressure is a great way to keep you on track), and never lose sight of your goal in the end.  It will make all the sacrifices along the way well worth it.

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Penny Wise and Pound Foolish – Get the Large Purchases Right

I had a boss who had over $60,000 of credit card and other consumer debt. He never could understand why he could not dig himself out of the hole that he had created. It only took a month of working for him to understand where most of his problems came from. His personal finance focus was mixed up or inverted in a way. My boss would agonize and sweat the small purchases while totally blowing all his money on poorly planned, researched, and impatient large purchases. He would hem and haw about saving a few dollars here and there on small purchases like going out to eat at a restaurant, but he would decide at the last minute to fly across the country to see his family while he was on temporary duty (TDY).

Don’t get me wrong, small needless purchases will quickly add up to large sums of money if you are not careful, but you have to be able to see the forest AND the trees. It’s a balancing act, but you have to get the large purchases like home mortgages, car loans, etc. right if you want to have any chance of having a healthy personal finance picture.

Here are just a few examples of the mistakes my boss made in order to get $60,000 in debt:

1. Poorly choosing the neighborhood to buy a house in
2. Sending his children to private elementary school
3. Leasing a car

Penny pinching is pointless if you get the large purchases wrong like those listed above. Get the large purchases right, and then sweat the small stuff.

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Best Advice I Ever Received

The best piece of advice that I ever received was right before I graduated from college.  I was in my professor’s office talking to him when he told me . . .

 

“Spend your money doing things, not acquiring things.”

 

We spend our entire lifetime collecting “stuff”.  We have rooms and houses full of stuff.  Stuff we don’t even use anymore.  When we look back at the lives we’ve lived in retirement, it is our experiences that we will remember the most.  Spend your money traveling.  Spend your money going back to school and getting that degree you always wanted.  There will always be enough time to buy things.

 

What’s the best piece of advice (about personal finance or not) that you have received?  I’d love to hear it.

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Loaning Money to Family Members Is a Losing Proposition

I was proud of one of my Soldiers today.  He received an e-mail from his mother last night asking him and all of his other siblings to help bail out their youngest sister who is facing foreclosure after six months of delinquency on her mortgage. 

 

Like popular radio talk show host, Dave Ramsey, I am against loaning family members money.  It only leads to hurt feelings and resentment when the loan is not repaid.  I am in favor of helping family if you are able though.  If a family member is struggling financially and you can give them money, that is probably a better course of action that a loan.

 

Depending on the family member’s need, there are other non-monetary ways you can help in those situations, such as giving them a job, referring them for a job, getting them financial planning help, etc.  Even something as little as giving them a book can help.  For example, Dave Ramsey’s Total Money Makeover changed my life.

 

No matter what you decide to do, make sure that your home is taken care of first.  You cannot help others until your financial wellbeing is secure.  Do not feel guilty if you cannot help because you are struggling to payoff your own debt or save for your 3-6 months emergency fund.  There will always be family emergencies that need our attention.  Set yourself up for success so that you are the helper and never have to be the helped.

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The Best Tip to Get Promoted

 The single best way for you to get promoted in your job is to stay current and up-to-date with the news and issues that occur in your chosen profession.  In order to be the best in your line of work, you have to know what is happening in your specific career field.  The same is true whether you are a member of the military or an executive in corporate America.

Become a subject matter expert in your field:

1. Join industry associations
2. Subscribe to trade journals
3. Attend conferences
4. Read and submit articles to industry journals
5. Read and subscribe to industry news media (newspapers, newsletters, blogs, etc.)
6. Read professional development books related to your job
7. Continue your formal education with a Bachelor’s or Master’s Degree in your field

 

   I am constantly amazed by how many young lieutenants enter the military who do not understand current events, issues, and trends that are happening in their particular branch of service and their military occupational specialty (MOS).  Not knowing about the latest techniques, tactics, and procedures will place leaders in a disadvantage that will affect them and affect their job performance.

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Why I Hate the Military’s Savings Deposit Program (SDP)

The military’s Savings Deposit Program (SDP) is a financial benefit to troops stationed in a combat zone, hazardous duty area, and a few other qualifying locations around the globe.  Members of the military can deposit up to $10,000 and earn a guaranteed 10% APY that accrues quarterly.  Sounds like a great deal, right?  A guaranteed 10% interest rate in today’s economy is pretty good, but I wouldn’t (and haven’t) touched the program with a ten foot pole.  And here’s why…

  

I do not trust the military finance system.  Like most Soldiers, I have been on the receiving end of “No Pay Dues”, and it’s not a pretty sight if you do not have your 3 to 6 month emergency fund in place.  To deposit money into the system, you have to begin allotments or submit cash collection vouchers.  Then, a person (finance clerk) has to manually put your request into the military’s over bloated, ridiculously complex pay system.  I have heard of more Soldiers having pay problems through this program than any other changes they make to their paychecks, withholdings, etc.  With a quarter of the military moving and changing BAH rates for example every year, there is a huge opportunity for your paycheck to get messed up.  I absolutely hate changing anything with my paycheck for fear that I won’t get paid the next month.

 

I have so little faith in the military’s finance and pay computer system that I refuse to enter into the SDP despite the guaranteed 10% interest rate.  10% is not enough!  Investing is a trade off between risk and return.  Classic finance theory states that the riskier the investment is, the more return you should require from it.  SDP is very risky to me.  I can’t sleep at night worrying that $10,000 of my hard earned COMBAT pay is going to be tied up for months because of computer and human errors.  I would rather invest that money in a good, growth mutual fund even if it earned less interest.  Members of the military have too much to worry about in Iraq and Afghanistan than whether their investments, paycheck, and household budgets are running amuck. 

 

Another reason that I do not like the program is that it is incredibly illiquid.  You cannot withdraw the money anytime you want to.  You have to go into the finance office and manually stop the allotment and wait for the military finance office to process your request.  I recently had a Soldier who needed to stop the allotment depositing money from his paycheck into his SDP account, but the first month the finance clerk messed up the transaction in the computer, and then the second month my Soldier caught the error after the transaction closing date.  So, now he has had three months of additional money withdrawn from his paycheck and deposited into his SDP, which is already maxed out and not earning interest anywhere.  See why I love the program?

 

Another point to consider is the tax implications.  Although federal income earned in combat zone is tax-free, interest accrued on earnings deposited into the SDP is actually taxable.  Funds can be left in an SDP account indefinitely, but the account will stop accruing interest 90 days after a member returns from war.  And withdraws may only be made upon leaving the combat zone. 

 

The entire deposit $10,000 in order to earn $1,000 in interest is also almost a misnomer too.  The military has made it very hard to deposit $10,000 to earn your entire $1,000.  A service member cannot deposit an amount into the program exceed a service member’s monthly current pay and allowances.  It will take most service members months to deposit the entire amount.  You also cannot begin contributing to the program until the 31st day you have been in a combat zone.  So, you are already loosing a month of interest.  The government has to let you leave your money in the SDP after you return home just to get you 12 months of interest after all the hoops they make you jump through.

 

The military’s entire finance system needs more transparency.  Servicemembers need to know right away if there is something wrong with their paychecks, and they need to be able to correct problems right away when they are found.  I should not have to hold my breath every two weeks waiting to see if this week is the week where I once again see a “No Pay Due”.

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